DESPITE ITS INCREASING popularity, many people remain unaware of what socialism really entails, and of its inevitable economic consequences. In my recent travels, I saw some of these consequences firsthand.
Socialism is an economic system that abolishes private property as the means of production—the land, capital, and labor used to make everything—and replaces it with some form of collective ownership. I recently traveled to socialist countries, including Cuba, in the course of co-authoring a new book, Socialism Sucks: Two Economists Drink Their Way Through the Unfree World. My experience illuminates how collective ownership is a lousy basis for organizing a prosperous, functional economy.
The Hotel Tritón’s decaying edifice hints at Cuba’s central-planning problems. It was rotting, inside and out. And nobody cared because nobody owned it.
In Cuba, private property rights are severely limited and government ownership and control are widespread. The state owns the hotels in Cuba, but citizens do have some limited private property rights that allow them to rent out their apartments to visitors. The contrast between the two is stark.
We stayed our first night in Cuba at a supposed three-star hotel on the coast in the western suburbs of Havana. The Hotel Neptuno Tritón opened in 1979, during the heyday of Cuban-Soviet cooperation. It has the look of two Soviet housing projects that protrude some 20 stories into the sky. Those two towers were once gleaming white, according to the poster in the hotel lobby, but four decades of diesel fuel emissions and neglect have turned them a sickly tan color. Most of the upper-floor windows were broken.
Three of the four elevators were out of service, and after an interminable wait, we decided to hoof it up five flights of stairs with our bags. We found our room down a dark hallway, and my co-author, Bob Lawson, needed both the key and his shoulder to open the door.
We had a view of the ocean, the deteriorating twin tower, and an abandoned courtyard from the balcony with its cracked glass railing. The bathroom was the real gem. One of the metal ceiling panels was missing, there was mold everywhere—and as we’d find out the next morning—running water was not guaranteed.
The pool was no better. Empty beer cans floated about in the cloudy water. The 20 seats in the swim-up bar had long since deteriorated, and the mirror behind the bar was broken.
The Hotel Tritón’s decaying edifice hints at Cuba’s central-planning problems. It was rotting, inside and out. And nobody cared because nobody owned it.
However, not all accommodations in Cuba are state run. In 1997, Cuba granted citizens the legal right to rent out up to two rooms in their private residences. More recently, the state lifted the two-room restriction and allowed homeowners to hire non-family members to work for them, while reducing the state’s per-room tax by 25%. Since then, the rental housing market has flourished.
We stayed two nights in a well-kept, two-bedroom apartment in Central Havana. The exterior of the three-story building was unremarkable: white with green paint, and balconies on most units. There was a combined living room and kitchenette, a room with a double bed, and one with two singles. The bathroom was clean and stocked with toilet paper, and it had reliable hot water. The two air-conditioner units worked well, and the balcony had a view of the ocean. At $57 a night, the apartment was three bucks cheaper than Hotel Tritón but vastly nicer, and in a much better location.
The stark difference between the government-run hotel and the private apartment rental was not a fluke. We next went to Trinidad on the south-central coast. We easily found a large casa that was clean and well kept, with two single beds, cold AC, and a bathroom with reliable hot and cold water, located above a bar for only $25 a night.
Upon returning to Central Havana, we stayed in the government-owned Hotel Caribbean. It was $50 a night and had a broken bathroom door, cracked toilet seat, shower mold, no hot water, leftover soap used by the prior guest, a hole in my towel, a suspicious-looking stain on Bob’s towel, and a used drinking glass that came out of a bag labeled “sanitized.”
The state-owned hotels in Cuba suck, but not because Cuba is poor. They suck because no one cares. The people who own casas particulares care because they profit when people opt to stay in them. Their desire to prosper leads them to reinvest some of their revenue to maintain and improve their property so more visitors will choose to stay with them in the future.
Private property rights give people the incentive to invest in and preserve resources for the future. The managers of the state-owned hotels don’t have the same incentive because they don’t benefit from the hotel being in better condition in the future.
Although this is only a brief story of how state ownership versus private property rights affects incentives and performance in one industry in Cuba, it’s representative of what we found everywhere as we traveled the globe studying socialist economic systems. It’s unlikely that anyone who has experienced the living conditions of true socialism, even on a traveling basis as we did, would want to duplicate that experience permanently.
Benjamin Powell is co-author, with Robert Lawson, of Socialism Sucks: Two Economists Drink Their Way Through the Unfree World (Regnery 2019), excerpted and adapted for this column; Executive Director of the Free Market Institute; Professor of Economics at Texas Tech University; and a Senior Fellow with the Independent Institute.
