Tag Archives: free markets

Cuba gets it half-wrong

What kind of financial crisis could America have had without private collection of land rent?  If homebuyers were able to purchase a house, but the land came practically free with an obligation to pay a land value tax, how bad could the mortgage mess have been?  Not very bad, evidently, since mortgages would have been much smaller and quite unlikely to go under water (because the price of houses can’t decline nearly as much as that of the land under them).

Veranda in CubaWhich is why I’m not pleased to learn that Cuba will allow the private purchase and sale of homes (including, apparently, both structure and land).  There will be limits (only Cuban citizens and permanent residents, and only two homes per person) “to prevent speculative buying and the accumulation of large real estate holdings,” tho one wonders how long-lived and how effective they’ll be.

There’s no question that Cuba’s struggling economy needs freer trade, and moves to allow buying and selling of cars, and an increase in the permitted size of private businesses, tend in that direction.   It’s unfortunate that the Cuban powers that be don’t seem to recognize that land is different, since by definition it will never be produced no matter how free or prosperous the economy.

“The new law requires that all real estate transactions be made through Cuban bank accounts so that they can be better regulated, and it sets a tax rate of 8 per cent of the assessed value.”  The need for more government revenue is one possible explanation for this change.  Another is that Cuban elites anticipate, after further easing of land ownership restrictions, the ability to accumulate at low prices sites which will become valuable in the future.  The least likely is that Cuban authorities just haven’t thought about what land is and its role in political economy.