On Cuba's budgetary finance system. A critique of Helen Yaffe's account

This article offers a critique of the budgetary finance system (BFS) conceived by Ernesto Che Guevara, as well as Helen Yaffe s recent account of it. We build on the economic theory of market socialism to analyse four key aspects of the BFS: investments, incentives, quality, and entrepreneurship. It is our contention that the BFS was virtually impossible, in the sense that it could not be reasonably expected that the BFS marginally allocated non-primary goods to those persons most in need or who valued them the most. We maintain that the unified control of factors of production rocketed diminishing returns to management and weakened the effectiveness of the mixture of moral and material levers; that Cuban directors lacked entrepreneurship because, in the absence of a market, they were blind to their functions of running Consolidated Enterprises and, in addition, the system of moral compulsion fostered a powerful discouragement for them.