As you can probably imagine, I was tickled pink today to learn that the progenitor of one of the most enduring communist dictatorships of our time has finally recanted, acknowledging that Cuba’s economy, largely owned and directed by the state (in absence of price mechanisms), is a failure:

HAVANA – Fidel Castro told a visiting American journalist that Cuba’s communist economic model doesn’t work, a rare comment on domestic affairs from a man who has conspicuously steered clear of local issues since stepping down four years ago.

Unfortunately, all I got out of the story is the nagging thought of how insane is Dan Mitchell? Why? Well, because Mitchell boils all of communism’s problems down to excessive government:

This chart, comparing inflation-adjusted per-capita GDP in Chile and Cuba, is a good illustration of the human cost of excessive government.

He goes on to show a chart of per-capita GDP growth between Chile and Cuba. As if Chile has been the model of restraint over the past few decades. Sure, Chile liberated it’s markets, but Pinochet was a disaster to every individual’s rights — something I’m assuming CATO still stands up for. Liberalization of markets is but one facet of how to analyze a society’s performance…and the question is certainly not about “small” vs “large” government, it’s about the smooth functioning of markets. Since markets exist within the confines of public institutions, it is worth a look at how to structure institutions as to best serve the goal of both economic growth and greater societal need (which are not necessarily mutually exclusive).

It is my inclination to view smaller government as the right level of government interaction with markets…but that’s a case-by-case thing. There are a few of places in the economy where I think heavy government intervention is warranted (like the application of law), and other places where I think it is not (like hair cuts). Just saying small government doesn’t do the job here. Yes, the communism that has plagued Cuba is a disaster, but that has nothing to do with the size of the Cuban government. The institutions which the Cuban government has set up are at odds with both human and economic development — they don’t work. Sure, the government should be scaled back in many ways — but that is still a question of how institutions should be structured, and not some anonymous specter of “big government”.

The Danish government is among the “largest” in the developed world, based on taxation as a fraction of GDP…and Denmark is also one of the most free-market countries on earth by multiple measures…and they continue to head in a more neo-liberal direction (i.e. cutting UI benefits in half).

The bottom line: Cuba’s problem is/has been communism as an institutional arrangment, not so much with the size of the government, per se.

Update: I softened my language in the bottom line, h/t to @jbarro.

About these ads