Friday, November 4, 2011

Instant capital formation

"Capital formation," the accumulation of funds that allow persons, companies, and economies to invest and grow, is a process that accompanies years of work and production and saving.

It's a process, not an event; it rarely happens overnight or at the stroke of a pen.

Except in Cuba, yesterday.

By allowing the purchase and sale of residential property effective November 10, the socialist state transformed the nature of that property. Before, a home was an asset to use and to pass on to heirs. Now it can be made liquid.

The result, at the family level, is instant capital formation; the creation of wealth through the creation of a new legal use for assets to which Cuban families hold clear title.

This is a historic step for socialist Cuba and a new landmark in the reform process led by Raul Castro.

The government has created a vast new stock of capital in private hands that will be used for private ends in a new market that will be driven by decisions of private parties. Moreover, this market will see an inflow of capital from Cubans abroad who will help relatives buy homes. To help this market work, the National Housing Institute is now cut out of the transaction process, something that makes Cubans smile.

It's now clear that when Raul Castro talks about "structural change," he means it. Yesterday's action gives meaning to that Marxist term that even capitalists can grasp.

The debate over the scope and pace of the reform process will continue, vigorously in Cuba and amid an intensifying blizzard of nonsense in Miami. But the question of the government's willingness to end burdensome controls and allow major expansions of private activity is now settled.

Yesterday's action constitutes an important human rights improvement because it transforms the nature of property rights and ends a prohibition on normal, beneficial transactions that affected all Cuban families. It also ends an odious aspect of Cuban immigration law: the requirement that emigrants (under the salida definitiva category, itself a good candidate for abolition) forfeit their property to the government.

All in all, a good day for Cuba and for the Cuban people.

Here are earlier items on the housing policy announcement last summer, on the convoluted permuta market that will now pass into history, and on the Miami politics.


Anonymous said...

very good news, yet another propaganda point for the counter-revs bites the dust. lets see how it all shakes out, but its exciting news
one point -- this is not a human rights construct. human rights is the availability of housing, which the cuban govt has tried to fulfill. the setting up of a system to capitalize on property is a civil rights issue, not human rights. please dont continue to obfuscate the difference, it's a cheap trip the hardliners use; you're better than that.

Anonymous said...

This is favorable because it is a measure of economic liberalization that creates the conditions for market reforms.

The cons are that both it and the authorization for the sale of cars are a measure to allow the process of primitive capital accumulation to allow the nomenklatura to transform itself into a neoburgeouisie.

The measure works in two stages, In the first the nomenklatura appropriates the houses and cars of all Cubans leaving the country.

In the second it resells these properties back the relatives of those expropriated in exchange for foreign exchange provided by the original victims.

We must not forget that the Cuban totalitarian regime can at any time assign to its members new homes and cars at a subsidized price which is much smaller than its market price.

This permits them to obtain a profit when reselling them that is the primitive accumulation that is necessary to create new private firms and to become the new bourgeoisie.

The Cuban totalitarian regime has managed to live off its victims during 52 years by charging them outrageous prices and fees to travel to Cuba and by making huge monopoly prices for the unrationed goods it sells to its relatives in the island for the remitances they receive from abroad.

Not content with this it is now scheming to force its victims to finance its process of primitive capital accumulation by having to buy back with foreign exchange its own property for its remaining relatives in the island.

There seems to be no way that the Cuban community living outside of the island can avoid being shaken down by the Castro regime while attempting to aid their impoverished relatives in the island.

Paradoxically all this parasitism comes from a regime that claims to have overcome the "exploitation of man by man"!


Anonymous said...

What is also good about the lifting of this prohibition is that it also allows Cubans to own another home, be it in the beach or in the countryside.

Phil Peters said...

anon at 10:07, sorry, we concept of rights includes economic rights, the right to engage in basic transactions without restriction by the government; it does not include the idea of a right to have a stock of housing assured by the government... which in practice translates into the right to have not enough housing to go around