Tag: communism

Lugar Targets Federal Sugar Racket

The federal government has been meddling with sugar production since 1934. Today’s convoluted system of supply controls, price supports, and trade restrictions benefits domestic sugar producers at the expense of consumers and utilizing industries. In other words, sugar producers “win” and the rest of the country “loses.”

Sen. Richard Lugar (R-IN) just introduced the “Free Sugar Act of 2011,” which would abolish the federal sugar racket. In a Washington Times op-ed on his bill, Lugar doesn’t pull any punches:

The collapse of communism brought an end to many of the world’s command-and-control economic systems and central planning by government bureaucrats. But a notable exception is the United States government’s sugar program. A complicated system of marketing allotments, price supports, purchase guarantees, quotas and tariffs that only a Soviet apparatchik could love, the U.S. sugar program has actually lasted longer than the Soviet Union itself.

A Cato essay on agricultural regulations and trade barriers elaborates on points Lugar makes in his op-ed:

  • The big losers from federal sugar programs are U.S. consumers. The Government Accountability Office estimates that U.S. sugar policies cost American consumers almost $2 billion annually. (Lugar says it could be as much as $4 billion.)
  • The GAO found that 42 percent of all sugar subsidies go to just 1 percent of sugar growers. To protect their monopolies, many sugar growers, such as the Fanjul family of Florida, have become influential campaign supporters of many key members of Congress.
  • U.S. food industries that buy sugar are harmed by current sugar policies as well. The employment in U.S. sugar growing is 61,000, which compares to employment in U.S. businesses that use sugar of 988,000.  According to a government report, for each sugar growing and harvesting job saved through high U.S. sugar prices, nearly three confectionery manufacturing jobs are lost.
  • Numerous U.S. food manufacturers have relocated to Canada where sugar prices are less than half of U.S. prices and to Mexico where prices are two-thirds of U.S. levels.

The federal government engages in a lot activities that are difficult to defend. But when it comes to sugar, the government’s protections are clearly indefensible.

The Cuba Embargo at 50

Fifty years ago Tuesday, the United States began to impose sanctions on Cuba in what would turn into a comprehensive U.S. trade, finance and travel embargo.

Though the embargo is not the cause of Cuba’s dismal and deteriorating economic and social conditions, neither has it worked to change Cuban policies or even lead to regime change.

It is time to lift the embargo. Doing so will not save communism from its inherent flaws; that system collapsed spectacularly elsewhere around the world in places where the West maintained or established trade. Keeping the sanctions will only further allow the dictatorship and its sympathizers to explain away the regime’s own failings. It would be better for Cubans and the world to see the unraveling of Cuban communism without U.S. intervention. When a free Cuba is eventually born, it will more easily flourish if enemies of the open society cannot rely on a false narrative about how the colossus of the North finally killed off the island’s socialist experiment.

A good way to start would be by lifting the travel portion of the embargo. That measure would expose ordinary Cubans to hundreds of thousands of American citizens, thus inevitably expanding Cuba’s informal economy and establishing innumerable relationships that would make Cuban citizens more independent of the state. The regime may try to reap the benefits of increased revenues, but it will have unleashed a social dynamic that will be difficult to control.

Cuban Government Will Choke the Nascent Private Sector

Following the announcement of massive layoffs in the public sector, the Cuban government published today new guidelines that will allow private employment in 178 economic activities. Among the newly authorized private occupations are masseurs, clowns, shoemakers, locksmiths, and gardeners.

However, these new entrepreneurs will face a few hurdles before enjoying the benefits of their own work. Not only must they get a government license in order to operate (according to official sources the number of permits will be capped at 250,000), but they will also have to pay high taxes. A leaked document from the Communist Party says that small businesses will pay between 10 to 40 percent of their gross income in taxes. On top of that, they will have to contribute 25 percent of their incomes to social security.

Don’t expect a thriving private sector in Cuba any time soon.

Now He Tells Us…

Here’s a story for the better-late-than-never file. Former Cuban dictator Fidel Castro confessed that communism doesn’t work and that his nation’s economic system should not be emulated.

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. The fact that things are not working efficiently on this cash-strapped Caribbean island is hardly news. Fidel’s brother Raul, the country’s president, has said the same thing repeatedly. But the blunt assessment by the father of Cuba’s 1959 revolution is sure to raise eyebrows. Jeffrey Goldberg, a national correspondent for The Atlantic magazine, asked if Cuba’s economic system was still worth exporting to other countries, and Castro replied: “The Cuban model doesn’t even work for us anymore” Goldberg wrote Wednesday in a post on his Atlantic blog.

Too bad Castro didn’t have this epiphany 50 years ago. The Cuban people languish in abject poverty as a result of Castro’s oppressive policies. Food is harshly rationed and other basic amenities are largely unavailable (except, of course, to the party elite). This chart, comparing inflation-adjusted per-capita GDP in Chile and Cuba, is a good illustration of the human cost of excessive government. Living standards in Cuba have languished. In Chile, by contrast, the embrace of market-friendly policies has resulted in a huge increase in prosperity. Chileans were twice as rich as Cubans when Castro seized control of the island. After 50 years of communism in Cuba and 30 years of liberalization in Chile, the gap is now much larger.

Economics 101

Today POLITICO Arena asks:

In his speech in Ohio yesterday, did President Obama draw a stark enough contrast with House Minority Leader John Boehner, whom he attacked by name eight times, to help his party in November?

My response:

The contrast the president drew was clear enough. His problem is that the people aren’t buying what he’s selling – and for good reason. His ideas, far from being new, have been tried countless times, both here and abroad. They don’t work. And they undermine basic American principles about individual liberty and free choice.

So when Obama says that Boehner and the Republicans have no new ideas, he’s partly right. (They have new ideas about how to address unsustainable entitlement programs – ask Rep. Paul Ryan.) At least in their rhetoric – their behavior in office, alas, is too often another matter – Republicans stand in substantial part for old ideas that work and conform more closely to the nation’s first principles, starting with lower taxes, less regulation, and less government management of the economy. That contrasts sharply with Obama’s countless “programs” to “stimulate” the economy, his targeted tax and spending schemes to create “green jobs,” to sell cars, and on and on. Listening to him, you’d think the economy would collapse were it not for Washington’s management of it.

The truth is quite the opposite, of course, as Americans are coming increasingly to appreciate. Economies prosper when entrepreneurs with ideas and capital are able to employ both for profit. But they won’t do that when conditions are uncertain, as they are when government meddles recklessly and uncertainly at every turn. How often have we heard entrepreneurs in recent months saying that they’d like to hire more people, but with the uncertainty of ObamaCare and so much else coming out of Washington, they’re sitting on their capital? And who can blame them?

So the answer is, get out of their way and let them do what they do best. But that’s not the Obama way. This “community organizer” – who organized people to demand more from government – seems to have no grasp of how economies work, beyond the failed command-and-control model. Even Fidel Castro has just now admitted that a government run economy doesn’t work. So either Obama smells the coffee coming now even from Cuba, or elections will take care of the matter.

Chávez Introduces ‘Good Life Card’, Better Known as Rationing Card in Cuba

The latest feature in Venezuela’s road to socialism was introduced yesterday by President Hugo Chávez. It’s the “Good Life Card,” an instrument that, according to the government, will make it easier to buy groceries at government-owned supermarkets.

Even though Chávez denies that the card is a way “to promote communism,” the concept of a government-sponsored card to buy food in a country suffering from acute shortages is well known. They call it a “rationing card” in Cuba.

Don’t Be Afraid of the Chinese Economic Tiger

The news that China has surpassed Japan as the world’s second-largest economy has generated a lot of attention. It shouldn’t. There are roughly 10 times as many people in China as there are in Japan, so the fact that total gross domestic product in China is now bigger than total gross domestic product in Japan is hardly a sign of Chinese economic supremacy.

Yes, China has been growing in recent decades, but it’s almost impossible not to grow when you start at the bottom — which is where China was in the late 1970s thanks to decades of communist oppression and mismanagement. And the growth they have experienced certainly has not been enough to overtake other nations based on measures that compare living standards. According to the World Bank, per-capita GDP (adjusted for purchasing power parity) was $6,710 for China in 2009, compared to $33,280 for Japan (and $46,730 for the U.S.). If I got to choose where to be a middle-class person, China certainly wouldn’t be my first pick.

This is not to sneer at the positive changes in China. Hundreds of millions of people have experienced big increases in living standards. Better to have $6,710 of per-capita GDP than $3,710. But China still has a long way to go if the goal is a vibrant and rich free-market economy. The country’s nominal communist leadership has allowed economic liberalization, but China is still an economically repressed nation. Scores have improved, but the Economic Freedom of the World report ranks China 82 out of 141 nations, just one spot above Russia, and the Index of Economic Freedom has an even lower score, 140 out of 179 nations.

Hopefully, China will continue to move in the right direction. That would be good for the Chinese people. And since rich neighbors are better than poor neighbors, it also would be good for America.