America Moves Left While Cuba Moves Right

10/19/2009 12:01 am EST

Focus: MARKETS

Terry Savage

Author, The Savage Truth on Money

Just as America seems to be taking a turn to the left, capitalism is rearing its head in Cuba. Raul Castro, brother of Fidel, and now the president of Cuba, has signaled that it’s time to do away with the “libretta.” 

The “libretta” is to Cuba what food stamps are to America. Except that the thick brown ration book serves the 11.5-million population, offering coupons for a diet of rice, salt, potatoes, legumes, bread, eggs, sugar, and some meat. 

While some Cubans supplement their food purchases with money sent from relatives in America, most of the population relies on the system that guarantees basic nutrition. And the Cuban government spends more than $1billion a year on food subsidies.

A strange thing has happened in recent years. The “libretta” doesn’t go as far as it once did, and many complain that it provides only ten to 15 days of food. In effect, there has been a sort of inflation of the “libretta”—with a coupon going for far less these days to provide food.

Cuban President Raul Castro took over from his brother in February 2008. He has said publicly that the ration books should be eliminated, and has been critical of “state subsidies that don’t give people an incentive to work,” according to those who follow changes in the island economy.

Although Cubans make very low wages, most of their basic necessities, including education and health care, are covered by the government. But now Raul Castro is proposing economic reforms, promising to allow more productive workers to earn higher wages. And he’s beginning to encourage a bit of “free enterprise,” according to observers there.

The stated goal is to lower the huge government costs for subsidizing “cradle to grave” care of the population. In its place would be incentives to encourage more production. 

Isn’t this a strange turn of events? One of the world’s last and longest surviving communist regimes is now turning toward capitalism, free enterprise, and incentives, just as China did. Cuba is turning away from the failed concept that the state can treat everyone equally, and keep everyone equally happy.

Look South, America. Look South!

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