What can Australia learn from Cuba?

| February 13, 2014

Australia needs a balance of excellent management, self-interest and a coherent narrative. Peter Fritz recently visited Cuba and reflects on what we can learn from this country.

53 years ago I left Rumania. I decided to visit Cuba because I was curious to experience the world I knew when I was 18 years old. My specific interest was to learn something that might be applicable for Australia today.

We landed in Havana and were met by our driver for the six days we were to spend in Cuba. John was a trained lawyer, and his father was once Minister of Transport.

We were driven to our hotel, met our guide and settled in. We went for a walk later in the afternoon, and the first thing that struck me was that the buildings are in a poor state of repair. Soon we learned that wages for doctors or lawyers are approximately $20 per month. All major assets are owned by the government.

About two years ago the Cuban State liberalised some areas of business, such as services related to tourism. You could for example lease a car from the State and become a taxi driver. You were also able to become a private guide. Until then you could only work for the State tourist bureau. Small repair services were provided by private individuals.

During this last period Cuba rapidly became an inverted society. The toilet woman is earning far more than the lawyer, and those connected to the tourist industry are in fact now the elite.

The reason that the buildings are in poor repair is partly because they are owned by the State, which doesn’t have the money to actually keep them in good repair and the tenants have little motivation or money either to invest into the property.

Obviously a doctor cannot live on $20 a month, even if the $20 has significantly more buying power than in Australia, but nevertheless it is totally insufficient. Restaurants are pretty much out of bounds for the average local. We went to a restaurant, had a nice dinner and paid $170 for the five of us. That is almost nine times the monthly wage of a doctor in one dinner.

We found the Cuban people friendly and the streets clean and safe. The quaint motor cars are vintage from before the 1959 revolution and are a worry when they break down. They are patched together with glue, wishful thinking and a great deal of ingenuity.

Until 1990, Cuba was supported by the Soviet Union, and life seems to have been pretty good until the change occurred in Eastern Europe. When Mikhail Gorbachev went to visit Fidel Castro during 1989, he simply told him that the gravy train had stopped and they were no longer going to prop up Cuba. That is when the so-called special period came into effect and things became extremely difficult.

I believe that Cuba is on the way to system change based on the experience in Central Europe. The moment you liberalise the economy and bring in private enterprise, it’s only a matter of time before the State system of distribution and production just collapses. Some people start accumulating significant wealth relative to the other people, they are looking at buying real estate, which is also going through liberalisation, and the whole economic fabric and social order transforms.

If that happens, the question is: Who will benefit? I think the answer is fairly clear – one only has to look at history and what happened in Eastern and Central Europe to have the answer. An important role will be played by the large Cuban migrant population in Miami and California, who obviously have an interest in coming back as investors. Some people will make a lot of money. The great majority of Cubans will have it tough for a couple of decades or more.

After Havana we visited Trinidad, a smaller regional city. There again, the liberalisation of trade is playing out – a lot of small merchants selling from their homes on the ground floor, tablecloths and little artefacts. People have bed and breakfast-type businesses, where you rent a room for $40 a night. For us, that is pretty good value, while it is two months salary for Cubans.

The revolution that Castro and Che Guevara led in 1959 came in a time of a horrific dictatorship, a corrupt regime that in all respects was mismanaging the interests of the country, and it had to be deposed. A lot of people even now, especially of the older generation, are supportive of that revolution. People got the opportunity to go to universities, who never would have been able to. For a short time there was a groundswell of support, there was excitement.

But soon it became apparent that the individual self-interest was really not taken care of. Without the incentives that come with ownership, a subculture of corruption develops, because people don’t feel responsible for assets they don’t own.

Although not obvious on first look we learned a lot from our Cuban experience that is relevant to us Australians.

Australians today do not see the relationship between effort and social outcomes. We have no simple narrative telling the story of where and how our tax money is spent with relation to our self-interest.

Because of that we have developed a sense of entitlement for all good things. Best education system, best health system etc. without paying the price. Our taxes are low in comparison with other countries with similar five star living standards.

Large corporations are not doing their part in shouldering the tax burden, and the Government is afraid to taking them on. They move their profits to tax havens and are taking advantage of loopholes in the law.

We are doing less and less ourselves. In a way China and the mineral assets are what the Soviet Union was for Cuba.

We have a relaxed way in which we allow ourselves to rort the system, where we confuse what value really is. Our Government management system and infrastructure is obsolete. Government budgeting operates on the concept that there is an amount allocated to a department to be spent, rather than looking at which services a department needs to do and then assessing the value we get for the money we are spending. We have no processes to monitor and assess cost versus value and outcomes.

Australians are much better positioned to have a good life than the Cubans, but much needs to be done in improving the management of our country, and our Government needs to tell us how it will do it.