If you’re an entrepreneur, grandiloquent anti-Capitalism speeches by unkempt Occupiers and other avowed socialists, who’ve all benefited from the success of the American economic system (see Michael Moore), really annoy you.
Every once in a while someone will even go so far as to say, “See, look at Cuba. They’ve survived without capitalism for over 50 years and its people are doing just fine.”
Yes, Cuba has survived…but, just barely, and certainly not on their own.
Now, however, Cuba is singing a different tune. Since the new—and slightly improved—Castro has taken power from his sickly brother, Cuba has very quietly (albeit, very quickly) made several moves towards a free-market environment.
In fact, in a new report from their economic minister, Cuba’s private sector workforce has nearly doubled in just a few short years.
As recently as 2010, Cuba’s central government employed more than 85% of its total workforce. By controlling the economy, the government was also able to control revenues, pay wages as it sees fit, and ultimately use those revenues to offer social services such as healthcare, education, subsidized food, as well as most of the basic needs of its population.
Cuba’s unemployment has been touted as among the lowest in the Western Hemisphere, while economists argue that the island’s real unemployment is actually quite high. Although it is impossible to know with precise accuracy given Cuba’s pension for misleading and secretive economic information, some economists have estimated unemployment closer to 25%.
One of the biggest reasons for the new government reforms? Socialism, it turns out is quite expensive and often suppresses the incentive for its workforce to produce. Why work hard for pennies if the government is going to give you what you need either way?
Yes, it took Castro fifty years to figure out what Alexis de Tocqueville figured out in just two, nearly two hundred years ago.
“Our state cannot and should not continue maintaining companies, productive entities, services and budgeted sectors with bloated payrolls (and) losses that hurt the economy, are counterproductive and form bad work habits,” a trade union federation statement said in 2010.
According to the Heritage Foundation, Cuba ranks near the worst of all countries in its 2012 Index of Economic Freedom. Besides government ownership of the majority of businesses in the country, an immense, and very corrupt regulatory environment combined with a 50% tax rate has severely limited entrepreneurial opportunity in the country. There just isn’t a lot of incentive in Cuba to work, at least, not legally.
Much of the entrepreneurship in the country is within a black market. Residents who wish to make more than the average monthly salary of $19, run their own small businesses as taxi drivers, hairstylists, seamstresses, or any other profession than can find that will pay more than their grossly underpaid government-employed counterparts.
As “official” unemployment has nearly doubled in recent years and economic aid and exports have suffered from a world economic downturn, the tropical haven that has clung to its socialist philosophies finally has no other choice but to reduce the number of government employees, increases the private sector workforce, and begin releasing the economy.
Although these aren’t the moves many ex-pats in Miami need to return to their homeland, rest assured that investors around the world will be looking for opportunities to help Cuba’s economy take off, as soon as the stubborn Castro regime finally realizes what Americans have for over 200 years: the free market is the only way to economic prosperity.
JUSTIN VELEZ-HAGAN is Senior Contributing Writer and Commentator for Politic365.com. He is also an Adjunct Instructor of Economics at the University of Maryland-University College and the National Executive Director of The National Puerto Rican Chamber of Commerce. He can be reached at Justin@Politic365.com.