Castro’s Economic Legacy

The former Cuban dictator Fidel Castro has died. During his long rule from 1959 to 2006, he turned Cuba into a communist country with Soviet-style central planning, a strict one-party rule, rigorous oppression of political opponents and cruel persecution of “social deviants” (prostitutes, homosexuals, etc.). Most comments I have read about his death focus on his extravagant personality and his crimes against human rights, but completely neglect to mention his economic legacy.

And that was quite disastrous. Look at this:

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In 1959, Cuba’s GDP per capita was about 2000 US dollars (in 1990 purchasing power parities), while the average of Latin American countries was about 3000 dollars. Today, the Latin American average has roughly doubled to 6000 dollars. Cuba’s is still 2000 dollars. The paper from which this graph is taken estimates that Castro’s communist experiment has reduced Cuba’s real GDP per capita by 40 percent in 1974 compared to what would have happened without the 1959 revolution.

If cold numbers are not your cup of tea, see George Borjas’ memories of growing up in Castro’s regime.

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New structural economics – A framework for a growth miracle

Once upon a time there were a number of Asian countries. They had scarce natural resources, hardly any notable capital accumulation, were heavily overpopulated and most of their people lived in extreme poverty. In fact, the situation of these Asian countries was so miserable, that development economists were betting on South America and Africa for rapid development. But then, one day, came the economic growth fairy and blessed the Asian countries with decade-long, (close to) double-digit growth rates and all was good and everyone was happy – except for the development economists, who didn’t know how this could possibly have happened. And after decades of research, … we still don’t really know. However, there are some new interesting approaches at the frontier of development economics. Justin Yifu Lin’s idea of the new structural economics is one of the ground-breaking ideas that shed some light on how economies develop. In this blog I will outline the main ideas and some personal points of criticism, but if you’re interested in more, you can look at the following paper or, if you need a more integrated perspective, at his newest book: Demystifying the Chinese Economy. Both are highly recommended readings.

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Measuring Development I – On the impossibility of being developed

There have been some recent changes on the blog and so it seems like a good time to become a bit more active as well. I’m a former KF student who left Graz a while ago and I’m now in the final year of a MSc program that specializes on Economic Development and Growth. This will also be the focus of my blog entries.

On the impossibility of being developed

As a profession we, economists, like clear concepts. When we use a term such as “market”, “capital” or “inflation” we tend to define these terms to get a clear understanding of what we are talking about. Studying a masters in development economics I’ve started to realize that the term “development” has become such a common word in our everyday language that hardly anybody pauses to think about what we actually mean by it.

This blog entry is the first one of a series I am going to write over the next couple of weeks that will deal with the questions of what development is and how we can measure it over time and space. These are obviously important questions, because without a clear idea of what we mean by “development”, “progress” and how we can measure and compare them, most of the things we can say in development economics become quite meaningless.1 In this first part of the series, I focus on discussing “development” and its relation to “progress”.

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