In the post linked below, Jim Lindgren discusses Forbes' estimate that Fidel Castro has a net worth of $900 million. However impressive this figure seems, it actually understates Castro's real wealth. As an absolute dictator, Fidel can appropriate for his use virtually any asset - or person - in Cuba, anytime he wants. His true net worth is the total value of everything in Cuba, possibly subtracting the expenses of the secret police, the military, and the other institutions needed to keep him in power.

This way of looking at Castro's wealth helps explain why Castro and other similar rulers are often reluctant to undertake market-oriented economic reforms that would increase the total wealth of their countries. In order to do so, they would have to give at least some of their subjects enforceable property rights that the dictator could not expropriate at whim.

Let us assume that the total wealth of Cuba right now is X, and Castro effectively "owns" 100% of it. After the introduction of market-based reforms, perhaps total wealth increases to 2X, but Castro now controls "only" 45%. 45% of 2X=0.9X and is of course a smaller amount than 100% of X. In this deliberately oversimplified scenario, Castro's wealth actually goes down, despite the fact that total Cuban wealth has doubled. Clearly, Castro has no incentive to want that to happen! And that doesn't even factor in the danger that allowing the creation of major concentrations of wealth outside Castro's control could provide a material base for opposition activity intended to topple his regime. If that happens, he might lose everything.

The above analysis assumes that the dictator is motivated solely by narrow self-interest. Real-world dictators (Castro included) are sometimes also motivated by ideology. But an ideology that justifies the rule of an absolute dictator (usually some variant of socialism, fascism, or nationalism) is unlikely to look favorably on market reforms, or any other reforms that constrain the power of the state. If it did, it probably would not have appealed to the dictator and his supporters in the first place.

Finally, the theory also helps explain why dictatorial regimes that do institute market-oriented economic reforms usually do so only if either 1) the dictator's power falls well short of being absolute (e.g. - Lee Kuan Yew, or Pinochet), or 2) an absolute dictator dies and is replaced by some form of collective leadership (China after Mao). In such regimes, the rulers have less to lose from market-based reforms because they don't start off owning everything or even controlling everything in the public sector. They might even be able to force their rivals within the government bureaucracy to bear the costs of creating property rights for the citizenry.

I certainly do not mean to suggest that this simplified theory fully explains either Castro's policies or those of other dictators. But it does perhaps identify an important dynamic.