Monday, July 26, 2010

Workers' Paradise?

Today marks the 57th anniversary of the Communist revolution in Cuba. All these years later and things don't seem to be going as well as promised. Doug French has alerted us to massive layoffs coming in the Republic of Cuba. He writes:

Cuba is facing a severe budget deficit and may have to trim its “bloated work force,” according to the Associated Press, even though the official unemployment rate is only 1.7 percent. That has some on the island socialist utopia upset because as the AP’s Anne-Marie Garcia reports, “guaranteed employment was a building block of the 1959 revolution that swept Fidel Castro to power.” A half century later, Castro’s brother Raul is hinting that one in five Cuban workers aren’t needed. In fact, he says some of his analysts, “calculate that the excess of jobs has surpassed 1 million.”

French goes on to point out that in reality Cuban officials can't even know the right numbers of workers to let go, because of the socialist calculation problem, citing Mises' classic article on the subject.

The problem occurs because in a socialist system all factors of production are owned by the state. Consequently, there is no real exchange of such factors and hence no real market prices that can be used to calculate profit and loss. In such a system, any accounting figures are mere guess work. Without meaningful profit and loss calculations, the so-called planned economy is no economy at all. It is planned chaos.That is why socialism is always disastrous. Pure socialism never works for any length of time and the more socialistic a market economy becomes, the less efficient it is.

One of my favorite articles to have students read about the socio-economic path of socialist Cuba is "Why Havana Had to Die," by Theodore Dalrymple. It is eight years old, but truth is never dated.

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