A friend – himself a Cuban – recently sent me his review of a made-in-Cuba movie, Una Noche. As he notes, “the Cuba in which this movie is filmed should be a social equalizer’s paradise;” he outlines how the island is essentially a model planned socialist society. His summary, though, is quite the opposite: “This movie is simply devastating. It shows how Cubans actually live, not how the tourists see them, or how the American professors present Cuban ‘culture,’ even when they do so with half-hearted caveats, to their naive students.”
One is left to wonder how the Cuban authorities might possibly have permitted such a movie to be filmed in Cuba, which he considers briefly at the end of the review. The director acknowledged in an interview that the city of Havana was itself a main character in the film. Given the leftist credentials of the film’s backers, though, one is left to wonder if the actual communication of the movie is an ironic oversight by those who made it; it would hardly seem that they would want to document the destructive effects of socialism on the city, to say nothing of the rest of the country.
A series of statements in the review piqued my interest: “The catch in this blissfully egalitarian society is that it produces little wealth. … Since salaries are basically equal, money has limited power in the open market. … What counts is political clout, or connections, or being able to pay what the black market demands—with money, or, as Una Noche makes clear, with whatever else the seller may want.”
The emphasized phrase in the middle sentence is what most interested me; the first and third give a framework in which to interpret the second, and that is what I will explore briefly.
In a normal supply and demand market, unsatisfied demand drives up prices, which in turn incentivizes producers to make more; there is a process that oscillates around the point where markets clear – that is, where supply and demand are equal. In Cuba, production, prices, and pay are all state controlled in the official economy; everything is designed to flatten and stabilize the supply and demand cycle. There is no such oscillation, yet production is insufficient; there are shortages of everything. With the prices of open market goods fixed, prices cannot rise in response to a shortage; in fact, prices must be controlled, or they would rise much higher.
As explained in the review, pay is essentially flat across the economy. Doctors, for example, are paid little more than anyone else, and some drive taxis to make ends meet To survive, some college girls get into prostitution in the European sex tourism industry on the island. With state-fixed incomes there is essentially no discretionary income; no one can gain enough to outbid another, even if it were possible to do so. The only recourse to acquiring what one needs is to turn to the black market, whether with monetary or non-monetary payment, or to make political connections or gain political power oneself.
In the scenario just described, money truly does have little power in the open market. Hayek described just this situation in The Road to Serfdom. “As soon as the state takes upon itself the task of planning the whole economic life … As the coercive power of the state will alone decide who is to have what, the only power worth having will be a share in the exercise of this directing power” (138.) Again, Hayek foresaw the results: “centralized as an instrument of political power, [economic power] creates a degree of dependence scarcely distinguishable from slavery” (165.)