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Cuban Property Reforms

As part of a raft of recent economic reforms, including a limited liberalization of self-employment, the Raul Castro government has recently reiterated its plans to introduce a market for housing at the end of this year. The reforms will permit Cuban homeowners to buy and sell their residential properties for the first time in decades. Discussions of the planned housing reforms have often misstated the existing law and have failed to note that the Cuban government has taken similar steps before, with disastrous results. That earlier experience suggests that, without a more ambitious transformation of the Cuban economy, these admittedly significant changes to Cuban housing law will yield the same disappointing consequences this time around.Although commentators (including arecent article in the New York Times) often mistakenly claim that all property in Cuba is owned by the state, Cuban law has long permitted private homeownership.

The nationalizations of property by Fidel Castros government after the 1959 revolution focused on agricultural, industrial, and commercial properties. Apart from confiscating the homes of those who left the island, the Cuban government did not undertake a wholesale collectivization of the countrys housing stock. Instead, from the beginning, its policy has been to widen the opportunities for private homeownership. To that end, it expropriated rental properties in order to transfer them to tenants, who purchased them from the state at low prices with state-subsidized credit. The Cuban government has also allowed residents of state-owned housing to purchase their units from the state at fixed (and relatively modest) prices. Absentee ownership remains illegal, but Cubans are permitted to own a single vacation property. By the late 1960s, virtually all commercial activity in Cuba was firmly in state hands, but private homeownership rates have remained consistently high, reaching nearly 90% in the late 1980s.In some respects, homeownership in Cuba resembles homeownership anywhere else. Cubans enjoy a great deal of tenure security. They exercise control over when and how to maintain their homes. They can, within limits, pass their property down to their children when they die. The most significant difference is that Cubans are not permitted to buy or sell their homes.Cubas blanket prohibition on sales leads to enormous problems. Cubans get married and divorced, have children, and occasionally need to relocate in order to live nearer to work or school. When these things happen, the inability to sell their homes or buy a new one makes it virtually impossible for Cubans to move into a house that matches their needs. As you might expect, the difficulty of sharing a house with, say, an ex-spouse and her new husband has inspired no small amount of dark Cuban humor.The state allows homeowners to swap their houses with one another in a heavily regulated barter transaction known as a permuta. In order to get a home that suits them, however, Cubans must sometimes put together intricate three and four-way transactions that resemble complex baseball trades. The states role overseeing the permuta process has predictably stimulated a great deal of corruption.The difficulty of arranging permutas has been exacerbated by Cubas severe housing shortage. Over the years, the Cuban government has tried solving this problem in the usual socialist ways writing five-year plans, using state enterprises to build massive, soul-crushing, soviet-style housing projects, and mobilizing small groups of people into militant microbrigades to construct housing for themselves in their spare time. None of these strategies has allowed Cuba to come close to meeting the demand for housing on the island. The cash-strapped government has never been able to dedicate enough resources to overcome the backlog of demand, and its job has been made more difficult by the inefficiencies of its state-run construction industry. The result has been severe and persistent overcrowding. Although genuine homelessness is very rare and Cuban cities lack the massive shanty-towns that skirt most Latin American cities, it is extremely common for Cubans to live in dangerously overcrowded and dilapidated conditions.Contrary to some news reports, the housing reforms planned for the end of this year are not the first time the communist government on the island has experimented with allowing the sale of residential property. In the mid-1980s, the government briefly permitted the sale of homes. The immediate result was sky-rocketing prices. The government blamed speculators, but the rapidly rising prices were a fairly predictable market response to a severe housing shortage. Within a few short years, the government slammed the door shut again. (Of course, illegal sales have continued to occur through corruption of the permuta process.)The outcome of the 1980s experiment illustrates why Raul Castros housing reforms are likely to fail this time around as well. No matter how heavily it regulates the buying and selling of property to prevent speculation, the government cannot repeal the law of supply and demand. Given a housing shortage that is now far worse than it was in the 1980s, housing prices are certain to shoot through the roof.What the Cuban government refuses to acknowledge is that Cubas housing problem is not really a housing problem. Its a socialism problem. In a market economy, rising housing prices stimulate activity among homebuilders competing with one another to meet the demand as efficiently as possible. High home prices in Cuba will not magically generate housing production where construction materials are almost impossible to come by and where the construction of new housing remains largely in the hands of inefficient state enterprises. Instead, Cuba is likely to find that the most immediate consequence of the introduction of a housing market will be to move the best properties into the hands of those fortunate Cubans lucky enough to have access to hard currency, either in their jobs or through remissions from abroad.This is not to say that the Raul Castro government is wrong to liberalize housing. Allowing home sales will add fluidity and mobility to its crippled housing system. That is a change for the better, at least relative to the low baseline of its current system. But Cubas housing problem will only be genuinely solved when the government goes much farther and liberalizes the other sectors of the Cuban economy as well.

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Fascinating. Thanks.Interesting how when a dictatorship to which a publisher is sympathetic announces a policy decision that appears to even slightly make things less awful, it's praised as significant progress.

It might be interesting if it were true. Are you saying that you think the New York Times is sympathetic to socialism as opposed to capitalism, or sympathetic to dictatorships as opposed to democracy, or sympathetic to Castro as opposed to Batista. Or are you just throwing out someone else's talking points?

I agree with Unagidon -- I would chalk it up more to ignorance/poor reporting than any kind of pro-Castro bias.

We Canadians are free to travel to Cuba, and it is probably my favourite destination, The weather is great, the countryside is beautiful, the beaches magnificent, and most important, the people are wonderful.The housing conditions are poor for most people, but some have built, or are having built, very nice homes. We are of course tourists, so we don't see Cuba as Cubans see it, but where we like to go, Guardalavaca, the local housing is within a few hundred yards of the resorts. It is shabby, and certainly there is overcrowding, but as mentioned above, there are no shanties.My observations are always as follows:You have to convert currency at the State run bank, which has got to be the height of inefficiency.There are armed guards in the departure lounges at the airports, this is after the security check, so it is obviously to keep Cubans there.According to the locals, corruption is rife.The locals don't talk politics, but they don't like Americans, and who can blame them.It is the one place in the N American continent which is not overrun by Americans, but Quebecois are twice as rude.So I hope that when change comes, and it will, it happens slowly, and the USA does not move in expecting to be greeted as saviours. Cubans have a long collective memory, and everything they remember about the USA is negative.

Thanks for the interesting tutorial about real estate conveyance in Cuba. Id be interested in hearing from those who have insights about the current level of discontent in Cuban society as a whole. (Thanks to Micahel Cowtan for his personal observations.) There are undoubtedly still a sizeable number of true believers in Fidel Castros revolution and his brand of socialism, but what happens when he passes completely from the national scene? Raul was also one of the core members of the revolution, and he has little in the way of taint associated with him as a result of the apparent absence of corruption in his administration of the Cuban defense forces, but he lacks Fidels sense of presence, both literally and figuratively. Raul is decidedly low key in comparison to his brother, while Fidel in his heyday wasnt hesitant to encourage the cult of personality around him. Fidel could also periodically reinvigorate Cubans sense of nationalism, as he did so skillfully during the Elian Gonzalez repatriation issue about a decade ago. Does Raul have a similar ability to transform Cubans frustrations with the economic and social hardships of daily life into patriotic zeal? I assume he will carefully lift restraints on other reforms, too, all the while attempting not yo betray the ideals of the revolution, but without his brothers larger-than-life presence, I wonder if Raul can keep the lid on the pressure cooker.

unagidon 09/06/2011 - 3:11 pm :

Are you saying that you think the New York Times is sympathetic to socialism as opposed to capitalism, or sympathetic to dictatorships as opposed to democracy, or sympathetic to Castro as opposed to Batista.

Socialism, of course. The belief that governments have the duty to aggressively protect their societies from excesses of individual greed is axiomatic among progressives. Therefore, governments that do this to a much higher degree than others are given much more good will up front. Conservative governments are considered dangerous at their outset, and in need of an extraordinary degree of close monitoring, whereas socialistic governments are given up-front credit for having their hearts and minds in the right place. They are free to engage in a fair amount of economically and socially harmful activity before progressive publishers decide to call them out editorially.Of course, the same thing works in the other direction. It's a shame we're stuck in this bipolar way of thinking. It skews much of our discussion and argument into unrealistic black-white channels.I wonder whether Eduardo may not be being too charitable in assigning most of the blame for biased reporting to navet and ignorance. Black-white thinking leads necessarily, I think, to a circle-the-wagons way of reacting to just about any event - the assumption that if you don't push your side's point of view aggressively and unremittently, and not give an inch, your opponent will walk all over you.

"Socialism, of course. The belief that governments have the duty to aggressively protect their societies from excesses of individual greed is axiomatic among progressives."Socialism is the ownership of the means of production by the State. It is not universal healthcare, universal education, minimum wages, business regulation, taxation, public housing, disaster relief, postal or rail subsidies, interstate highways, economic stimulation, gun control laws, public support of the arts, water fluoridation, food regulation, public works, free WiFi, public libraries, traffic laws, abolition of capital punishment, pollution regulations, or anything else. Think of it this way: nationalized industries = socialism, otherwise, no. Once you have that straight, you will see that my list contains a whole array of choices that people calling themselves "conservative" or "progressive" (whatever those are supposed to mean once one gets outside of their purely tribal contexts) can then discuss on their own merits. Otherwise, it skews much of our discussion and argument into unrealistic black-white channels.

If it helps David's thinking about socialism, it should be said that no one in Cuba is living in a sewer, and life expectancy in Cuba is the same as the USA.Reminds me of when I was a kid and listened to "better dead than red". I always thought that maybe those communist countries were not great, but I would prefer to be alive than dead.

unagidon --I fear you are under the misapprehension that for many conservatives the word "socialism" refers to an economic system adopted by certain governments at different times. Having a history, such a government can be evaluated based on facts. But the aforementioned conservatives don't mean that. For them "socialist" is a dirty word useful for discrediting an opponent, which like many dirty words convey only the users negative feelings, not facts which might be checked out.

Alexis de Tocqueville - - "The most dangerous moment for a bad government is when it begins to reform."The Old Regime and the Revolution (1856)

Michael Cowtan:There are armed guards in the departure lounges at the airports, this is after the security check, so it is obviously to keep Cubans there.We are of course tourists, so we dont see Cuba as Cubans see it...According to the locals, corruption is rife.Wow! and this is your favourite destination? Different strokes for different folks.

I would think, U, that a mindset that wants the government to directly control - to own - all production would need to control - own? - a lot more almost directly - to ensure that raw materials and components are delivered as needed and finished products will be distributed as desired. Surely, ownership of production is only the first step - you can't stop there. For example, what does government ownership of housing have to do direrctlywith production?I'm obviously not well read on political theory. As Ann suggests, neither are, probably, a lot of people who find the European model of wide and deep state control of individual lives at least worrisome. The thing that bothers me most - call it what you please - is the very real possibility of government's clamping down on individual liberties. If "socialism" doesn't best describe that - fine. I'm sure Fascism or some other more or less familiar label would do as well. Liberal democracy, even, properly transmogrified, would do as well.But do we need to get hung up on terminology? Do most of us agree (blindered Canadian tourists excepted) that the people of Cuba have been living for half a century under a cruel socialist dictatorship masquerading (feebly) as a workers' paradise? If so, doesn't that at least give a reasonable person pause when choosing his preferred model of government?

Interesting observation Helen. Corruption is relative. Cuba is # 69 on the Transparency International Corruption Index, most sunshine destinations are much worse than that. Mexico for instance is 98. I will not go to Mexico because the police are not on my side, they are there to "screw me over" if possible. In Cuba you can trust the police.As for seeing places as the locals see it, none of us see the real conditions anywhere if we go to a resort.As a "nice" Canadian, I am astounded that the richest country in the world seems to think that it is OK for people to be homeless. That is not a mindset that I, or many people in the developed world, accept. Not to say it does not exist in Canada, it does. The difference would seem to be that we are ashamed that some Canadians are forced to live like that. Does that make us less "free" than Americans? I suppose it does, not that you are going to notice the difference if you cross the border. My personal experience suggests that many Cubans dislike the situation in Cuba, but please don't think that they want to be like America, they don't. There collective memory of America is that they were controlled by American gangsters, and the Cubans who were corrupted by those Americans. One other reason why it is great to be a tourist in Cuba. My Canadian Health Insurance covers the full cost of treatment in Cuba. The last time I went to Florida, health insurance cost almost $1200 for my self and my wife, for two weeks. I cannot afford that twice a year.

"But do we need to get hung up on terminology? Do most of us agree (blindered Canadian tourists excepted) that the people of Cuba have been living for half a century under a cruel socialist dictatorship masquerading (feebly) as a workers paradise? If so, doesnt that at least give a reasonable person pause when choosing his preferred model of government?"This statement doesn't get us anywhere. It ignores all the important stuff. Sure, Cuba Bad, America Good. But their government has also enjoyed wide support for 50 years. Note I say support, not love. What the people have supported are (first and foremost) their nationalism (which Mr. Cowtan points out); their medical system; their educational system; low rents; etc. The Cuban revolution that brought Castro to power was also a popular revolution that had wide support in the country. A more interesting question is "why was that"? How has Castro held onto power for 50 years? (You can't just say because of the police and military; these people are drawn from the same people who support the government.) What kind of government would the Cuban people really like to have? Would they really go back to the kind of governments they had before Castro? If they embraced democracy, would they utterly reject socialism? The question of what would they save is as important as the question of what would they jettison if you want to understand who they are and where they might be going.Regarding "the European model of wide and deep state control of individual lives" I am not seeing Europeans talk like this. It might look like this to you, but it doesn't look like this to them. And again, whether you hate their system(s) or not, the important question is "why do they support those systems"?

"As Ann suggests, neither are, probably, a lot of people who find the European model of wide and deep state control of individual lives at least worrisome"David S. --I think you confuse government ownership/control of basic industries with provision of social support systems. The first IS a limited sort of control, whereas the second is not a matter of controlling individual but of supplying them with the means to live their lives in more secure fastion. This is the sort of thinking I'm talking about when I refer to conservatives confusing "socialism" with all sorts of other things, and then making "socialist" a dirty words.You really do need to get into some basic political and social studies. But be sure to listen to both sides.

Ann (9/7 4:57 pm), I'm talking mostly about generalities, general principles, attitudes, reasonable conclusions from what seems - to me, of course - a fair amount of evidence. College classes and certification aren't required for that. No doubt you're convinced I'm a conservative, ignorant, and confused. Fine - I concede that from your point of view, I'm guilty on all counts. I don't see the evidence, but that probably simply proves your point :0)

Michael and U, it's a matter of values and priorities. If the Western democracies were to become dictatorships, I have no doubt that great improvements in many areas could fairly rapidly be achieved. Democracies are inefficient and wasteful. Dictatorships can, for example, eliminate poverty simply by making it unnecessary and illegal - unnecessary by providing free food, shelter, and medical care, and illegal by prohibiting any recipient from taking advantage of them. When governments see and treat people as objects to control, they can bring about much social improvement. Presumably, members of dictator classes believe that the sacrifice of individual liberties is worth the cost. Fair enough - most people probably ask for little more than to be fed, housed, and cared for when sick. The notion that there's anything particularly valuable about individuals other than as servants to the collectivity is an abstraction that they might quickly become accustomed to doing without, so long as their basic physical needs are met.

This BBC article ("The Revolution of Capitalism") is not on topic, but it's generally relevant, I think. It's about how capitalism, not communism, has destroyed the middle class and our expectations. It surely seems to describe the situation of middle class people these days, especially as contrasted with the Victorians, and, I'd say, the '50s. Claims capitalism is intrinsically unstable, and maybe it's right.HEre's a bit:"Marx was wrong about communism. Where he was prophetically right was in his grasp of the revolution of capitalism. It's not just capitalism's endemic instability that he understood, though in this regard he was far more perceptive than most economists in his day and ours."More profoundly, Marx understood how capitalism destroys its own social base - the middle-class way of life. The Marxist terminology of bourgeois and proletarian has an archaic ring."But when he argued that capitalism would plunge the middle classes into something like the precarious existence of the hard-pressed workers of his time, Marx anticipated a change in the way we live that we're only now struggling to cope with." (http://www.bbc.co.uk/news/magazine-14764357

Thanks for the URL, Ann. Here's a bit about the author:http://en.wikipedia.org/wiki/John_N._GrayFrom it:

Gray sees volition, and hence morality, as an illusion, and portrays humanity as a ravenous species engaged in wiping out other forms of life. Gray writes that 'humans ... cannot destroy the Earth, but they can easily wreck the environment that sustains them.'

and

Furthermore, he argues that this belief in progress, commonly imagined to be secular and liberal, is in fact derived from an erroneous Christian notion of humans as morally autonomous beings categorically different from other animals. This belief, and the corresponding idea that history makes sense, or is progressing towards something, is in Grays view merely a Christian prejudice.

David S. --And how does any of that biographical information falsify his economic theory? Science is not a matter of the good guys against the bad guys, nor the religious v. the non-religious.

It's not science, Ann - it's philosophy. He's not a scientist, just an opinionator.

"When governments see and treat people as objects to control, they can bring about much social improvement."So are you saying that such policies as Social Security and Medicare are cases where the government is treating people as objects to control?

While Leftists are probably satified with Cuba and the status of things there, the "progressive policies" of Fidel's brother Raul, it is a tragedy all the same. In fact Cuba is such an old tragedy, that it is easy to forget the plight of the average Cubano. After Fidel with blood on his hands had his way with that country, now his brother Raul, (also a murderer by the way) seems to see what a catastrophe Fidels Cuba is, and that it seems, passes for "progress".At least Chavez in Venezuela has not started murdering people like Casto did. Hopefully Chavez will stay on-course and keep good relation with the Catholic Church. In that sense, Chavez' alliance with Iran's president (a fanatical Muslim) may have helped; who knows?Meanwhile, regarding the Cuba-embargo, the US is stuck in a quandary. Because it was first imposed by JFK, who is admired by most Americans regardless of party, and is quite naturally and probably justifiably revered by Democrats, and since in general Democrats are touchy about being seen as going too soft on Communists, to date no Democrat president has seen fit to lift the embargo. The Republicans also have a problem regarding this. They cannot afford to enrage Florida Cubans, and most rank-and-file Republicans oppose lifting the embargo because it would be seen that in the end we will cave in to Communists, but the fact of the matter is that Republican business types would like to start working/investing in Cuba.After all these years of moronic rules by crude Leftists, it will take Cubans several generations to bring back a work ethic, not to mention the Church, decency, some kindness and culture.Oh well, I wish the Cubans luck; I would like to visit Cuba someday.

Ken, you really do have a rich fantasy life.

KenYou can visit Cuba any time you like. Just go via Canada or Mexico. A tip. If you go, don't make a point of being American, and take Euros or Canadian Dollars. Much better rate of exchange.

The Castro regime is a family-run enterprise. The leading candidate for Defense Minister, to follow now "President" Raul Castro, is his own son. The second and third generation apparatchiks want to live well, but in Cuba you cannot live well within the law. It is awkward for the scions of the Castros and their families to live openly in nice houses that are illegal to buy or sell. Hence, the law is changed so all can buy and sell respectable properties. But, this is a meaningless reform. The average salary in Cuba is $12 per month. It would be difficult to save enough to buy a home on such a stipend. Raul Castro allowed a few years ago people the right to own computers and cell-phones. Again, only government-insiders can afford such luxuries, but now they need not hide their electronics to avoid charges of revolutionary insincerity. I am glad our Canadian friends enjoy their cheap vacations in Cuba. It helps when you don't give a hoot about political prisoners and other such malcontents. Compared to Cuba, North Korea doesn't have good beaches and kimchi can grow old. But why not give it a try too.

J.C. Marrero, I was wondering if you could comment on the US trade embargo with Cuba. On one hand, ending the embargo would immediately benefit the Cuban government who seems to own the commanding heights of the economy. On the other hand, the flow of foreign capital into Cuba might cause a power shift and a trend towards political liberalization (at least that's the argument). Eastern Europe is often held up as the argument for this. What do you think?

William, for one perspective on current level of happiness (or not) in Cuba, read the blog Generation Y. It is banned in Cuba, but has found a way to be heard, both within and outside of Cuba.

Thanks, unagidon. The US has an porous embargo that allows medicine and food, but a true complete of the US embargo would require the US to extend credits to a nearly bankrupt Cuba for it to purchase US goods. Lifting the embargo tomorrow without lending the Cuban regime funds with which to purchase goods would mean very little. Spain, Italy and Canada are among Cuba's top trading partners. Mostly, Cuba has leased beach front properties to firms from those countries to build tourist facilities. Cuba also hand picks employees (mostly white Cubans) to work at these hotels and restaurants. The firms pay the Cuban government the salaries of these Cuban nationals in hard currencies and Cuba then pays the Cuban employess in near worthless pesos. However, these jobs are worth more than a medical degree because of the tips involved. So, the government makes sure that only Cubans with demonstrated loyalty to the regime will get these positions--a famous example is Elian Gonzalez's father who was rewarded with a waitressing job in one of these resorts. The key to it all is Government control. Castro, paraphrasing Mussolini without attribution, early on declared that "everything is permitted within the Revolution; outside the Revolution is permitted. Any end of the embargo would only flow from such orthodoxy. when you think of Cuba think of an organized crime family running a large enterprise.

Kris - I reviewed the blog briefly; thanks for the link. It is interesting.It seems clear that poor Cuba has a long, long way to go before being anthing like a reasonable place.

I meant to write, "everything within the Revolution is permitted; outside the revolution nothing is permitted". This Castro quote is from a speech he gave to intellectuals at the start of the Revolution, on June 30. 1961. This is similar to Mussolini's dictum "Everything inside the State. Nothing outside the State". As a teenager, Castro studied the mannerisms and speaking styles of Il Duce and Hitler, hence the dramatic pauses and the huge rallies that have bedeviled Cuba during his tenure.

Frankly it is always amazing how Democrats are so, shall we say, carefully quiet regarding Cuba.

There he goes again.---Ronald Reagan

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About the Author

Eduardo Moisés Peñalver is the John P. Wilson Professor of Law at the University of Chicago Law School. He is the author of numerous books and articles on the subjects of property and land use law.