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    Another Socialist Economic Innovation – Cuba Reinvents Barter WithRum For Czech Republic

    Another Socialist Economic Innovation – Cuba Reinvents Barter With Rum
    For Czech Republic

    Tim Worstall , CONTRIBUTOR
    I have opinions about economics, finance and public policy.
    Opinions expressed by Forbes Contributors are their own.

    One of the things which truly puzzles about the general enthusiasm for
    socialism in certain quarters is quite why people keep claiming that
    it’s a successful economic system. Given that places which are socialist
    never have any money and thus the living standards of the people are
    pretty foul the claim just seems to run contrary to basic logic. Indeed,
    the system seems to be regressive, not progressive, as here with Cuba
    trying to reinvent barter. You know, barter, that system we all
    abandoned once we worked out the value of the greater division and
    specialisation of labour, with more people, available through the use of
    money and free markets?

    But this is what is happening, Cuba is offering a barter deal to the
    Czech Republic:

    Cuba has come up with an unusual way to repay its multimillion dollar
    debt to the Czech Republic – bottles of its famous rum, officials in
    Prague say.
    The Czech finance ministry said Havana had raised this possibility
    during recent negotiations on the issue.
    Cuba owes the Czech authorities $276m (£222m), and if the offer is
    accepted the Czechs would have enough Cuban rum for more than a century.

    As someone currently sitting in the Czech Republic I would say that that
    claim of a century’s supply is not correct. As someone who works in
    journalism and thus someone who is no stranger to the iniquities of the
    demon rum I would say that it is definitely not true. It is not true to
    say that the Czechs are a sodden nation but alcohol does play its part
    in the social system here. A meeting for a couple of beers of an evening
    might well be enlivened by a round or two of shots (“panaki”) for
    example. And the idea of more Cuban rum floating around does
    appeal–there is a local rum-like concoction which is really potato
    vodka flavoured and coloured with caramel. The bottled sweat and tears
    of the Cuban students sent out to cut the sugar cane would be an
    improvement upon that.

    The AP quoted data from the Czech Statistics Office, which showed that
    the Czechs imported $2m worth of rum from Cuba in 2015.

    Definitely not true then. For any greater imports of Cuban rum would
    lead to substitution effects. Less rum imported from other nations, less
    of the home grown fire waters consumed and so on. Well, actually,
    knowing the Czech sense of humour we might just see the introduction of
    the Cuban round of shots. Come on lads, drink up, we’ve got to help Cuba
    pay its debts (Good Soldier Svejk does come from these parts after
    all–bloke comes back late from the pub and tells his wife there was
    money off shots that night. So he stayed to maximise the amount of money
    they saved. Next evening he tells her he’s off to spend the money he had

    However, it’s the Washington Post that manages to get this completely wrong:

    Cuba, a communist isle stifled for decades by a U.S. embargo, is saddled
    by tremendous external debt — measured at the end of 2014 to be about
    $24.7 billion, or 31 percent of the country’s gross domestic product. In
    the 1970s and 1980s, Cuba took out development loans from private
    non-U.S. banks and then defaulted in 1986.

    How is that stifling embargo consistent with being able to take out
    massive foreign debts? If you are cut off from the global economy then
    you’re cut off–if you’ve substantial debt to that global economy then
    you’re not cut off from it, are you? You have obviously been interacting
    with it to run up the debt in the first place.

    It’s also a misnomer to call 31% of GDP in external debt “tremendous.”
    Luxembourg is not impoverished by having external debt of 3,443 % of
    GDP, the UK of 569 % nor the US with 114 %. It’s entirely true that such
    levels, even one of 31 %, can be problematic. But the problem is not the
    level of debt, it’s what was done with the money owed plus the ability
    of the economy owing it to produce something to service it. And that’s
    what Cuba’s problem is. The island produces very little of value. This
    is why the people there are poor of course–producing little of value
    will mean that little of value can be consumed.

    And thus this regression back to older forms of commerce, the retreat
    from free markets and money into barter. We are all very much richer
    because we live in economies with those two things, markets and the
    money that make them work. And the foolishness of Cuban economic
    management is what both means they desire to use barter and also why the
    island and its people are poor.

    Sitting at this end of the trade in Bohemia of course they can send all
    the rum they want to. But that that’s all they have to send is entirely
    the fault of that Cuban socialism of the past 55 years.

    Source: Another Socialist Economic Innovation – Cuba Reinvents Barter
    With Rum For Czech Republic –