Lessons for Cuba after communism

Regardless of when the US eases its embargo on Cuba, the country's communist days are numbered. With an economy in shambles, support from the Soviet Union gone, and contacts with the capitalist world increasing daily, it is only a matter of time before this failed system crumbles and opens its doors to political and economic reform. Anticipating the fall, hordes of foreign investors and Cuban émigrés are poised to make the rush to Havana.

In preparing for the stampede, investors and émigrés would be well advised to consider the experience of Central and Eastern Europe after the collapse of communism. There, the clash between the naive idealism of returning émigrés and the harsh reality of those who stayed behind was pronounced and painful.

The effects of communism on the mentality of the population at large were immense. Decades of stifling bureaucracy, incessant propaganda, and an extreme nanny state destroyed people's will to work. Entitlements became a way of life. No one expected to get fired, and the government was viewed as the solution to all problems. As a result, most people over the age of 40 were lost, and it will be left to the youth to forge a future.

Life under communism was simple. Most things – even the lines, the shortages, and the inefficiencies – were predictable. Everyone but the communist elite was equally poor. Nobody worried about investments, college tuition, and mortgage payments. For the simple worker, peasant, or civil servant, loath to worry or think, the system had considerable attractions. The arrival of capitalism with its plethora of choices and risks upset that predictability and proved unnerving to most of the working class and older generation.

Communism was a system of patent lies. Corruption, bribery, and cronyism were deeply embedded in the system. For most in the West, it was difficult to imagine the importance of contacts, friends in high places, and well-placed relatives. Once the lid of repression was off, these forces of privilege emerged with an uncontrollable vengeance, so that freedom initially aggravated corruption and crime. As the communist system collapsed, an oligarchy of former communist managers thrived on the transitional chaos to amass enormous wealth. The easiest fortunes were made on privileged trading between low state-controlled prices and high free-market prices. The cost was borne by the older generation and pensioners, too old to adapt to the rough and tumble of the market.

Yet, even as communism lay in ruins, politics and people were real. Émigrés and foreign advisers arriving with a can-do swagger and the confidence that they "know it all" often failed to understand how society functioned. Under communism people may have forgotten how to work and never learned to use a credit card, but they were bright and had pride. The combination of local pride and émigré arrogance excluded all but a handful of émigrés from prominent government positions. Without genuine humility, returning émigrés are not likely to succeed.

An awareness of these problems helps to harness them. Cubans must be mobilized and empowered. It is not enough to preach the principles of capitalism. Early democratic party elections to a new parliament are vital to put into place a functioning legislature that can adopt the hundreds of new laws a market economy requires. A popularly elected president cannot do it alone, as President Boris Yeltsin experienced in Russia.

Early and thorough privatization is an economic necessity, but it is also a good means of giving many a share in the new market economy. Restitution has worked well for housing and family farms, though it has not been politically acceptable for large enterprises, even in eastern Germany.

The first moment of economic reform is vital. Focus on the fundamental principles: maximum liberalization and financial stabilization. When prices and markets are deregulated, inflation is bound to skyrocket, requiring a firm fiscal and monetary policy. If the rulers hesitate, the social costs of transition will only rise. Either you get onto the right track or you do not. In the midst of transition, many statistics become nearly meaningless and are best ignored.

Surely, the US can and should help. New policymakers need relevant advice. A new class of entrepreneurs and civil servants will have to be trained. A cause of Cuba's collapse is likely to be its excessive external debt, and the US should give a postcommunist government ample financial support so that it can contain inflation, manage its debt and attain sufficient reserves. Business investment, however, is best left to the private sector.

Many mistakes were made after the fall of the Berlin Wall. We can only hope that they will not be repeated when the Castro regime collapses.

• Anders Aslund and John Hewko are with the Carnegie Endowment for International Peace. They have advised several postcommunist governments over the past decade.