Rental cars for tourists in Havana. (DDC)
A good gauge of how the process of how the «updating» of the economic model is working is the application of the two administrative instruments found in Section 102 of the Conceptualization of the Cuban Social and Economic Development Model: direct or administrative, and indirect or economic.
The latter is made up of competition mechanisms between the various economic actors, in addition to fiscal benefits and other incentives. The administrative instrument, on the other hand, is associated with menacing closures, confiscations and prohibitions, some examples being cited below.
When there were complaints about the high prices that prevailed at supply-and-demand agricultural markets (MAOD), the government was unable to compete through its state markets (MAE) with establishments operated by private workers. Consequently, we have recently witnessed the closure of several MAODs, with a view to their transformation into MAE.
In the end, what was announced as a strategy that would benefit consumers has become just the opposite: those transformed markets, a few days after their reopening, stand out for their dire shortages and the poor quality of their products.
The opening of 3D cinemasby private entrepreneurs was a blow to the arbiters of the regime’s culture. The network of government cinemas, it seems, was unable to match the technology employed by these individuals. The government’s response was not long in coming: the self-employed were banned from providing this service any longer. And, of course, we should not overlook the regime’s zealous protection of its monopoly on the media.
More recently we witnessed the government’s inability to improve public transport for passengers, and compete with private taxi drivers and their celebrated, retro vehicles, popularly known as almendrones. The result of such ineptitude was the implementation of an experiment including caps on the prices that they can charged, which rankled many of those offering this service, many of whom have even given up their licenses, to the detriment of those who need to get between their workplaces or schools each day.
Thus we arrive at the last chapter of the administrative frenzy in the context of the updating of the economic model: the obligation to open fiscal bank accounts imposed on the self-employed who work in the preparation and sale of food; those who rent housing, rooms and spaces; transporters, and those engaged in construction work; accounts in which at least 65% of the workers’ gross monthly income must be deposited.
Obviously, this obligation is part of the government’s effort to wield greater control over the self-employed, all in the context of its struggle to prevent certain non-state entities from accumulating certain levels of wealth. But we should also consider the government’s interest in removing from circulation part of the cash currently amassed by certain sectors of the population, which affects the precarious supplies at Cuba’s undersupplied state shops.
If this is the case, we can point to a notable difference between the dynamics of free and market economies and the methods employed by the island’s rulers. In the former, central banks increase interest rates, and the holders of the money are thereby encouraged to deposit their cash before investing it in the economy, which reduces the currency in circulation and combats inflation.
In Cuba, however, the approach is one of command and control: if the government does not get or things do not go its way, it simply proscribes the economic activity in question.
As can be seen, the predominance of administrative instruments over economic instruments is, at bottom, another sign of governmental arrogance and inefficiency. Someone once pronounced a maxim apropos to the current situation: «Force is the law of beasts.»