Saturday, August 28, 2010

Cuba Allows Some Market Reforms

See Cuba eases property laws, could open door to golf. In my classes this week, I went over some basics of economics, like the different economic systems, tradition, command and market. I said that there were not very many examples left of countries that used the command economy. North Korea and Cuba are two possibilities.

But now Cuba's government is loosening its grip on economic behavior. Here are the changes:
"Cuba has begun allowing foreign investors to lease government land for up to 99 years, a step toward a future that could be filled with golf courses ringed by luxury villas, beachfront timeshares and vacation homes for well-heeled tourists."
"A measure appearing the following day expanded self-employment, letting Cubans grow and sell small amounts of farm products out of their homes or special kiosks."
These are only small steps, of course. But they are in the right direction.

The article also mentions:
"The law marks the first major expansion of self-employment since Castro said in an address to parliament Aug. 1 that his government would reduce state controls on small businesses and private enterprise — a big deal in a country where about 95 percent of people work for the state.

Cubans already sell fruit, pork, cheese and other items on the sides of highways across the country, fleeing whenever the police happen past. The new measure legalizes such practices by letting Cubans grow whatever they wish and sell it, while bolstering state coffers with new taxes on their earnings."
Update 8-29: Cuba is also no longer going to subsize cigarettes. See No Smoking: Cuba drops cigarettes from ration book. It says:
"A program that provided state-subsidized smokes to Cuban seniors is headed for the ash heap.

The communist government announced Wednesday it is cutting cigarettes from its monthly ration books effective Sept. 1, the latest in a series of small steps toward fully eliminating subsidies for food and other basic items that impoverished islanders depend on.

Cubans 55 and older had been eligible to receive three packs of "strong" cigarettes and a pack of milds -- 80 cigarettes altogether per month -- for 6.50 pesos, or the equivalent of about 30 cents, using their ration books at state-run distribution centers.

The island's lowest-quality cigarettes, the only kinds subsidized, normally cost 7 pesos, or about 33 cents, per pack, while imported or topflight domestic brands can go for $3 or more apiece.

Until the 1990s, all Cubans 18 and older received a monthly allotment of cigarettes, but the loss of billions of dollars in annual subsidies from the collapsed Soviet Union forced officials to scale back subsidized smoking. Now even older smokers are out of luck."

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