Cuba is a country so impoverished that the people don’t beg for money on the streets. They beg for underwear, pencils, and aspirin. And this is a country that was one of the wealthiest in Latin America prior to the Cuban Communist Revolution, not to mention a famous tourist destination known for glamor and luxury, all of which you can now see decaying on the streets of Havana.
Of course, if you ask the Cuban government, their economic plight is all because of US sanctions. Enacted in 1960 in response to the Castro government’s nationalization of American-owned oil refineries as well as the confiscation of various other property and businesses owned by Americans, the Cuban embargo is the longest of its kind in modern history and famous for preventing American citizens from traveling to the country except under special circumstances.
On July 11, 2021, mass protests erupted around the country due to shortages of food, medicine, and even water, resulting in the arbitrary detention of activists, some of them minors. In July, I traveled to Cuba for the anniversary, and it was more apparent than ever that it’s time for that embargo to end. Not only does it cost American and Cuban citizens alike, exacerbating the poverty of a nation already suffering from communist policies, but it’s counterproductive.
It’s actually helping the Castroist regime remain in power.
A Collapsing Economy and ‘the Blockade’
Cuba is the quintessential example of an economy based on eating your seed crop. It can be seen in the thousands of buildings, machines, and pieces of infrastructure that were clearly top of the line 50 years ago and have now been pushed to their limits and are in disrepair.
In a survey of experts at the University of Chicago Booth School of Business, 98 percent agreed Cuba’s economic hardships were due to the Cuban government’s own policies, not US sanctions. That’s because, while there is certainly an embargo that interrupts trade between the US and Cuba, it’s hardly the blockade the Cuban government likes to claim it is.
In fact, the US government even gave an American company approval to build a plant in Cuba for agricultural machinery, the kind of capital the country desperately needs. The Cuban government rejected it, though, since private individuals are not allowed to own factories in the country. In fact, one Cuban citizen claimed the frequent shortages of water we experienced, even in preferred tourist areas, were due to the fact that, while Cuba has plenty of water, they don’t even have enough industrial infrastructure to produce something as simple as plastic bottles.
With absolute state planning having destroyed nearly all production on the island, Cuba must rely on imports for just about everything. However, importing is difficult because no one trusts the Cuban government to pay up due to decades of debt defaults. For instance, China has had to forgive almost $5 billion in debt owed by Cuba, just about half of the total debt it’s forgiven to its trading partners. As a result, trade with China has decreased as it has with numerous other nations that have tried to come to Cuba’s aid like Russia, Venezuela, and Mexico.
A US State Department memo reveals the intended purpose of the embargo: “The only foreseeable means of alienating internal support [for the Castro regime] is through disenchantment and disaffection based on economic dissatisfaction and hardship.”
But if the Cuban government itself is responsible for the nation’s poverty (Cuba’s poverty rate is estimated at around 50 percent) and the regime has stayed in power for over six decades, the embargo hasn’t accomplished much of anything. In the meantime, it’s had a number of negative consequences.
Punishing Cubans and Americans Alike
While Cuba’s economic woes are the result of their communist policies, not the US embargo, it simply cannot be denied that the sanctions do little to help the situation on the island. Estimates abound. Some claim that the embargo has cost the Cuban economy well over $1 trillion; the Cuba Policy Foundation provides a lower figure of $685 million per year, or nearly $50 billion in total.
Moreover, with the Castroist regime’s abysmal economics, the only way for Cubans to get their hands on quality foreign products is with foreign currency. American tourists could put USD into the pockets of private Cuban citizens if they were not faced with the bureaucratic absurdity of procuring a “license” just to travel there and subjecting themselves to a potential audit.
Of course, it’s not just Cubans. Free trade is always beneficial economically, so it’s ironic that a country like America that generally advocates global free trade (with notable exceptions) is willing to stifle it for their own citizens by prohibiting them from trading with Cubans. The US Chamber of Commerce estimates that the embargo costs Americans $1.2 billion per year, which means it has cost roughly $75 billion since its inception.
Moreover, it puts Americans at a severe disadvantage going forward. During my visit, I didn’t speak to anyone in Cuba who had anything positive to say about their own government, and it’s unlikely that the communist regime will last much longer. When it inevitably falls, investors from other developed nations will have a head start. After Raul Castro’s decision to allow home ownership, Cubans are selling their homes to Europeans en masse for next to nothing in order to get Euros just so they can feed their families. Americans don’t get the same opportunities because of our own government.
The Embargo Only Supports the Castroist Regime
The economic costs are the least of it, though. The worst effect of the US embargo on Cuba is that it helps keep the Castroist regime in power. That’s because the Communist Party of Cuba—not to mention their supporters around the world—can use it as a scapegoat for all their problems.
The 11J protests and general anti-government sentiment among the Cuban people is perfect evidence of this. Now that the internet has provided Cubans with a means to view the outside world and spread information, such as the clandestine news outlet Cibernoticias, Cubans believe the bloqueo excuse less and less. A particularly passionate citizen even told me, “Blockade? There is no blockade. The chickens say ‘Product of USA’ right on the side.”
Yet until recently, Cubans didn’t have access to the internet, so the regime has been able to blame the embargo for all the problems the regime itself has caused. Lifting the embargo would eliminate this excuse and prove that Cuba is just another example of a failed communist state.
The Definition of Insanity
US sanctions against Cuba simply haven’t worked. Sixty-three years later, the communists are still in power while most of those involved with the original revolution, on the parts of both the US and Cuba, are long dead.
Despite the total failure the Cuban embargo has been, to the point of leading to the exact opposite of its stated purpose, politicians have been eager to repeat the strategy whenever possible. Just consider the response of the Biden administration to Russia’s invasion of Ukraine: “unprecedented sanctions.” Supposedly, these were going to turn the Russian people against Putin. Yet by April 2022, Putin’s domestic approval rating had risen to almost 82 percent from 67 percent prior to the invasion.
The Biden administration didn’t need to have looked as far as Cuba to have known this would happen. They could have looked at the sanctions the US and EU applied to Russia and Putin after the annexation of Crimea in 2014. In this case, Putin’s approval rating shot up from one of its lowest points to 89 percent.
It seems that there’s a pattern when it comes to sanctions. They help the regime in power. Yet our governments keep telling us they’re the solution to thwarting authoritarian regimes.
If officials really want to help end authoritarian regimes, whether they’re in Cuba or Russia, it would be far better to get out of the way and let the free market work.
By encouraging peace, free trade, and immigration, it will become abundantly clear what creates prosperity and what inflicts poverty. These regimes won’t survive the truth.
The post What I Learned about the Cuban Embargo on My Trip to Havana was first published by the Foundation for Economic Education, and is republished here with permission. Please support their efforts.