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A False Choice Between Communism And Corruption

Boiling down a complex situation into a binary choice seldom yields a reasonable result. What it does yield is the recipe for an eye-catching headline – or brisk book sales.

The headline in question ran in The New York Times recently, claiming “One Big Risk for Cuba-U.S. Relations: Moving Too Fast.” This is a bit catchier than the title of the book the article discusses, “Economic Normalization with Cuba: A Roadmap for US Policymakers.” As described in The Times, the book warns that it would be foolhardy to rush the reintegration of the American and Cuban economies, now that President Obama has called upon Congress to reconsider our long-standing embargo.

The column further describes how the book’s authors, Gary Clyde Hufbauer and Barbara Kotschwar, warn against liberalizing Cuba’s economic system too rapidly. The Times article, apparently like the book itself, sets up a false choice between massive corruption, as experienced in post-Soviet Russia, and a so-called hybrid system, in which a communist party continues to rule the country while allowing commercial enterprises to exist and, to a degree, thrive. It cites China and Vietnam as successful examples of such systems. Cuba’s options, the article suggests, fall into one of these two camps. Russia or China; there is no third way out of communism.

That proposition is misguided. Anyone with even a passing familiarity with the world as it exists today, and how it has evolved in the years since Chairman Mao and the Soviet Union left the scene, should be able to see that.

First, we should observe that post-Soviet Russia does not have a corner on corrupt government. There is massive corruption in China, too. The fact that we have treated the two nations differently says more about our diplomatic shortsightedness than it does about the differences between them. It is also worth noting that while private companies have been allowed to grow and prosper in China, a large share of the economy remains dominated by state-run industries that enjoy preferential access to credit from state-controlled banks. It seems overly generous to characterize this state of affairs as practicing “free-market capitalism to a large degree,” when independent and start-up businesses still face a deck heavily stacked in the government’s favor.

Since when did communist governments become bulwarks against corruption? Since never, that’s when.

More importantly, Cuba will never be either Russia or China. With a population of a little over 11 million, it has a much better chance of resembling Lithuania, which joined the eurozone on January 1. The 3 million or so people who live in Lithuania can expect rising living standards due to tighter trade and currency links to the country’s European neighbors. This is exactly what happened in Poland, the Czech Republic and other relatively small, post-communist economies.

Neither the euro nor membership in the EU is any guarantee of prosperity (as Greece knows all too well), but the free and fair implementation of democratic economic and legal principles provides a platform on which prosperity can be built. And Cuba does not need to worry about a neighbor with designs on its territory and which claims to represent a large ethnic group within its population, as Russia has and does regarding Lithuania and its Baltic neighbors.

Of course things could go badly wrong in Cuba. Cuba could end up resembling Romania or Ukraine, which did not handle their transitions to capitalism well. But it could also be the Czech Republic, or Slovenia, or maybe even Poland. The differences between the countries that have succeeded and those that have struggled, which are so manifest today, were visible early on for many bystanders. Those differences seemed to have less to do with the transition’s speed and more to do with which allies a nation chose. Not only does Cuba potentially benefit from proximity to America, it has the advantage of a huge existing Cuban-American population that is prosperous, talented and burning with desire to rebuild their ancestral homeland.

Cuba does not have a thing to fear from leaving communism behind. It certainly has no reason to want to hang on to it.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us,” and Chapter 4, “The Family Business.” Larry was also among the authors of the firm’s book The High Achiever’s Guide To Wealth.

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