Thursday, 18 December 2014

Forget Cuba, it flushed itself down the toilet three years ago.

Further to Stigler's post of earlier, from The Daily Mail, March 2012:

The purchasing and selling of private property was legalised by President Raul Castro in Cuba last November in a bid to keep the struggling Communist state afloat.

Only citizens and permanent residents are allowed to buy properties in the Communist country but many Cuban exiles in America are entering the property markets through friends and family on the island - bumping up property prices.

Now many homes in Havana are being sold at $250 per square metre - 12 times the average monthly wage of $20...

The new property market will drastically alter everyday life on the island for its residents - with many being able to choose for the first time where they want to live.


Great, you can choose where you live, but will spend all your income forever paying for it.

And there's the usual fig leaf..

But the government has insisted no individuals will be able to accumulate great wealth through the law change as sales will be subject to taxes.

"Sales" will be subject to taxes, but not "ownership". As a result, land ownership will quickly become concentrated in relatively few hands (probably former senior government people) and without those taxes on land values, they'll raise taxes from wealth creation instead, rinse and repeat.

Fair play to Raul C for trying to liberalise the economy a bit; but the correct procedure would have been to do this (except about five times as fast, but not so fast as that US corporates pile in and take everything over), make private earnings tax free and to increase ground rents, which can go into the pot for paying for education and healthcare and stuff.

And if any emigres want "their" land back, they'd be welcome to it, provided they pay the land tax.

9 comments:

DBC Reed said...

@MW
Spot on!

Lola said...

Go on. Give him a call.

Vova said...

You have to bear in mind that the Cuban state isn't keen on private ownership of land or property built on it. They weren't looking for a permanent fix, just trying to get out of a (hopefully) temporary fix.

Ben Jamin' said...

I was recently reading that letter that all those economists sent Gorbachev after the fall of the Berlin wall.

http://en.wikisource.org/wiki/Open_letter_to_Mikhail_Gorbachev_%281990%29

Shame he ignored it.

There's no reason why Cuba couldn't emulate Singapore.

Heath in the Telegraph the other week accused Singapore and Hong Kong of being socialist run countries because of their attitude towards immovable property. ie high taxes/state supplied accommodation.

So, perhaps Cuba should take note and evolved it's own "socialist" philosophy?

Mark Wadsworth said...

DBC, ta.

L, what's his number or email address?

V, I do not think that this is temporary, this is just the start.

BJ, highly unlikely. They're going from Communism straight to Home-Owner-Ism, giving everything else a miss.

Lola said...

MW. Google will know...

Lola said...
This comment has been removed by the author.
Random said...

More homey nonsense:
http://www.telegraph.co.uk/finance/newsbysector/constructionandproperty/10397242/We-need-to-build-more-homes-just-dont-make-them-social-housing.html

Mark Wadsworth said...

R, well that's Heath for you, he's full of shit. He starts off by listing a few facts, fair enough, but then we get this:

" If there is a plentiful supply of property, and thus lower rents.."

Bullshit. The European countries he is praising with a large private rented sector only has low rents because they are regulated to a greater or lesser degree, and tenants have more rights.