Written by Ralph R. Reiland
Tuesday, 20 December 2011 00:00
Ralph ReilandMillions of economic transactions take place every hour in
the United States, too many for any central committee in Washington to
handle or even Understand, even if they all graduated with honors from
Harvard's Kennedy School of Government.
For the most part, the economic transactions happen instantaneously,
automatically sending market signals that organize production according
to size and color, spontaneously determining losses, profits, wages and
And so, if we want organic pomegranate granola with cherries, it'll be
there, right on time for breakfast every day on the capitalist shelves.
It's the same with red Corvettes or caramel ice cream with cinnamon bun
dough and a streusel swirl.
It takes a little longer to get it right once the central controllers
take charge of deciding things.
Starting on October 1, 2011, some 52 years after Fidel Castro shot his
way to power in Cuba, it finally became legal for some poor guy in Cuba
to sell the 1965 Russian-made Moskvich piece of junk he's had sitting up
on blocks in his front yard for the better part of half a century.
Previously on this island of alleged power to the people, Cubans were
permitted only to sell their own automobiles if they were manufactured
before the 1959 revolution.
By some strange twist of collectivist logic, re-selling any car that was
produced in the post-revolution period was viewed as an act of
capitalist sabotage, a crass act of individualism and greed.
As a result, it paid to keep a legally-transferable '57 Chevy on the
road, even if it was held together with coat hangers and duct tape.
That's why the streets of Havana look like those shopping center parking
lots in the U.S. on Sunday afternoons in the summer when the vintage car
guys get together in their shined up '59 Impalas and '56 T-Birds to sit
on lawn chairs, drink beer and listen to Chubby Checker.
But now things will be different in Cuba, more like a free market,
according to President Raul Castro's speech to the National Assembly in
December 2010, pushing his effort to cut bloated government payrolls and
encourage private sector initiatives in Cuba's failed economy. "The
state has no business getting involved in a matter between two
individuals," he proclaimed, sounding more like Ron Paul than brother Fidel.
The new decree from the Cuban government allows someone to sell his own
car from all years of production, even post-revolution models, and also
permits, with a progressive tax penalty, the ownership of more than one
car per person.
The Cuban government, additionally, wants 8 percent of the price of each
car sold, with buyers and sellers each to pay a 4 percent tax. Try to
cheat on that and you've got to worry about some neighbor on the
Committee for the Defense of the Revolution getting a few extra pesos in
his government paycheck for squealing.
New cars can be only sold in state-owned monopolistic dealerships. The
state-established price on a new Hyundai runs around $30,000, not
counting the bribes that may be required to get the right color and a
The average income in Cuba is $20 a month, so a $30,000 Hyundai is equal
to the total income for 125 years of the typical Cuban worker. If the
worker could manage to save 10% of his pay every month, he'll have the
$30,000 in 1,250 years.
Under the new rules, any buyers of a new car will be required to prove
they made the money for the purchase in a government-approved occupation.
That might not be so easy. Under various government dictates, for
instance, hundreds of occupations were disapproved for Cuban women,
including the jobs of grave digger, house painter (unless the house was
extra short) and deep sea diver.
It was legal under the government rules to open a restaurant, but
anything bigger than 12 chairs for customers was prohibited, no matter
how much the neighborhood liked the food.
Employees in a restaurant were also illegal — too hierarchical for the
collectivist mindset — so someone seeking to be a restaurateur had to be
like one of those multi-armed Hindu deities, able to simultaneously seat
customers, clean tables, cook the food, serve drinks, pay the bills,
play the bongos, and wash the dishes.
Ralph R. Reiland is an associate professor of economics and the B.
Kenneth Simon professor of free enterprise at Robert Morris University