To make it work you need to change over key from str to tuple before decryption(ast.literal_eval function). Here is the fixed code:
import Crypto
from Crypto.PublicKey import RSA
from Crypto import Random
import ast
random_generator = Random.new().read
key = RSA.generate(1024, random_generator) #generate pub and priv key
publickey = key.publickey() # pub key export for exchange
encrypted = publickey.encrypt('encrypt this message', 32)
#message to encrypt is in the above line 'encrypt this message'
print 'encrypted message:', encrypted #ciphertext
f = open ('encryption.txt', 'w')
f.write(str(encrypted)) #write ciphertext to file
f.close()
#decrypted code below
f = open('encryption.txt', 'r')
message = f.read()
decrypted = key.decrypt(ast.literal_eval(str(encrypted)))
print 'decrypted', decrypted
f = open ('encryption.txt', 'w')
f.write(str(message))
f.write(str(decrypted))
f.close()