Wall St.Journal Weekend 29Feb2020

THE WALL STREET JOURNAL. **** Saturday/Sunday, February 29 - March 1, 2020 |A

The Real Cuba Is a Land of Extreme Deprivation

I

’ve been to Cuba twice with my
church, which has been organiz-
ing trips for almost 20 years.
It’s astonishing some people still
cling to a romanticized version of
Cuban life under communism. It
bears no resemblance to reality.
On these visits, in 2006 and 2007,
my fellow travelers and I brought
two suitcases, one for our clothes
and another for the things we gave
away to Cuban churches and our
translators. We loaded up on basic
medications, especially prenatal vi-
tamins and children’s Tylenol, which
Cuban children would otherwise go
without.
We bought dozens of pairs of in-
expensive reading glasses—the kind
Americans can find at the pharmacy
for a couple of dollars. Older Cubans
sometimes cried when I gave them
these glasses, which restored their
ability to read.
I can’t say I conducted a study of
the Cuban health-care system, but
I’ll go out on limb and suggest that
people who don’t have children’s Ty-
lenol and cheap reading glasses

probably aren’t getting world-class

medical care.

Another striking feature of Cuba

is the pervasive idleness. Every-

where you look, people are standing

around. They aren’t working, be-

cause they get paid almost nothing.

The old Soviet joke “They pretend

to pay us and we pretend to work”

sums it up. Most people have infor-

mal jobs to supplement their in-

comes, but this is still strictly lim-

ited by the government and thus

kept underground.

Cuba is famous for the 1950s cars

still on the road, but few Cubans can

afford them. On our trips from Ha-

vana to Pinar del Rio in Chinese-

made minivans, the highways were

virtually empty except for the peo-

ple waiting near overpasses hoping

to catch a ride on a flatbed truck. A

ticket for a two-hour bus ride is well

beyond the means of a typical Cu-

ban. Even the buildings a few blocks

from the seat of government in Ha-

vana are crumbling. It’s obvious to a

visitor that Cubans live in abject

poverty.

And none of this is a secret. A

quick Google search reveals the av-

erage income in Cuba is $25 to $

a month. Based on my observations

and conversations with our transla-

tors, there are three classes of peo-

ple in Cuba. The governmental elite

live in gated communities and enjoy

what Americans would regard as

middle-class living standards. The

average person who relies on his

own income lives in desperate Third

World conditions. In between are

people with generous relatives in

the U.S. They have more disposable

income, but their living conditions

are comparable to those of the poor-

est Americans.

Income inequality is so extreme

that Cuba has two currencies, one

for tourists and senior government

officials—and one for everyone else.

Ordinary Cubans use the national

peso, valued at 25 to the U.S. dollar.

Tourists and the elite use the con-

vertible peso, which converts one-

to-one with the dollar (after sur-

charges to the Cuban government).

A soft drink or ice cream costs in

convertible pesos what it would cost

in small-town America. Given the

average wage in Cuba, a trip to the

equivalent of a 7-Eleven is a luxury

most people can’t afford.

A group from my church returned

from Cuba a couple of months ago.

Little has changed. We’re still bring-

ing the same basic necessities, and

circumstances are still desperate.

Conditions in Cuba may be deterio-

rating further thanks to the collapse

of Venezuela, itself a socialist basket

case where people are starving and

go without basic medicine. Cuba

used to receive oil and cash from

Venezuela in exchange for what

amounts to slave labor performed

by Cuban physicians. But those

flows have slowed.

One surprise was how many peo-

ple in Cuba were openly critical of

the government. Cuba is not as to-

talitarian as it was in the early days

after the revolution, when the gov-

ernment sent critics of the regime

(as well as pastors, priests, artists

and others) to labor camps. Exercis-

ing basic political rights will get you

thrown in prison, but the govern-

ment has lost the will to punish

people merely for complaining. It

seems almost everyone in Cuba gets

the joke. If only American profes-

sors, college students and politi-

cians did.

Here’s a proposal for a govern-

ment program that would almost

certainly pay for itself many times

over: free trips to Cuba (and per-

haps Venezuela and other socialist

paradises), so Americans can see the

sobering truth with their own eyes.

Visitors from the U.S. will find

that the people of Cuba are warm

and friendly, despite their bleak cir-

cumstances. Almost all of them

would open their homes to a

stranger and offer a cup of coffee.

Our translators were some of the

loveliest people I have ever met.

They deserve better. So do future

generations of Americans.

Mr. Laperriere is a partner at

Cornerstone Macro.

By Andy Laperriere

Families were overjoyed

when my church group

brought children’s Tylenol

and cheap reading glasses.

re-election based on these things.

But the stock market is being hit

hard by virus-driven concerns. If

those fears continue—and there’s no

reason to believe they won’t—the

gains the president has enjoyed

could be wiped out.

As for unemployment, if the virus

spreads people will begin to self-

distance. If they shop less, if they

stay home more and eat out less,

and begin to cancel personal gather-

ings—if big professional events and

annual meetings are also canceled—

it will carry a whole world of bad

implications.

What I notice as a traveler in

America is the number of people

who make a traveler’s life easier,

and whose jobsdependon heavy

travel—all the people in the airport

shops and concessions, and those

who work in hotels. There’s the

woman whose small flower shop

makes the arrangements for the do-

nor reception at the community fo-

rum, and the floor managers, wait-

ers and waitresses at the charity

fundraising dinner. Local contrac-

tors, drivers, the sound man who

wires the dinner speaker. Many are

part of the gig economy, operating

without the protections of contracts

and unions. If the virus spreads and

events are canceled, they will be out

of jobs. And that’s just one sliver of

American life.

In a public-health crisis the role

of government is key. The question

will be—the questionis—are the

president and his administration up

to it?

Our scientists and health profes-

sionals are. (I think people see Tony

Fauci of the National Institutes of

Health as the de facto president on

this.) Is Donald Trump? Or has he

finally met a problem he can’t talk

his way out of? I have written in the

past questioning whether he can

lead and reassure the nation in a

time of crisis. We are about to find

out.

Leaders in crises function as

many things. They are primary giv-

ers of information, so they have to

know the facts. They have to be se-

rious: They must master the data.

Are they managerially competent?

Most of all, are they trustworthy

and credible?

Or do people get the sense

they’re spinning, finagling, covering

up failures and shading the facts?

Trump Isn’t Easing Coronavirus Forebodings

even know they’re sick—it feels

like a cold and passes. But about

20% will get really sick. Among

them, mortality rates are low but

higher than for the flu, and higher

still among those who are older or

impaired.

So it’s serious: A lot of people

will be exposed and a significant

number will be endangered. And of

course there’s no vaccine.

We live in a global world. Every-

body’s going everyplace all the time.

Nothing is contained in the ways it

used to be. It seems to me impossi-

ble that there are not people walk-

ing along the streets in the U.S. who

have it, don’t know it and are

spreading it.

Americans are focusing. If you go

to Amazon.com you famously find

that the best face masks are no lon-

ger available, but check out the prices

of hand sanitizers. They appear to be

going up rather sharply! (Note to Jeff

Bezos: if this turns bad and people

start making accusations about price

gouging and profiteers, public senti-

ment won’t just be hard on manufac-

turers, they’ll blame you too. What-

ever downward pressure can be

applied, do it now, not later.)

If you limit your focus to politics,

to 2020 election outcomes, you find

yourself thinking this: Maybe it’s all

being decided not in the next few

weeks of primaries but in the next

few weeks of the virus, how much it

spreads, and how it’s handled.

If coronavirus becomes a for-

mally recognized world-wide pan-

demic, and if it hits America hard, it

is going to change a lot—the na-

tional mood, our cultural habits, the

economy.

The president has been buoyed

the past few years by a kind of in-

flatable raft of good economic news

and strengths. The Dow Jones In-

dustrial Average gained 8,581 points

from the day he took office to the

beginning of 2020. Unemployment

is down so far it feels like full em-

ployment. Minority employment is

up, incomes are up. He’s running for

It is in crisis that you see the dif-

ference between showmanship and

leadership.

Early signs are not encouraging.

The messaging early this week was

childish—everything’s under control,

everything’s fine. The president’s

news conference Wednesday night

was not reassuring. Stock market

down? “I think the financial markets

are very upset when they look at the

Democratic candidates standing on

that stage making fools out of them-

selves.” “The risk to the American

people remains very low.” “What-

ever happens we’re totally pre-

pared.” “There’s no reason to panic,

because we have done so good.”

It was inadequate to the task.

I wonder if the president under-

stands what jeopardy he’s in, how

delicate even strong economies are,

and how provisional good fortune

is.

If you want to talk about what

could make a progressive win the

presidency it couldn’t be a better

constellation than this: an epidemic,

an economic downturn, a broad

sense of public anxiety, and an in-

cumbent looking small. Especially if

the progressive says he stands for

one big thing, health care for every-

one.

The only candidate to bring up

the threat of coronavirus at the

Democratic debate the other night

was Mike Bloomberg. This is how

you’ll know the fact of the virus has

hit the political class: Politicians

will stop doing what they’ve done

for more than two centuries. They’ll

stop shaking hands. It will be a new

world of waving, nodding emphati-

cally, and patting your chest with

your hand.

Some kinda world, when the pols

can’t even gladhand.

It would be extremely reassuring

if a temporary armistice were called

in the cold war between the White

House and congressional Democrats.

If the virus is as serious as I think it

is, no one will look back kindly on

anyonewho acted small.

Vice President Pence, Trump and CDC director Anne Schuchat Wednesday.

SARAH SILBIGER/BLOOMBERG NEWS

P

unditry 101: It’s bad when
you don’t write about what
you’re thinking about. All
week I was taking notes
knowing I’d be looking at
South Carolina, Super Tuesday and
this week’s debate. I was thinking
about polls and Rep. Jim Clyburn’s
beautiful remarks in support of Joe
Biden. They were beautiful because
they were highly personal without
being manipulative, which is now
something unusual in American poli-
tics. But my mind kept tugging in
another direction. So I’ll write what
I’m thinking, and it may be ragged
but here goes.

I’ve got a feeling the coronavirus
is going to be bad, that it will have
a big impact on America, more than
we imagine, and therefore on its
politics. As this is written the virus
is reported in 48 nations. We’ve
had a first case with no known
source, in California, and the state
is monitoring some 8,400 others
for possible infection. Canada has
13 cases. There have been out-
breaks in Iran and Italy; in Rome,
there are worries because Pope
Francis had to cancel a Lenten
Mass due to what the Vatican
called a “slight indisposition.”
There’s a lot we don’t know but
much we do. We know coronavirus
is highly communicable, that per-
son-to-person transmission is easy
and quick. Most who get it won’t

If it hits America hard,

a lot will change—the

national mood, cultural

habits, the economy.

DECLARATIONS

By Peggy Noonan

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A

s the country barrels toward
Super Tuesday, there are many
ways to make money from the
2020 presidential election. If you
think Sen. Bernie Sanders is going to
win, you could short luxury-goods
manufacturers. Or if you’re betting
on Sen. Elizabeth Warren’s chances,
you could plan to buy shares of An-
cestry.com in the event that the DNA
testing company’s long-rumored IPO
finally takes place.
But if you want to take a position
directly on the presidential election
outcome using an online market, you
can’t bet more than $850 on any sin-

Why Won’t the CFTC Let You Take a Position on the Election?

gle prediction. That’s because the

Commodity Futures Trading Com-

mission has set strict limits on trad-

ing. It has further kneecapped online

political betting by allowing it only

for “research purposes.” Existing

platforms like PredictIt and Iowa

Electronic Markets are run out of

universities and cannot profit from

the markets they create.

Political betting is a useful source

of information for journalists and

voters who track campaigns. And un-

like pundits, election speculators

have skin in the game. It’s time for

the CFTC to relax its suffocating reg-

ulations on prediction markets.

Political betting has a storied his-

tory in the U.S. In October and No-

vember of presidential election years

from 1896 to 1924, the prices for

such bets were regularly quoted in

major New York newspapers. Trading

of election-related bets on the New

York Curb Exchange—predecessor of

the American Stock Exchange—occa-

sionally exceeded the volume of stock

and bond trading.

Political markets serve valuable

purposes: They help people imagine

alternative futures and make it possi-

ble to hedge political risks in a more-

direct way than proxy bets allow.

Coal companies could go long on

Bloomberg futures to mitigate some

of the losses they anticipate from his

energy policies. Companies that

would rely on government subsidies

under a Green New Deal could do the

same with Trump contracts.

The CFTC disputes this, holding

that “the unpredictability of the spe-

cific economic consequences of an

election means that the Political

Event Contracts cannot reasonably

be expected to be used for hedging

purposes.” This is like saying that be-

cause the efficient-markets hypothe-

sis is true—it’s impossible to beat the

market—stock trading shouldn’t be

allowed. It’s a paternalistic view that

prevents Americans from reaping the

benefits of financial innovation.

If unleashed, such markets could

also provide useful information for

policy makers. George Mason Univer-

sity economist Robin Hanson has

suggested using prediction markets

to test hypotheses about how a given

political event, such as the adoption

of a single-payer health system,

would affect some other variable, like

gross domestic product or life expec-

tancy. Two markets would be cre-

ated, one in which investors would

predict U.S. real GDP in five years if

single payer were passed and one

without the change. The differential

between the two might help policy

makers make wiser decisions.

Prediction markets aren’t limited

to legislation and elections. Re-

searchers at Tel Aviv University and

New York University’s Stern School

of Business have found that the

prices of contracts that paid out on

the precise timing of Saddam Hus-

sein’s expulsion from power were

correlated with stock and oil prices

during Operation Iraqi Freedom in

2003.

Advances in blockchain and smart-

contract technology further militate

for rethinking regulations on political

betting. These innovations have cre-

ated alternatives to third-party bro-

kers like PredictIt, which takes 10%

of profits and 5% of withdrawals. The

CFTC’s current limits on competition

among brokers have kept transaction

costs high and reduced efficiency.

To be sure, not all contracts

should be allowed. A bet on whether

a certain politician will be assassi-

nated could easily create dangerous

incentives, and the CFTC rightly

deems such event contracts contrary

to the public interest. (Although Con-

gress could determine whether some

killings—such as of Iranian Maj. Gen.

Qasem Soleimani—are in the public

interest, and could conceivably issue

such contracts under the constitu-

tional power to grant letters of

marque and reprisal.)

But the CFTC’s draconian restric-

tions on general political betting are

not justified by its concern that citi-

zens would have perverse incentives

to vote for their bets instead of their

honest political preferences. Mr. Han-

son’s research finds that alleged mar-

ket manipulators, like the so-called

Romney Whale, who wagered $4 mil-

lion on the 2012 Republican presi-

dential nominee with an Irish broker-

age, actually make markets more

accurate on average by “boosting the

returns to informed trading.”

The U.K. already allows such mar-

kets, and no one asserts that they

played a decisive role in the elections

of Margaret Thatcher or Tony Blair,

just as no one questions the electoral

legitimacy of William McKinley or

Warren G. Harding—both of whom

were elected when the federal gov-

ernment still allowed freewheeling

prediction markets.

The CFTC should let you make

money off our next president,

whether it’s Donald Trump, Bernie

Sanders or Hillary Clinton—whose

odds of securing the 2020 Demo-

cratic presidential nomination are

currently priced at 6 cents to the

dollar.

Mr. Raskin is an adjunct professor

of law at New York University.

By Max Raskin

The commission prohibits

political bets except those

under $850 and for

‘research purposes.’