Cuban Capitalism

In 1994, five years after the fall of the Berlin Wall, communist Cuba was hurtling toward economic collapse. For decades, Fidel Castro's wealth-destroying policies could be sustained only by Moscow's largesse, but all of the Kremlin's subsidies to the island were eliminated when Boris Yeltsin dismantled the Soviet empire. In response, Castro initially opted for more state control of the economy. When this exacerbated economic problems, he quickly allowed limited amounts of entrepreneurship, betting that the market would rescue communism.

In the August/September 1994 issue of reason, Mack Tanner and Larry Grupp described a Cuba in transition: a beggar state without a patron, forced into limited experiments with "bourgeois economics." In what would become known as the "special period"—in other words, an economic collapse—Cubans, long accustomed to scarcity, found they had to abjure "soap, shampoo, toilet paper, toothpaste, pencils, shoes, headache pills, vitamins, and even the single piece of meat per week for which they have ration coupons." With the ensuing reforms, Cubans were allowed to "hold and spend American dollars; rural families can once again sell the surplus they produce; and city dwellers can legally engage in single-owner private business enterprises."

None of this was enough. Cuba, resilient in its adherence to collectivism, required another lurch toward classical liberalism. In 2010, after Fidel Castro retired from public life, ceding control of the country to his brother Raul, the government slashed 500,000 public-sector jobs in an attempt to save the state from insolvency. The newly unemployed were encouraged to start businesses. Writing in The American in January, Cuba watcher Philip Peters notes that you can find "lines of would-be entrepreneurs seeking—and getting—business licenses from the socialist government." According to the Cuban government sources, 75,000 business licenses have been issued since Raul's experiment in limited markets.

Tanner and Grupp proved prescient in other ways too, arguing that contrary to some optimistic assessments, there were no signs of Castro's imminent ouster and even less evidence that America's misguided policy toward the country—the embargo and travel ban—would precipitate the regime's fall. They added that "viable opposition is not likely to develop." But their most powerful argument is one that, 17 years later, the Cuban dictatorship might be beginning to understand: Only a total economic transformation of the revolution can save the revolution.