Private Property
Written by Michael Tennant
Friday, 04 November 2011 10:15
When it comes to private property, wrote economist Ludwig von Mises, it
is a simple "either-or" proposition: "either private ownership of the
means of production, or hunger and misery for everyone." In 1959, Fidel
Castro essentially abolished private property in Cuba, and the result
has been exactly as Mises predicted: a declining standard of living and
shortages of basic necessities such as food, building materials, and
housing.
Faced with this reality, Raul Castro, Fidel's brother and successor, has
begun scaling back government and liberalizing property laws. He has
pledged to trim nearly one-quarter of the government workforce, which
accounts for over 80 percent of all jobs in Cuba. Last year he began
allowing private enterprise in some limited circumstances, and now "the
number of private business operators has hit more than 333,000, above
the expectations of the authorities, from 148,000 in 2010," according to
Agence France-Presse. In October he lifted some restrictions on the
buying and selling of automobiles. Now, in what the Associated Press
terms "the most important reform yet," Castro's government has announced
that individuals will, for the first time in half a century, be able to
buy and sell real estate.
The details as reported by the AP:
The law, which takes effect Nov. 10, applies to citizens living in Cuba
and permanent residents only, according to a red-letter headline on the
front page of Thursday's Communist Party daily Granma and details
published in the government's Official Gazette.
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. It requires that all real estate transactions be made through
Cuban bank accounts so that they can be better regulated, and says the
transactions will be subject to bank commissions.
Sales will also be subject to an 8 percent tax on the assessed value of
the property, paid equally by buyer and seller. In the case where Cubans
exchange homes of equal value in a barter agreement, each side will pay
4 percent of the value of their home.
While the new law hardly establishes a laissez-faire real estate market,
it is, as Lexington Institute Cuba analyst Philip J. Peters told the AP,
"a very big step forward." "With this action," he explained, "the state
is granting property rights that didn't exist before," thereby turning a
person's house into "an asset that can now be made liquid."
Fidel Castro made the sale of property illegal in stages over the first
years after he took power, first by giving title to whoever happened to
live in a home at the time and then by prohibiting the sale of the home.
Since that time, notes the AP, "Cubans could only exchange property
through complicated barter arrangements, or through even murkier
black-market deals where thousands of dollars change hands under the
table, with no legal recourse if transactions go bad" — in other words,
the usual ways the naturally arising free market evades artificially
imposed restrictions.
After the ban went into effect, the government took over the building of
houses; but as with all socialist schemes, it was a failure. "Three
years ago, the government acknowledged that its national housing
construction and maintenance program was meeting only five to seven
percent of the population's needs," writes AFP. "The country is believed
to have a deficit of around a million homes," the report adds. Thus, the
AP observes, "many are forced to live in overcrowded apartments with
multiple generations crammed into a few rooms."
Raul Castro, therefore, is simply bowing to reality by allowing a freer
market in housing. This is commendable given that political leaders'
propensity is never to admit failure but to intervene further each time
previous interventions fail — as witness Washington's various responses
to the financial crisis that was largely of its own making.
Castro claims that he will never allow Cuba to become a capitalist
country. In fact, AFP remarks that Castro's reforms are "an effort to
restructure a Soviet-style economic model and revive a stagnant economy
while stopping short of creating a market-led system." Of course, the
last time someone tried to reform a Soviet-style economy, he ended up
destroying his own repressive regime instead. As Wikipedia reminds
readers, Mikhail Gorbachev's program of perestroika, which "introduced
some market-like reforms" into the Soviet Union's then-moribund economic
system, was intended "not to dismantle socialism but rather to make
socialism work more efficiently to better meet the needs of Soviet
consumers." However, since it is impossible to make socialism more
efficient, perestroika instead led to the fall of the communist regime
in Moscow (though not exactly to a Jeffersonian republic). Castro may
very well find himself in the same situation within a few years — an
eventuality that could result in the ouster of his regime and freedom
for the longsuffering Cuban people.
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