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Tale of Two Economies

Summary:
In the 1950s the two states of Cuba and Hong Kong were largely similar. They both had a GDP per capita of roughly ,500 in today's money.Today the picture is quite different. For every thousand people in Cuba just 30 have a  computer, but in Hong Kong there will be 600 for every 1000 residents. Hong Kong has an average salary of ,000 compared to 0 in Cuba. Yes, you read that right. Cuba is a country where doctors earn salaries of 0 a year. The two countries started from the same low base and through their experiences of communism and capitalism have diverged to such a stark degree. Only on a few measurements do the two appear close. Life expectancy is surprisingly high in Cuba at 79.74 years (it's still higher at 84.23 in Hong Kong). Indeed Cuba's healthcare is one of the few

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In the 1950s the two states of Cuba and Hong Kong were largely similar. They both had a GDP per capita of roughly $4,500 in today's money.

Today the picture is quite different. For every thousand people in Cuba just 30 have a  computer, but in Hong Kong there will be 600 for every 1000 residents. Hong Kong has an average salary of $26,000 compared to $400 in Cuba. Yes, you read that right. Cuba is a country where doctors earn salaries of $600 a year. The two countries started from the same low base and through their experiences of communism and capitalism have diverged to such a stark degree. 

Only on a few measurements do the two appear close. Life expectancy is surprisingly high in Cuba at 79.74 years (it's still higher at 84.23 in Hong Kong). Indeed Cuba's healthcare is one of the few items still singled out in adoration by Western Commies. However, that may be down to Cuba spending 10% of GDP on healthcare compared to 2% for Hong Kong (only paying your doctors $600 a year also probably helps — not to mention pocketing the cash that foreign governments pay when the doctors are sent overseas). 

Neil Monnery's book A Tale of Two Economies gives an interesting account of the two men responsible for the construction of the two starkly different systems: Che Guevara and Sir John Cowperthwaite. Guevara after helping Castro into power also helped to construct Cuba's communist economic system and held key posts in government. The less well known Cowperthwaite served in a number of posts in the British administration of Hong Kong including over a decade as financial secretary. He pursued non-interventionism in the country and free market principles which have helped deliver remarkable prosperity to the territory, an approach that was worlds away from Guevara’s centralised technocratic system. 

The history provides evidence of a fairly good experiment of two countries at similar stages of development which, taking two different models, have resulted in two incredibly different outcomes. A similar story can obviously also be found with East and West Germany. No matter how well intentioned and high the principle employed, it has been regularly demonstrated which is the better of the two systems.

Importantly however, Monnery distinguishes about the type of capitalism. Crony capitalism can be just as much a hindrance as Communism. It was crony capitalism which the Cubans rejected in their revolution in the late 1950s. It is also one that still racks many developing nations — and even to a lesser extent the developed ones too from time to time.

With the recent preferential treatment of Flybe, this is evidently an important nuance that still seems to be relevant. Seeing that Flybe has been in trouble for years it is worth remembering the remarks of Cowperthwaite’s successor, Sir John Haddon-Cave when describing their policy of positive non-intervention

 ‘that it is normally futile and damaging to the growth rate of an economy, particularly an open economy, for the government to attempt to plan the allocation of resources to the private sector and to frustrate the operation of market forces.’ 

To forget the lessons of Cuba and Hong Kong is to forget the risks and consequences of crony capitalism - but more importantly, it is to forget the costs of socialism. 

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