The Cuban Money Crisis
bloomberg.com
bloomberg.com
The real issue, for consumers, is that they were given almost no money. People would earn something like 480 CP per month. If you were doing well, you had access to another source of income (foreign remittance, black/grey market, tourists, etc)
But for consumers who did have enough money, it was very easy to convert back and forth. Everyone had stocks of both CP and CUC on hand and used them as needed.
Of course, people would complain "CP is worth nothing, this is a problem!", but effectively the real issue is that salaries were nothing. People wouldn't have been happier receiving 15 CUC per month.
Where the real issues happened was at the level of state enterprises. I worked with an NGO working with agriculture. Capital investments were in CUC. Yet enterprises were forbidden from using CP earnings to finance CUC purchases. IIRC, enterprises had to balance their budgets in both currencies. This led to major inefficiencies.
Note: 15 CUC is a pittance. The way people survived was through the other benefits of the state. Ration cards, subsidies, etc. I don't really know how that worked. People certainly were very poor, but not as poor as "15 CUC" sounds.
Why is this? I don't think it's just intellectual cop-out. I think the problem is that economics and all the other complex systems issues that hide behind politics are things that human beings are just not well-equipped to understand. We're bad at economics and social planning for the same reason we are bad at understanding the genome holistically. We just can't "grok" stuff like that.
I sometimes wonder if this isn't a neurological barrier. After all, how often in human evolution did we confront the need to understand parallel auto-adaptive systems with tangled webs of causality, multiple positive and negative feedback loops, and chaotic behavior? This may require neurological hardware that we just don't have, so we try to muddle through by applying linear reductionism. It doesn't work very well, but it's the only cognitive tool we have for decomposing a system that remotely works at all.
The free-ish market with a welfare state is a mess of hacks we've come up with through historical experimentation that seems to offer the benefits of certain classes of systems while mitigating their downsides. It's not pretty but it doesn't hurt as bad as being set on fire.
I think we _can_ grok stuff like that, but not easily and not without study. I think that the main reason there are so many arguments about economics is that most people have not done that and because people know where various economic arguments lead and they've already made up their minds on those issues. Economics is just too fundamentally intertwined with public policy to be left to pure economists. Almost (and that's just a hedge) everybody who puts forth economic opinions online, for example, has some sort of political axe to grind.
A notion that just about every other science, that is not out there in the lala land of social sciences, have since replaced with dynamic modeling.
They insist that debt is just a exchange between individuals, with banks just sitting there passing the baskets back and forth.
They also have suffered 50 years of a trade embargo by their main natural customer (they were a huge Sugar exporter to the United States before we cut them off).
It might be due to universal healthcare, or it might be that people simply can't afford "bad" food and mostly eat what they're given by the government. And the government doesn't give them fast food, it gives them traditional staples like rice, beans, etc.
http://en.wikipedia.org/wiki/Health_care_in_Cuba#Health_indi...
Just because the healthcare is universal doesn't mean that it's good. There are differing views of the efficacy.
http://en.wikipedia.org/wiki/Health_care_in_Cuba#Contrasting...
The main criticisms are that the government has the power to first game the statistics or outright manufacture them. And because journalists don't have the freedom to report honestly (repeat negative exposure means no more visas) we don't actually know if the stats are gamed a little or a lot.
[1] great healthcare! https://www.youtube.com/watch?v=MK3AnxSgdxA
http://ije.oxfordjournals.org/content/35/4/817.long
There is propaganda on both sides, it is obvious by now that communism sucks. However, to say that everything about communism sucks and that nothing can be learned from it is intellectually lazy.
Additionally, if you're trying to compare Cuba to the US, you need to keep in mind that the US has a abnormally high and statistically powerful incidence of car crash fatalities (we drive everywhere), and Cuba has an anomalously low level of accidental death.
The idea that the only important contribution of a health care system is through the outcomes it produces to major health incidents is bizarre; if that was the case, then preventive care would have no value.
The idea that life expectancy statistics do a poor job of capturing the quality of health care systems isn't mine; it's a pretty popular one among economists.
The argument is that the observation "worse outcomes to major health events" does not justify the conclusion "better life expectancy is not due to health care system", because a health care system can be better at reducing the probability of major health events, while having worse outcomes from the health events that still do occur, and still have the net effect of those differences bet better life expectancies when all other factors are equal.
> Is there a statistic we can find to validate it?
I'm not arguing that Cuba's health care system is the reason for the better life expectancy numbers, I'm pointing out that the premise from which you drew the conclusion that it was not does not lead to that conclusion. (It supports the conclusion that Cuba's health care system's ability to respond to major health events is not the reason, which is a much narrower conclusion.)
I'd personally be surprised if the health care system alone was the explanation (whether through preventive care or otherwise.)
If it's not preventative care that Cuba does particularly well, what is the thing it does well? There would need to be something, right? One of the major tasks of the health care system is to prevent people with CVD, stroke, and cancer from dying. Cuba doesn't do a particularly good job of that. I'm sure there are other things a health care system needs to do well. What are they? Then we can go find out how well Cuba does them.
They have Europe and all of their natural" trading partners in Latin America.
The us is not the only place they can sell sugar tobacco and bananas. Also why not buy cars from europe or Japan etc? Why must it be american cars?
Meaning that if you traded with Cuba, and then attempted to trade with USA, and USA found out about your Cuba trading, it was pretty much game over.
So nobody trades with Cuba for fear of being banned from the US market.
Because like much of the Carribean, one of the prime industries in Cuba prior to the embargo was tourism, and distance is a factor in tourism, and the main source of tourists with money to spend that would travel to Cuba in the absence of the embargo is the United States.
And, perhaps most importantly, because as big of a real effect that it has, those clear real effects that are hard to quantify exactly provide a convenient and plausible cover for any harms that are really due to the economic policies of the government.
> The us is not the only place they can sell sugar tobacco and bananas.
No, its just one of the places (and the most affluent one) that they have the best position compared to other sources for doing so (without the embargo) because of transport cost per unit of goods.
> Also why not buy cars from europe or Japan etc? Why must it be american cars?
As the article here notes, those with the money to afford it are buying cars from elsewhere (Korea and China are mentioned specifically.)
They could have been the main manufacturers or skilled labor for the caribbean, if they had tried to. Unfortunately, collectivization doesn't seem to have been conductive producing any significant industry, other than healthcare and education as an export.
There are 550m people in south america, central america, and mexico with a combined $6.5 trillion GDP.
If Cuba is unable to convince any of the 550m people near them to visit, maybe it's not a tourist attraction and they should find something else to do.
I also think you completely missed the second (original, not quoted) paragraph in the past you responded too.
In the 80s, North Korea issued separate types of "foreign exchange certificates" based on whether you were from a socialist or a capitalist country. Andrew Holloway describes the arcane system in "A Year in Pyongyang." Local currency could buy a few simple things. The red won used by visitors from GDR or USSR could buy substantially more, but the blue won from capitalist countries was at a premium and allowed access to the best shops for tourists.
It reflects the awkward North Korean currency paradox: a hatred for the capitalist West but a deep need for Western capital.
It's fascinating and frustrating to me how much more there is to unwind from the Cold War. Lingering soviet satellites like Cuba, North Korea, Belarus, maybe Vietnam... all very different situations, but each has to grapple with its own basket of leftover problems from that era.
Hopefully Cuba will prove that softening relations provides a way out of some of these dilemmas.
But you're right, I don't think it's completely far fetched.
On the other hand Bretton Woods probably wouldn't have had the same effect with just any global currency, the US did have a few perks (intact infrastructure, great mix of labor and capital, rising consumer class, demographic dividend, etc.)
Cue technically legal schemes, exchange rate manipulation, real estate bubble and the other fun things we've seen lately in Iceland, Greece etc.
I wish to remain optimistic, but I don't believe the Cuban government can match the level of cunning and expertise of e.g. Goldman Sachs.
As an American tourist (with a French bank account), we were restricted to taking out CUC exclusively at ATMs, and most tourist-facing places would accept only CUC from us (though a few of the paladares and casa particulares preferred USD). The National Museum for the Arts in Havana, for instance, charged the same price in CUC as CUP but only accepted CUC from us (25x the "locals rate").
It fails to account for a vast number of things that are critically important.
The notion of scoring high on the human development index while living under an extremely repressive dictatorship is more than enough to completely discredit it. Equivalent to the UN allowing Saudi Arabia on the human rights council.
People that have never experienced any meaningful freedom of speech, press or ideas - can have a high HDI? I think that's inherently impossible. What's the value of an education that occurs in the very narrow box of a dictatorship that doesn't allow for freedom of expression, for competing ideas, etc? I say it's worth very little, and it's a cruel joke to rank Cuba so high.
How can anyone properly score Cuba's healthcare system when it almost entirely lacks transparency?
"Normalization of relations with the U.S." is to be expected after Russia wrote off multi-billion-dollar Cuban debts. Who wins? Cuba a lot, USA a bit. Who won't get anything? Same side that never got any good deals in the last hundred years.
Cuba is a different situation. There was no flow of foreign currency in exchange for Cuban pesos, so they are worthless.
A closer analog to Greece are all of the south east asian countries that have their own currency, but it is weaker than the dollar & euro. Those seem to be working just fine.