By Justin Callais. He the Chief Economist with the Archbridge Institute. Excerpts:
"Recent work by JP Bastos, Jamie Bologna Pavlik, and Vincent Geloso shows that Cuba severely underperforms “synthetic Cuba,” or what Cuba’s growth trajectory would have been if not for the socialist policies post-Revolution. Notably, they conduct their analysis based on reported GDP per capita numbers, adjusted (to account for fabricated data) GDP per capita, and adjusted for aid from the Soviet Union."
"Using the corrected data, Cuban GDP per capita was 48.3% below the synthetic counterfactual by 1972, and 44.3% below by 1989. When Soviet subsidies are stripped out, the picture is even grimmer: by 1972, Cuba’s GDP per capita fell 55.5% below the counterfactual, with that gap persisting through 1989.
Is this really just the US’s fault because of embargos? The authors account for this with specifications that are generous to inflate the embargo’s damage. Even so, the verdict is clear: the embargo can account for at most 8% to 10% of the difference between Cuba’s actual GDP and the counterfactual, a trivial share of the Revolution’s total effect."
"Before the Revolution, Cuba (much like Venezuela, which is covered in another great paper by Kevin Grier and Norman Maynard) was one of the wealthiest countries in Latin America. In just four years after the Revolution, Cuba returned to roughly the same living standards it had in 1937, effectively erasing more than two decades of economic growth."
"Louis Rouanet studies the impact of François Mitterrand’s 1981 election, who ran on a platform of “rupture with capitalism.” The findings are drastic: by 1996, France’s GDP per capita was roughly 26% lower than that of the synthetic counterfactual, a gap of about $7,300 in constant 2017 dollars. Investment collapsed relative to the counterfactual, and the employment rate underperformed by more than two percentage points."
"Even though Mitterrand somewhat reversed course after 1983, Rouanet argues that the policies persisted. The policies that expanded welfare spending, created hundreds of thousands of public sector jobs, and restructured the labor market were not reversed, and they locked in institutional arrangements that outlasted the President himself. France’s centralized, bureaucracy-dominated politics made bad policies stickier than they would have been elsewhere.
It is important to note that this wasn’t the type of social democracy (large welfare state complemented with a market economy) that exists in Scandinavia. The French Socialist Party in 1981 openly declared its goal to be the “socialization of the means of investment, production, and exchange.”"
"The broadest of the three, this paper by Andreas Bergh, Christian Bjørnskov, and Luděk Kouba, asks the question most directly: what does socialism do to economic growth, across countries and time? The authors draw on a dataset covering 192 sovereign countries from 1950 to 2020 and focus on the 22 countries that made a decisive transition to socialist planned economies after independence, countries like Tanzania, Zambia, Vietnam, Sudan, and Venezuela.
They use neighbor comparisons (China vs. Taiwan, Czechoslovakia vs. Austria, Yugoslavia vs. Greece) as a first cut, then apply more formal panel methods. The neighbor comparisons are striking:
Taiwan’s annual growth rate between 1950 and 1990 was on average 2.7 percentage points higher than China’s, Austria’s was 1.6 percentage points higher than Czechoslovakia’s, and Greece’s was .7 percentage points higher than Yugoslavia’s despite Greek instability, coups and a period of military dictatorship.
The results are consistent across every specification: adopting socialism is associated with a decline in annual growth rates of approximately two percentage points during the first decade after implementation. That sounds modest, but compound it over decades and it’s the difference between prosperity and stagnation. Let’s make a simple comparison. Assume two countries both have GDP per capita of $10,000. One goes socialist and grows at 2 percentage points less than the non-socialist country (assume 1% versus 3%). After 10 years, the socialist country has a GDP per capita of $11,046; the non-socialist one has GDP per capita of $13,439. After 20 years? Just $12,202 versus $18,061, a nearly $6,000 per capita difference!"
