In any dictatorship, the biggest fool is the dictator.
It takes a prodigious amount of self-deception to believe you are running a country. I was reminded of that as I heard about Fidel Castro’s preparations for the Pope’s visit to Cuba last winter. In an interview on Cuban television, Castro said he didn’t think the visit would lead to the end of socialism in Cuba. (John Paul II, of course, is widely credited with contributing to the peaceful toppling of the Soviet-backed regime in his native Poland.) Here is where the Cuban ruler reveals the depths of his self-deception.
There is no socialism in Cuba.
Consider this headline in the Washington Post just before the visit: “Cubans Scurry To Capitalize On Papal Visit, Cost of Hotels, Services Soars for Foreign Influx.” Translation: the Cuban people are entrepreneurs behaving as though they live in a capitalist country. Almost 40 years of “socialism” have failed to propagandize or breed capitalism out of them. Could capitalism be the political economy of human nature? It would seem so.
But is there really no socialism, or communism, in Cuba? We have been told for decades that Castro is a Marxist. He claims to be in the vanguard of the Marxist revolution. As Marx wrote of it, socialism was not only to include state ownership of the means of production, but also the abolition of markets, money, and exchange. In Cuba the state owns the major industries and the land; nevertheless, there are markets, money, and exchange. Castro may think he and his experts plan the economy, but that is the biggest self-deception of all.
Every day the Cuban people make countless decisions, transactions, and calculations about which the dictator and his bureaucrats will never know anything. Thanks to the black and gray markets, Cubans most of the time buy and sell and produce, within constraints, according to their own lights. The “planners” issue decrees, but they know they will often be ignored. Even if they are obeyed, the planners can’t know what the rippling unintended consequences will be. Often they are opposite of what was expected. Human action is unpredictable that way.
Ask yourself: how can the small group of bureaucrats constituting the government of Cuba possibly direct the actions of over ten million people, each with his own preferences and aspirations? It would take as many bureaucrats as citizens to attempt to pull that off. But even that wouldn’t help, because the bureaucrats themselves are already too busy wheeling and dealing. The government calls that “corruption.” But for such corruption the people would have all starved long ago.
The plan is a sham. If Castro has any sense, he knows it.
In a path-breaking demolition of socialist theory almost 80 years ago, Ludwig von Mises called socialism “impossible.” He meant that literally. He was ridiculed for making what seemed a patently absurd statement. As years passed, people, pointing to the Soviet Union, asked how socialism could be impossible.
The critics missed Mises’s point. The great liberal and Austrian economist had said that an economy of any complexity could not adequately satisfy consumers in the absence of money, markets for capital goods, and private property because people would have no way to make the calculations necessary to comparing and choosing among alternative uses of resources. Prices permit disparate things—a supply of steel, a parcel of land, a machine, a quantity of labor services—to be stated in terms of a common denominator, the monetary unit. They can then be subjected to calculation. The balance sheet can be filled out. Entrepreneurs can compare the price of the factors of production with the price of final consumer goods and determine if they will have a profit or loss at the end of the day. That information reveals whether resources are being used as consumers wish.
Responding to Mises, so-called “market socialists” said prices could be simulated through bureaucratic trial and error or by solving a series of equations. Startlingly, even some who grasped the virtues of capitalism agreed: the renowned Harvard University economist Joseph Schumpeter declared the socialists the winners in the famous “calculation debate” launched by Mises and carried on by F.A. Hayek. Directly repudiating Mises by name, Schumpeter wrote in Capitalism, Socialism, and Democracy (Harper & Brothers, 1942, p. 172), “There is nothing wrong with the pure logic of socialism.”
Hayek countered the “market socialists” by pointing out that real prices cannot be created by simultaneous equations or by bureaucrats playing at markets. Those prices would be empty, in contrast to market prices, which are rich in content. Markets—that is, actual choices by sellers and buyers—reveal and stimulate the discovery of knowledge that is otherwise left undiscovered. Market prices, free to fluctuate spontaneously, deliver that ever-changing knowledge sufficiently to permit effective economic calculation. To do their informative work, prices have to arise from real transactions. Without market prices (a redundancy, really) there would be no way to economize resources in behalf of consumer well-being. As Mises said, socialism, as an economic system, is impossible.
The existence of the Soviet Union did not refute Mises. After their disastrous postrevolutionary experience with War Communism (Trotsky recollected that the country looked into the “abyss”) and the advent of Lenin’s New Economic Policy, the Bolsheviks never again tried to abolish money, markets, and exchange. The government controlled most capital goods, but under the surface, markets—hampered to be sure—hummed. The West, moreover, was available for mimicking when necessary. Castro followed the Soviet model.
I am not saying Cuba has a free market. I’m saying it has an unfree market. That is far different from socialism, the obliteration of the market. Like the old Soviet Union, Cuba suffers from a government-saturated market. The state has clamped on so many regulations and taxes that the limits within which people can act are narrow. That is why Cuba is poor, lacking basic things we take for granted.
But within those constraints, the Cubans behave like entrepreneurs—buying low, selling high, profiteering, speculating, seeking at every turn to improve their circumstances. Despite what they may say, in their conduct Cubans are about as socialistic as Bill Gates and Warren Buffett. (See “Inventing Life in Cuba” by Marc Olshan, The Freeman, April 1998.)
Since Cuba has a government-saturated market economy, that makes it much more like the United States than Americans would like to think. It is interesting, then, that Castro invited President Clinton to try to persuade the Cuban people to give up “socialism.” What could he (and most of his opponents) possibly say? Get rid of government-provided education and health care? End state-guided investment? He’s for those things. The American people’s economic activities are constrained by bureaucratic regulations, taxes, subsidies, and enticing “services” only to a lesser extent than the Cubans’ are. The inane embargo on Cuban exports is one obvious example. Clinton and virtually everyone else in government enthusiastically support those restrictions. They want even more.
That’s why the thought of the President trying to persuade the Cuban people to give up “socialism” is so funny.