16-Sep-10 News -- Cuba's seismic shift has global implications - 16-Sep-2010 - Generational Dynamics

It was a dry bureaucratic announcement appearing in the official Granma web site (Translation). It signaled the end of Cuba’s Communist economy.

"After 52 years, the Cuban Revolution is a living and unshakable direction for the nation, and our people's will and determination to continue the construction of socialism, and make further progress in the development and updating of the economic model we must follow, and consolidate the gains achieved. ...

Cuba faces the urgent need to move forward economically, better organize production, enhance productivity and raise reserves, improve discipline and efficiency and this is only possible through the dignified and devoted to our people. Today, the duty of the Cubans is to work and do it well, with seriousness and responsibility, and to make better use of resources available to better serve our needs.

In order to update the economic model and economic projects for the 2011-2015 period, the guidelines call for the reduction of more than 500 000 workers in the public sector and in parallel the increase in non-state sector.

The timetable for implementation [of the reduction] for agencies and businesses is the first quarter of 2011. ...

Our state neither can nor should continue to burden companies and productive organizations with services and inflated budgets that weigh down the economy, are counterproductive, create bad habits and distort the behavior of workers. It is necessary to increase production and quality of services, reduce social spending and eliminate bulky improper gratuities, excessive subsidies.

Hundreds of thousands of workers will move to self-employment in the coming years.

Within the state sector, it will only be possible to go to places with a historical workforce deficit, such as agriculture, construction, teachers, police, industrial workers and others.

A matter of singular importance is the salary. We must reinvigorate the socialist principle of distribution, to pay to each according to the quantity and quality of work provided.

The unity of the Cuban workers and our people has been key to maximizing the gigantic edifice built by the Revolution and the changes that we are now undertaking she will continue to be our most important strategic weapon."

In brief, the Cuban government will lay off 500,000 workers by April. These workers will have to move to self-employment or private businesses. However, we will reinvigorate the socialist principle of distribution, so this is GOOD FOR YOU.

Why socialism and communism always fail

I am not making an ideological argument here. I'm making a mathematical argument, further enhanced by a generational argument.

It's easy to prove mathematically that socialism cannot work as population grows. If you're a serf lord or a war lord and you control a couple of hundred people, then socialism is easy. You just appoint your son to be chief bureaucrat, and have him monitor all commercial transactions.

As the population P grows exponentially (proportional to e**P), the number of transactions between two people grows even faster (proportional to e**2P). So as the population grows, the number of bureaucrats grows even faster.

An excess of over one million seats in the financial bureaucracy!!! That's amazing, and it shows what happens -- what MUST happen -- in socialist economies. That's the mathematics of socialism.

I happened to attend the huge CeBIT computer conference in Hannover, Germany, in spring, 1990, just after the Berlin Wall fell. With the border open, for the first time large numbers of East Germans were permitted to visit the show, and the culture shock was enormous for both sides. I spoke to Andreas Heuer, a young man working for Finanzgruppe, and he spoke earnestly of his pain when talking to these visitors from the east. "They visit here and within an hour they have a blackout -- it's too much for them. Their savings banks have no electronic devices to do the work. They do all their work with only mechanical devices." Pictures of 1950s vintage adding machines sprang to my mind.

This is the remarkable thing about all the Communist countries -- East Germany, Russia, China, North Korea and Cuba -- they were all stuck in the 1950s. There's a good reason for that. A socialist government cannot allow the introduction of new products, because the bureaucracy can't handle the huge volume of transactions that would be generated.

Mao Zedong must have understood this problem, when he decided to implement "true Communism" with his Great Leap Forward that began in 1958.

500,000,000 million peasants were taken out of their individual homes and put into communes, creating a massive human work force. The workers were organized along military lines of companies, battalions, and brigades. Each person's activities were rigidly supervised.

The family unit was dismantled. Communes were completely segregated, with children, wives and husbands all living in separate barracks and working in separate battalions. Communal living was emphasized by eating, sleeping, and working in teams. Husbands and wives were allowed to be alone only at certain times of the month and only for brief periods. All workers took part in ideological training sessions, to provide for ideological training of the Chinese masses.

Mao's stipulated purpose was to mobilize the entire population to transform China into a socialist powerhouse -- producing both food and industrial goods -- much faster than might otherwise be possible. This would be both a national triumph and an ideological triumph, proving to the world that socialism could triumph over capitalism.

The program failed because of the reasons stated above -- it takes too many bureaucrats to closely govern a large population. The result was disaster: management and reporting structures collapsed, and there was too little food to feed everyone, resulting in tens of millions of deaths from starvation.

That triggered the collapse of China's Communist experiment, leading to a kind of "free market socialism" that resembles Nazi Germany's economic experiment, with central control of only selected industries.

From the point of view of Generational Dynamics, we see a historical pattern being repeated over and over in Communist countries.

First off, there's no such thing as a "slippery slope" towards socialism. The slippery slope is always towards capitalism and free markets, because that's where the mathematics leads. This should be reassuring to people who are afraid that President Obama is trying to lead us to socialism.

A country is susceptible to a Communist revolution ONLY during a generational crisis period, and only when there's a fault line between two birth-defined demographic groups, one of which is a market-dominant minority. The resolution of the bloody civil war is to confiscate the property of the market-dominant minority. There's more than one way to accomplish this goal, some more or less dictatorial than others, but Communism provides one of the most convenient dictatorial templates.

Geopolitical significance

In Venezuela, President Hugo Chávez is trying to introduce Communism during a generational Unraveling era. I'm willing to bet that his efforts will collapse. You need a bloody civil war to implement Communism, and besides, Chávez must really be feeling apoplectic these days, watching his pal Fidel and Cuba's Communism go down the tubes.

So Communist revolutions always begin during generational crisis eras. When do they end? The evidence from East Germany, Russia, and now Cuba seems to indicate the mid to late generational Unraveling era. This makes sense, because it's about the time when the nation's leaders in the Hero generation of the previous crisis civil war retire or die off (as is happening to Fidel), and when the mathematical tensions become unbearable, resulting in a "bloodless coup."

This brings us to the geopolitical implications of Cuba's announcement, which may be significant. We've already described the effect on Venezuela, but other countries will be affected as well.

The North Koreans have managed to use iron-like dictatorial control on the population to keep the Communist economy together much longer than they should have, and they're now well into a new generational crisis era. The tension caused by economic factors, including globally surging food prices, and by the political situation with Kim Jong-il apparently near death, will almost certainly mean a major change. The collapse of Cuba's Communist system will give an enormous boost to the reformers in North Korea. But since North Korea is in a generational crisis era, reform will almost certainly mean a civil war, a massive starving refugee crisis, and probably war with South Korea.

The implications for China are also potentially enormous. The elders of the Chinese Communist Party (CCP) have been experiencing enormous panic and paranoia since 1991, when the Soviet Communist economy collapsed. They've been fearing for their lives, and rightly so.

Now another Communist economy is collapsing in Cuba, and I can only imagine that Beijing is watching this in horror -- and well they should. Ironically, the CCP itself has become a birth-defined market-dominant minority in China, and with tens of thousands of "mass incidents" every year, they know that a full-scale rebellion may be close. China is forced to import huge amounts of food to prevent unrest among the peasants, but as food shortages grow and food prices increase, that can only go so far.

Let's not forget the significance for Cuba itself. The collapse of Communism in Russia and East Germany may have been relatively "bloodless," but both regions were economic basket cases for years. Cuba does not have any infrastructure to absorb 500,000 unemployed people all at once, and there will certainly be massive economic chaos in Cuba in the next years, with implications for the United States.

Additional links

As we reported yesterday, Viviane Reding, a Luxembourg politician serving as the EU's justice commissioner, accused France's Roma Gypsy expulsions of being comparable to Nazi WW II atrocities. On Wednesday, French President Nicolas Sarkozy struck back, saying that he was only applying European regulations, French laws, and France was irreproachable in the matter but that if the Luxembourgers want to take them he had no problem. A furious Jean Asselborn, Luxembourg's foreign minister, replied, "I know that Nicolas Sarkozy has problems with Luxembourgers, but he's gone too far here." Telegraph

French socialist MPs are furious at president Nicolas Sarkozy because France's National Assembly has passed a bill that raises the minimum retirement age from 60 to 62. Let's all share a moment of silence and send our best wishes to the poor French people whose lives will be destroyed by working two additional years. EuroNews

As Mideast peace talks proceed in Egypt, Hamas terrorists have been trying to derail the talks by firing phosphorus shells into Israel from Gaza. Jerusalem Post

In Bahrain, the majority of the population is Shia Muslim, while the Sunni Muslims form a market-dominant minority. The Sunni-dominated government is arresting scores of Shia political activists, accusing them of plotting to overthrow the government. Washington Times

China's Prime Minister Wen Jiabao says that the real estate bubble -- runaway property prices -- are a grave threat to China's economy and could imperil social stability. Reuters

Generational Dynamics Web Log for 16-Sep-2010
16-Sep-10 News -- Cuba's seismic shift has global implications

In a seismic shift with global implications, Cuba will lay off 500,000 workers

Why socialism and communism always fail

Geopolitical significance

Additional links

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	Generational Dynamics
	Forecasting America's Destiny ... and the World's

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Generational Dynamics Web Log for 16-Sep-2010 16-Sep-10 News -- Cuba's seismic shift has global implications

In a seismic shift with global implications, Cuba will lay off 500,000 workers

Why socialism and communism always fail

Geopolitical significance

Additional links

Web Log Pages

Generational Dynamics Web Log for 16-Sep-2010
16-Sep-10 News -- Cuba's seismic shift has global implications