Cuba’s transition from command to market economics system may face to many problems. This article will mention four main problems that Cuba may face to.
Firstly, lack of robust system may become an obstacle for the economic reform. Because of the incomplete institution, Cuban house price may escalate rapidly without any signs of reduction.
Secondly, in the time of command economic, all of the factories were belongs to country. Many state owned industries were very inefficient, with poor quality goods, overstaffing, and lack of incentives, etc. In the Short term privatization caused many problems such as an increase in unemployment and a negative multiplier effect. Also, it may results in problem of corruption. Many state managers converted assets into their private property. Additionally, people had no sense of management and efficiency because all the property were own by the government. So, people may not have enough management skills to adapt the transitioning.
Furthermore, when prices were control by the price mechanism, it may leads to a soar increase of inflation. However the problem with rising inflation is that money becomes less useful and efficient as a medium of exchange and store of value. Rapidly changing prices also erode money's function as a unit of account and standard of deferred payment. In a hyperinflation, less efficient barter replaces the use of money. In addition, it also will leads to a falling Real GDP. So there will be extra pressure put on the government’s budget, there will be less tax collected.
Finally, the transitioning will leads to instability in many markets. In agriculture, for example, shifts in supply due to natural occurrences such as the weather can lead to major movements in the price.
In conclusion, Cuba will face many challenges in transitioning from a command economy to market economy.