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Taxi Prices – Raul’s Reform Is Not Working

Taxi Prices: Raul’s Reform Is Not Working
ORLANDO FREIRE SANTANA | La Habana | 13 de Febrero de 2017 – 22:04 CET.

When a society manages to liberalize prices – that is, they are
determined by the relationship between supply and demand – they
constitute an indicator of economic health.

This is so because a freely-set price is a function of consumers’
tastes, the state of competition, the necessary levels of production, as
well as a proper allocation of resources towards certain sectors of the
economy.

In this regard the perspectives of renowned economists like Ludwig von
Mises and Friedrich von Hayes, prominent members of the Austrian School,
are salient, as they insisted on the non-viability of socialism due to
this social system’s absence of market prices. Because of this, they
argued, there was no accurate information about what was really
happening in the economy.

In state-controlled economies that introduce market reform, the
liberalization of prices generally marks one of the climactic moments of
that process. Cases in point: the European nations that belonged to the
former Soviet bloc, and also the economic reform measures implemented in
China and Vietnam.

Of course, at times the conditions do not yet exist to carry out the
liberalization of prices. If a country begins with depressed production
levels, a premature liberalization of prices could be interpreted as a
kind of shock treatment that could affect the society’s poorest
citizens. However, the trend in cases of successful reforms is to move
towards the establishment of market prices shaped by fluctuations in
supply and demand.

The opposite is what is currently occurring with the economic reform
measures implemented by the President Raúl Castro. Almost one decade
after the initiation of the “updating of the economic model,” the
tendency observed is inverted: several market prices have been adopted
by the governmental bureaucracy and established as official.

First we see this in the commercialization of agricultural products,
with the closing of several supply and demand markets and the
proliferation of state markets that employ price caps.

And now it is happening with the government’s intervention to set the
prices applied by private transport providers. Last Thursday the
newspaper Granma published an announcement by the Council of the
Provincial Administration of Havana setting the rates that must be
offered by taxi drivers working as independent professionals. In almost
every case the prices are lower than those existing prior to state
interference.

For example, there are some routes henceforth to be charged at 5 pesos,
half of what self-employed drivers used to. Other longer routes that
used to cost 20 pesos have now been set at 15. It is also stressed that
“violations, whether complaints received from the population, or the
result of oversight actions, entail the cancellation of one’s Transport
Operation License; or, depending on the nature of the complaint and its
corresponding processing, the potential seizure of the vehicle.”

It goes without saying that, in the case of agricultural products, and
private taxi drivers, the price ceilings set by the Government result in
the demoralization of producers, marketers and service providers.
Therefore, the purported protection of the population cited by the
regime as a pretext for its policies, is soon belied by the damage they
do to everyday citizens. The shortages suffered by state markets are now
coupled with a drop in the number of almendrones (as private taxis are
called) on Havana’s streets.

In any case, the situation that has spurred the authorities to meddle in
the reformulation of prices and fees, which used to be freely
determined, is viewed by many as just the tip of the iceberg, revealing
the serious problems underlying the Cuban economy.

Source: Taxi Prices: Raul’s Reform Is Not Working | Diario de Cuba –
www.diariodecuba.com/cuba/1487019867_28921.html

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