Layoffs, Socialist Style

Douglas French, Mises Economics Blog
Jul. 18, 2010

According to the Socialist Party USA website, “In socialism, full employment is realized for everyone who wants to work,” because, “In a socialist system the people own and control the means of production and distribution through democratically controlled public agencies, cooperatives, or other collective groups. The primary goal of economic activity is to provide the necessities of life, including food, shelter, health care, education, child care, cultural opportunities, and social services.”

Now it turns out that Cuba is facing a severe budget deficit and may have to trim its “bloated work force,” according to the Associated Press, even though the official unemployment rate is only 1.7 percent. That has some on the island socialist utopia upset because as the AP’s Anne-Marie Garcia reports, “guaranteed employment was a building block of the 1959 revolution that swept Fidel Castro to power.” A half century later, Castro’s brother Raul is hinting that one in five Cuban workers aren’t needed. In fact, he says some of his analysts, “calculate that the excess of jobs has surpassed 1 million.”

Wait a minute, there’s no way to calculate in a socialist economy. Castro and his planners can’t calculate the optimal deployment of the factors of production, including labor. It’s impossible to adjust these factors moment to moment as conditions change. The number of redundant workers could be one million or five million. Who knows? As Ludwig von Mises pointed out in Economic Calculation In The Socialist Commonwealth, the folks like those over at Socialist Party USA,
have consistently neglected to apply to the economics of the disputed socialist state the same caustic acumen, which they have revealed elsewhere, not always with success. Economics, as such, figures all too sparsely in the glamorous pictures painted by the Utopians. They invariably explain how, in the cloud-cuckoo lands of their fancy, roast pigeons will in some way fly into the mouths of the comrades, but they omit to show how this miracle is to take place.
The AP reports that Cuba’s workforce totals just over five million and 95 percent are on the government payroll. But for the most part, Cuba’s employed are not exactly busting their humps. Cubans joke, “the state pretends to pay us, and we pretend to work.” However, this kind of attitude is no joke to the younger Castro. “Without people feeling the need to work to make a living, sheltered by state regulations that are excessively paternalistic and irrational, we will never stimulate a love for work.” Sounds like Fidel’s little brother is on to something.

“All socialist systems, including that of Karl Marx, and his orthodox supporters, proceed from the assumption that in a socialist society a conflict between the interests of the particular and general could not possibly arise,” Mises wrote. “Everybody will act in his own interest in giving of his best because he participates in the product of all economic activity. The obvious objection that the individual is very little concerned whether he himself is diligent and enthusiastic, and that it is of greater moment to him that everybody else should be, is either completely ignored or is insufficiently dealt with by them.”

The head of the labor union that represents 60 percent of Cuba’s government workers claims no one will be fired but instead will be re-assigned. Maybe a few more are needed at the government cafeteria where the AP’s Garcia reports that the staff mostly ignores customers. “Three waiters sit at the counter cracking jokes. A fourth is the only one working, making coffee for three tables. Nearby, a cashier stares into space, a cook flirts with a scantily clad teen and a supervisor sits idly by.”

So how does Cuban government fire its employees? Does George Clooney fly in to give you the bad news face-to-face? “I was saved, there are a ton of drivers on the list, but not me,” Cuban Huffington Post blogger Yoani Sanchez overheard a cab driver tell someone on his cell phone. If your name appears on a layoff list, you’re done.

As warm and fuzzy as its proponents make socialism sound, you’d think they would find a kinder, gentler way of giving people the bad news. Private employers operating in dog-eat-dog capitalism can people with much more compassion.

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