My involvement with illegal immigration stems from my time in post-communist Hungary, which provided both daily and professional experience in black markets, including black markets in labor. In addition, working in a country transitioning from communist to capitalist ideologies afforded a unique opportunity to witness the associated societal impacts. These led me to develop the conservative theory which I use for much of my analysis, including for illegal immigration, improving national governance, and today, the prospects for a post-communist Cuba.
As readers know, we treat the term liberal as 'pertaining to the individual', and conservative as 'pertaining to the group'. People in a group setting often have specific roles. For example, if you are a member of the military, a soldier, you are expected to fight the enemy in that capacity. Moreover, you are expected to fight as though your personal priorities did not exist, to risk and possibly lose your life in the service of the group. This is normally referred to as duty or, in our terminology, as agency. In a group setting, you are supposed to act as an agent of the group as though you as an individual (principal) did not exist. When we use the term 'work', for example, we mean that the individual is focusing all his energies as an agent on satisfying his employer's demands, rather than his own as principal.
In a communist system -- as in black markets -- the agent is typically divorced from the principal. Doing well is not the same as doing good. The cause is simple. Under communism, prices are set below the market-clearing level and private enterprise is not permitted. This creates a shortage economy, resulting in a host of associated pathologies which will also apply to Cuba.
The list:
Corruption
Because the price of a good is set below the market price in a communist system, there is always a buyer willing to pay more than the list price. They will gladly pay this differential to the person selling the good, for example, the clerk or cashier. This is, of course, a bribe and makes the clerk a corrupt person, and they know it. A person selling goods in a communist system will be dishonest virtually by definition, and this is corrosive to both their own psyche and the culture of the broader society. Nor is this behavior limited to a single sector. If you needed surgery in Hungary's universal healthcare system, for example, you had to pay the doctor under the table. (But how much, and when? Expats never knew.) If you wanted to be fed in the hospital, you had to pay the nursing staff on the side for the food. The rot was everywhere.
Cronyism / Insider Dealing
The other option for disposing of below-market priced goods was to reserve them for a favored person, perhaps a relative or friend. In Hungarian, this was referred to as protekció, protection, and it means privileged access to goods, housing or jobs obtained through personal connections. For example, a shoe store clerk might set aside a pair of sneakers for his brother-in-law.
Lying
Because the state-owned companies which characterize socialist systems ultimately depend on government funding, capital expenditures are driven by national budget constraints rather than customer preferences. For example, I once flew the Hungarian national airline, Malev, from Budapest to New York, and the entertainment system was not working. Upon my noting this, the stewardess responded that the system had just failed and would be replaced when the aircraft returned to Hungary. Six weeks later, I flew back to Budapest on the same aircraft, and the system was still broken. I asked the stewardess, and she replied that the system had just broken and would be replaced when the aircraft returned to Budapest. How often had she said that to passengers? Probably hundreds of times, every time knowing she was a liar. Forcing an employee into this sort of behavior makes people bitter and jaded, which many Hungarians were.
Stealing
Because prices were set below market, many state-owned enterprises routinely lost money to be made up from the national budget. As a consequence, however, it was well nigh impossible to tell whether a company was well-managed. Governments are not profit-maximizers, but rather budget-sufficers. No one in parliament knew whether stealing was occurring, or more precisely, much cared. For example, the fuel vendors at Budapest's Ferihegy Airport signed out the jet fuel in liters and sold those liters at official rates. However, fuel expands with the heat of the sun, so they were able to sell and pocket the difference in volume. The CFO of the company could have detected this (fuel should be sold by weight), but his pay was not tied to performance and wage rates were low, so this practice was allowed to continue largely undisturbed. Asset managers for the government were clueless about underlying realities, because, of course, they had no expertise in the business. Nor did they wish to look too hard, for perhaps someone at a higher level was getting a piece of the action, and they feared stirring the hornet's nest. Thievery was therefore ubiquitous at state-owned enterprises, that is, virtually across the economy during the socialist era. Hungarians are not an inherently dishonest people, but many of them were petty thieves, because that was the everyday reality they experienced in a shortage economy with pathetic wages.
Indolence
Employees were in fact often lazy, because they were not paid more for better work; if they worked less, they could not easily be fired (except for political offenses). Meanwhile, customers were paying below market anyway, so if there was a shortage or quality was poor, well, the customers had no choice in the matter. There was no competition. As a result, there was little workplace discipline in terms of efficiency or effectiveness. Part of this was by design. In the PREPA example in the previous note, the company was stuffed with excess employees, which by definition meant that many of them were effectively redundant. They were hired to be lazy, in effect.
Cynicism
Hungarians were extraordinarily cynical. There was always the presumption of a hidden agenda, in our terms, that a given agent was just pretending to be acting in that capacity, and in reality providing a smoke screen to cover their own pecuniary activities as principal. Whatever the official line was, it was all orchestrated to further the personal goals of the people pulling the strings. Of course, the stewardess in the example above would have developed an acute sense of cynicism, as did the passengers who regularly flew on Malev. Anything written in the press was assumed to be a lie, or at best, a distorted half truth. This was captured in the Soviet quip that there was no truth in ‘Pravda’ (the truth) and no news in ‘Izvestia’ (the news), these being the Soviet Union’s leading dailies at the time. The sentiment was wholly shared by Hungarians.
Despondency
All this made people despondent. They drank too much, smoked too much and felt they had too little control over their own lives. Governance for most of the public was about victimization by the communist elite. And that's how the Cubans feel.
A Degraded Culture
These attitudes do not simply disappear when communism falls. For those who grew up in the system, say, above 40 years old when communism fell, their behavior did not change, even though market incentives did. Older managers still treated employees as shiftless, lying, corrupt and incompetent thieves. And moreover, the public continued to believe and expect that governance was about exploitation, as did the political class above them. Therefore, hopes that communism would be replaced with flourishing liberal democracies were largely frustrated. Corrupt and nationalistic regimes were the more common outcome, for example in Hungary and Russia, both of which flirted with more open democracies for a time.
The Outlook for Cuba
The eastern European experience suggests that any post-communist Cuba will not become a thriving liberal democracy, but rather a typical, poorly governed Latin American democracy or a military -- but not communist -- dictatorship*. We can forestall such an outcome by presenting any new government with a system explicitly rewarding economic growth with material, financial incentives at the personal -- principal -- level. That is, after sixty years of communism, we rejoin the agent to the principal -- doing good to doing well -- and establish habits of thinking of governance as helping the country move forward, rather than helping oneself to the fruits of the treasury.
The Centrality of Prices and Markets
Note that all the ills of communism listed above can be traced back to just two sources: a ban on voluntary transactions and the elimination of market prices. It is hard to overstate the importance of voluntary interactions -- free markets and prices -- in establishing a civil society characterized by the conservative virtues of honesty, integrity, responsibility, industry, faith and optimism. Free markets create the habits of and belief in service to others. A free market not only represents the best outcome in classically liberal terms -- the best for the individual -- but also in classically conservative terms with respect to the morale and culture of the group, the country in this case. Prices and markets are that important to both classical liberals (libertarians) and conservatives -- but of course, for different reasons.
The Implications for Illegal Immigration
In my writings on illegal immigration, I emphasize the importance of on-demand visas at market prices for just this reason. These will create both a functioning market and social order. Consider how a market-based system would change the nature of those coming across the border. The current system favors migrants with the most courage to undertake the perilous journey and the greatest willingness to break the law and live for years under effectively illegal conditions. By contrast, in a market-based system, those with the best qualifications will have the edge. These include English language skills, appropriate industry experience, and solid references both from the home country and from US employers. By giving the migrants the freedom to come work in the US when they like, we also provide them the incentive to improve their resumes to compete on non-financial terms. As a conservative, how would I feel about a Guatemalan laborer who speaks decent English and has impeccable credentials? The words colleague, neighbor and fellow citizen come to mind. Paradoxically, a system which provides the greatest initiative to migrants also represents the most conservative alternative, achieved by pushing the incentive to invest in human capital back onto the migrants themselves. (I would note parenthetically how well this would mesh with an incentive system for Central American policy-makers which rewards them for creating GDP growth, part of which would result from investing in human capital.)
Free markets and freely set prices are critical to the health of society, not only in economic terms, but also to ensure essential conservative values. These will be enough to bring dignity to Cuba's people, but the country's politics must also be professionalized, by tying pay to outcomes, to create a Cuba capable of both reaching its own potential and serving as a proud friend and ally of the US.
* President Biden described the Cuban government as an 'authoritarian regime'. This is a mischaracterization. China and Russia are authoritarian regimes. In such regimes, both voluntary transactions and market prices are permitted, but challenging the power of the autocrat is strictly prohibited. By contrast, in a communist regime, both voluntary transactions and market prices are prohibited. North Korea and Cuba are thus communist regimes. Venezuela falls into a middle zone, with prices set below market, but without banning voluntary transactions in other respects. We would expect to see phenomenal levels of black market activities in these latter three countries, but not in, say, China or Russia.