So-Called Communist Cuba Legalizes Sale & Purchase of Real Estate

In another testament to the fallacies and disastrous effects of Marxism in practice, Cuba announced on Thursday that citizens will soon be permitted to sell and purchase real property. The Associated Press is reporting that "the law will take effect Nov. 10 and applies to citizens living in Cuba and permanent residents only" according to the front page of the Communist Party daily Granma and details published in the Cuban government's Official Gazette.

Those who think that this means that Cuba is moving from "pure communism" to "pure capitalism" in a matter of days may find themselves disappointed. Associated Press: "The law limits Cubans to owning one home in the city and another in the country, an effort to prevent the accumulation of large real estate holdings." Even further, "[The law] requires that all real estate transactions be made through Cuban bank accounts so that they can be better regulated". Real estate transactions will also be subject to bank commissions and an 8 percent tax on the assessed value of the property to be paid equally by buyer and seller.

Cuba's announcement today comes amidst a series of free-market reforms from President Juan Castro. Recently, the so-called communist nation of Cuba legalized the sale and purchase of automobiles. As the abolition of private property is the core of Marxist communism, it is difficult to see how Cuba can continue to legitimately call itself a Marxist socialist state led by the Communist Party. Given the economic situation in Cuba, most Cubans are only allowed to buy a used car, i.e. foreign cars from Poland and Russia that are more than 15 years old. Even so, a market is a market. And as I always say, from love to labor to lemons, there's a market.

Pres. Castro has also recently permitted Cuban citizens to start businesses in a number of state-approved jobs such as food vendors and accountants. According to the Associated Press, "Cuba's government employs more than 80 percent of the workers" in Cuba while paying relatively low wages and providing free education and health care, "and nearly free housing, transportation and basic foods". Despite recent free-market reforms, Pres. Castro maintains that Cuba will remain a socialist state. Even so, as increasing economic liberties evolve, reforms in Cuba could possibly open the way for foreign investment and tourism in the future, e.g. perhaps firms could indirectly use Cuban citizens as proxies for Cubans-only business transactions.

The current free-market reforms in Cuba that appear analogous to Gorbachev's perestroika initiatives serve as a sad testament to the end of Marxist ideology when it is applied to any given nation-state. Where the Cuban Revolution was rooted in Marxist theories of communism and state-control over a nation's society, the fate of Cuba reflects the fundamental flaws, inefficiencies, and costs of not only a state-controlled economy, but also Marxist and communist ideological aims.

This is not to say that for all circumstances communism will not work. Far from red-flag ideologies, artfully-crafted propaganda, and hammer-and-sickle leaflets, some forms of communism have worked historically via religious values. In particular, various sects of the Anabaptist movement continue to practice communalism. The prevalence of kibbutzim in Israel is another example where communalism has worked. In the right circumstances, some forms of communalism may be highly advantageous and beneficial for individuals.

Despite the various situations where communism has appeared to work in the world, Marxist communism forced upon individuals with mandated state-control over an economy appears to be a recipe for disaster.

I recently discussed problems with Marxism with respect to economist Nouriel Roubini's remarks that Marx was somehow right. Roubini: "Karl Marx had it right. At some point capitalism can self-destroy itself. That's because you cannot keep on shifting income from labor to capital without not having an excess capacity and a lack of aggregate demand. We thought that markets work. They are not working. What's individually rational...is a self-destructive process." Far from being right, I argued that Marx was a false prophet.

Ironically, as one can turn Roubini's remark on its head, Marxist theory in practice also appears to self-destroy itself. Even with Roubini's idea that capitalism can self-destruct, capitalism has yet to self-destruct. As for Marxist theory, we see how Marxist economies can destroy themselves from within.

Far from Roubini's comment on capitalism, we have the historical evidence of what occurs when a country goes the way of Marxist socialism. One need not look any further than China, Russia, Vietnam, and Cambodia to see what occurs when nation-states take on Marxist reforms.

The results of what happens when Marxist policies are implemented by force should come as no surprise to reputable economists. When the government forcefully takes over operations that could be undertaken in the free market, the government tends to not be as quick, productive, and efficient as the free market. With a state-controlled economy with price-controls the legal market degenerates and gives way to a burgeoning black market where goods & services are traded. As private property rights have been dissolved in a Marxist or fascist state-controlled economy, individuals have considerably less incentives to invest and maintain common property, i.e. the Tragedy of the Commons.

To echo the sentiments of economist Tim Harford, in contrast to venture capital experiments where "some people will go bankrupt, but nobody will die", central planning experiments can do great damage to nations. Harford: "Only command economies can promote experimentation on such a fatally extravagant scale and suppress informed criticism."

In the wake of Marxist reforms forced upon the individuals within a nation-state (at least in this time period), as the society degenerates owing to a lack of incentive, investment, ingenuity, and innovation combined with dysfunctional attitudes towards the family and religion, the nation-state's economy begins to eat at itself from within. Where Lenin promised Russians peace, land, and bread, many in the USSR found themselves starving...and/or worse.

In this light, Marxism is a bit analogous to cigarettes. Where cigarettes were once marketed as a way to lose weight, e.g. "Reach for a Lucky", the health effects of smoking revealed cigarettes to be a dangerous and harmful habit. Most likely, those who lived in the late 1800's and early 1900's did not appreciate the long-run negative effects of Marxism; perhaps some individuals could tell that Marxist theories were faulty from the start.

In a similar way to smoking cigarettes, we now know the problems of Marxist policies and we now know what happens to countries that implement some form of Marxism communism by force. I mentioned previously that a state-controlled market has a tendency to create a black market. In light of historical communism and socialist policies, it is as if there is an underlying "market of markets" whereby various economic regimes can compete with each other in a given geographical region. For example, the Nordic model is the dominant market-form in Scandinavia, the unraveling communist model market-form is present in modern-day Cuba, the US has a capitalist mixed economy market-form, and in a religious commune the dominant market-form is communalism.

As various economic systems compete by virtue of individuals practicing various forms of business, market-forms evolve according to the attitudes of the region's citizens.

As I discussed previously regarding marijuana legalization in Chicago, "In a Darwinian economic sense, it appears that if a government becomes too bloated, too controlling, too bureaucratic, or too inefficient, it will either gradually improve over time to the point of becoming lean, eventually collapse, or be overtaken by a leaner or even more efficient government."

This appears to be what is going on in Cuba. It would appear that Cuba's leaders and citizens are in the process of becoming leaner lest the entire system collapse or be overtaken by a leaner or even more efficient nation-state/economy.

The story of Cuba is thus just another witness to the fact that between two nations with equal strength, equal resources, and equal population that differ where one is a state-controlled economy and the other is a free-market economy, the nation that advocates liberty with a free market will tend to economically supersede and overtake the nation that restricts liberty with state-control over property. In this light, it is in the interest of even governments and politicians to let liberty prevail while guaranteeing the protection of natural rights. Indeed, let liberty prevail.