To Have and Have Not

Cuba and the predictable tragedy of central planning...

(The revolution will not be televised. Photo: Anya)

“Never insult a man when you’re selling him a car.”

~ Ernest Hemingway, To Have and Have Not, (1937)

Joel Bowman with today’s Note From the End of the World: Buenos Aires, Argentina...

We begin today with a story from the “predictable tragedy” file. Here’s Reuters:

Cuba slashes size of daily bread ration as ingredients run thin

As the newswire goes on to explain, the communist government was recently forced (by economic reality) to cut the weight of its subsidized ration of daily bread – a holdover scheme from the inglorious Castro era – from 80 grams to 60 grams. Continues Reuters:

Cuba's ration book, or "libreta," as it is known among island residents, was once considered a hallmark of Fidel Castro's 1959 revolution, providing a range of deeply-discounted products to all Cubans, including bread, fish, meat, milk, and cleaning and toiletry supplies.

Today, the crisis-racked government offers just a fraction of those products, and often, they arrive late, in poor quality or not at all.

To the shock of few, and the horror of many, the Cuban government is short on wheat flour. It is also short on potable water. And medicine. And hard currency. And, well, pretty much anything that can be appropriated, mismanaged or otherwise ruined by reliably corrupt politicians. 

The Old City and the Sea

And yet, the adjective “predictable” barely covers the reality on the needlessly impoverished Caribbean island. Indeed, the consequences of total state planning should have been apparent to practically anyone lacking an advanced degree in economics. Alas, Cuba also suffers from an acute non-shortage of communist apologists, who insist the starving nation’s self-inflicted woes are everywhere and always a consequence of external factors entirely beyond its control. (Insert “no true Scotsman fallacy/not real communism” argument here.)

An amateur connoisseur of economic idiocy himself, your editor visited Cuba back in the late 2000s. We stayed in a grand old hotel near the Malecón, a picturesque promenade that was steadily crumbling into the deep blue sea. During the entire time we were there, we didn’t notice a single other guest in the place. (We were, to be sure, keeping a younger man’s hours back in those days... but such stories are for another time.)

(Our hotel. Empty by day, emptier by night. Photo: Anya)

On the surface, the island at first appears as the quaint setting Ernest Hemingway so vividly described for us in his iconic novels and essays written from and about the place. The ubiquitous street musicians, performing the Buena Vista Social Club setlist on an endless loop. Classic, American-made Chevrolets and Buicks and Fords, vintage specimens from the ‘40s and ‘50s, cruising down broad, cobblestone boulevards. Cabaret bars filled with cigar smoke and questionable decisions and all the things a man is supposed to have and have not. 

(Vintage autos line the streets of a place suspended in time. Photo: Anya)

Eventually, however, the music stops, the rum wears off... and the denizens of El Floridita and La Bodeguita stumble out into the sharp and disinfectin light of day. What was once an intoxicating realm of promise and paradox is revealed as the haunting specter it always was. “The bell has tolled,” you can almost hear the ghostly whisper, “and it tolls for thee.”

So, too, does the utopian dream of centrally planned economies fade under well-hydrated, daylight inspection. 

The Sun Also Sets

The problem with relying on The State for one’s daily bread is that, even if The State truly “wanted” to act as Baker in Chief (and Butcher in Chief, Candlestick maker in Chief, etc.), it simply lacks the necessary ingredients to do so... which is to say, the ability to make rational decisions based upon real world market signals. Ludwig von Mises recognized this as the Economic Calculation Problem.

Without private ownership of the means of production, there can be no true market... no price formation... and thus no way to account for profits and losses. In the absence of real prices, without knowing how much a good or service is “worth” to each side of the trade, suppliers are left twisting in the cool ocean breeze, relying on their own wishful “estimates” as to what the market wants, when it wants it, and how much it is willing to pay in exchange. 

Much as politicians rail against “unfair prices,” as if there is even such a thing (see for instance Mrs. Harris’s Price War), those much-maligned prices nonetheless provide a critical market signal, without which even the most robust economy cannot long stand.

The issue, as per F.A. Hayek’s diagnosis, is that knowledge is “dispersed” throughout the market, among the countless individuals acting (and reacting) within it. Only individuals with localized knowledge (including their own particular demands, preferences, motivations, etc.) can properly coordinate supply and demand, Hayek argued, by forming part of the “spontaneous order” required both to establish and respond to dynamic price signals in real time.

A Farewell to Alms

Whether planners’ intentions are blindly utopian or consciously nefarious, it remains impossible for The State to possess the specific knowledge required to manage an economy. 

In the end, distorted signals can only lead to overcorrections, followed by the all too familiar “boom and bust” cycles we see the world over. Cue more arbitrary planning, irrational resource allocation, malinvestment, widespread shortages and general misery for the population at large. 

Cue, in other words, Cuba.  

Of course, all this ought to be common knowledge. We should have left such nonsense behind, long ago bade farewell to alms. After all, if price fixing, capital controls and markets by committee really were the secret ingredients to capital formation, economic growth, and higher standards of living generally, Cuba would look more like Singapore, Venezuela would resemble Switzerland and Argentina wouldn’t be picking itself up out of the gutter and shaking off a 75-year collectivist hangover. 

Alas, here we are, standing in the broad light of day, with our academics and our politicians still acting like they don’t know the difference between a moveable feast, and death in the afternoon. 

Stay tuned for more Notes From the End of the World...

Cheers,

Joel Bowman

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