Why the Cuban economy has failed

The CME is the economic model launched by Fidel in the 1990s, proudly different from the Chinese and Vietnamese models. Why doesn’t it work?

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The Internet carries an amusing parody of Despacito [Slowly](https://www.youtube.com/watch?v=ueQoNF3pC1w), Luis Fonsi’s successful song, ridiculously danced by Raúl Castro, his son Alejandro, and his grandson and bodyguard, Raúl Guillermo, known as El Cangrejo [The Crab].

It’s Cuba’s imperial family. The three, like the entire population, perceive that the country is sinking into misery but are paralyzed by the fear they’ll lose power. By this time, Raúl has not the slightest doubt that the Military Capitalism of State (CME) does not work and knows that his reforms, the “guidelines,” have failed but insists on plodding toward the abyss “without haste but without pause.”

The CME is the economic model launched by Fidel in the 1990s, proudly different from the Chinese and Vietnamese models. Why doesn’t it work?

Essentially, for two reasons linked to human nature: first, because it’s not based on incentives but on fear of punishment. If we’ve learned anything with any certainty from behaviorism, it’s that positive reinforcements tends to reproduce, while negative reinforcements have the opposite effect. Second, the CME forbids and represses the momentum of the entrepreneurs, which is the main engine of the development and progress of any society.

Roughly speaking, the CME is based on the idea that Cuba’s main sources of wealth are the nation’s 2,500 midsize and large companies. All of them are protected by the state and preferably headed by military brass, while the minor service activities (restaurants, small hostels, clowns for private parties and an endless number of microenterprises) provide jobs for most of a population that’s closely watched so it won’t accumulate capital and barred from developing its own potential political power.

Objectively speaking, we’re facing a model of centralized and planned organization of the economy, based on the classic scholastic mechanism: all the truths have already been discovered by the fathers of the nation, and all that society needs to do is to constantly verify the wisdom of those heroes.

Out of that nonsense comes another: the 500 projects waiting in Cuba for those foreign capitalists who want to invest and profit from the docile and cheap manual labor that abounds in the country. The regime’s economists have planned this in great detail. That’s how central planning works: everything has been mulled over and sketched. There’s no space for improvisation. None for the market or competition, those diabolical inventions of neoliberalism.

I don’t know if Raúl Castro and his advisers have examined the profile of the successful modern nations, but all of them are subject to growth through what Hayek called “spontaneous order.” In them, the economy grows freely, subject to the mechanism of trial and error, guided by the impulse of the entrepreneurs with their spasmodic efforts, in which they sometimes “win,” sometimes “lose,” because the only sure thing in a regime of economic freedom is that there is not the slightest certainty. The consumers are the ones who decide — and they are unpredictable.

And who are those entrepreneurs who assume all the risks? Nobody knows for sure. In another context, economist Wilfredo Pareto launched the 80-20 hypothesis, and it is probable that the proportion is, more or less, the one found in all societies. Twenty percent chases dreams, works tirelessly, makes valiant efforts, invents, innovates, fails, picks itself up, and pulls ahead of the remaining 80 percent.

True, only a few in that 20 percent achieve a tremendous economic success, but to persecute them in the name of equality is more than a crime; it’s an absurd injustice. The fact that Jeff Bezos today is the world’s wealthiest man because he revolutionized direct sales through Amazon, or that Amancio Ortega is the most powerful man in Spain thanks to the Zara shops is something admirable, condemned only by the pea-brained leaders of the reactionary left who continue to ignore how wealth is created and distributed.

It shouldn’t be so difficult for Raúl Castro and his family to understand this phenomenon. In the early 20th Century, an impoverished and semi-illiterate Galician who a few years earlier had fought in Cuba for his defeated Spain returned to the island. He had the inner fire of an entrepreneur. When he died, 50 years later, he left a fortune of 7 million dollars, several dozen workers, and a town that boasted a cinema, a post office and a school. His name was Ángel Castro, the father of Fidel, Raúl and ten other children. He died before his descendants invented the nefarious CME.

Published in Spanish by El Blog de Montaner on Saturday August 5th, 2017

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