In mid-2024, a Cuban official made headlines by likening the nation’s finances to a “war-time economy.” The politician was referring to insufficient wages, food shortages, and rising inflation, which has made living costs unaffordable for many. An American University in Washington researcher described this statement as preparing the Cuban people for austerity measures likely to couple increased taxes with less government outlay on public programs.
One target of such measures would be the island nation’s small and medium-sized enterprises (MSME), which have flourished since the privatization of limited sectors was announced in 2021. Curtailing non-state economic activity is a way of exerting price controls on both state and non-state sectors and re-establishing a centralized single price policy.
Unfortunately, this is a case of putting the genie back in the bottle. It’s a tacit admission of state failure to reign in inflation and will have myriad consequences, including increased scarcity of many consumer goods, particularly those exported from abroad. Placing caps on the maximum prices of essential goods such as cooking oil, powdered milk, chicken, sausages, pasta, and detergent may ease consumer costs in the short term, at best, but it will again discourage production.
It will adversely impact private businesses' bottom lines. It will also curtail the supply of many goods, which could lead to an uptick in smuggling and other lawless activities. As one analyst puts it, “the best cure for stabilizing the economy is to make it grow” rather than adding new restrictions.