The Free Market 19, no. 2 (February 2001)
While it did not make headway in this latest presidential campaign, events of the last year have weakened one of the longest-standing policies of the US government: the trade embargo with Cuba. Born in the cold war fervor of the early 1960s and further strengthened by the Cuban Missile Crisis of October 1962, the embargo has survived the Vietnam War, the Great Society, Woodstock, Watergate, the breakup of the USSR, Monica Lewinsky, and the 2000 presidential election crisis.
Many conservatives, including those who say they support free markets, insist that this embargo, like all of the dozens of other embargoes and sanctions this government sponsors, is necessary to promote freedom here and abroad. Fidel Castro is an oppressive, bloody dictator whose tyrannical regime has little to offer but poor sugar harvests, a dilapidated capital city that Caribbean partygoers once knew as a jewel named Havana in the pre-communist era, and cigars that we can’t legally buy in the USA.
This is a bogus argument. For many years, the US government has regularly carried on diplomatic relations and traded with nations governed by tyrants bloodier than Castro. The USSR for many years threatened its European neighbors in a far more deadly manner than Castro’s Cuba ever threatened us, and we have often supported other governments that would not have met the approval of Thomas Jefferson or George Washington.
Outside the fact that our embargo of Cuba is hypocritical and simply vindictive, there are many other misconceptions about this boycott with which we need to deal. First, I turn to the arguments from leftist supporters of Castro.
Cuba s economy clearly is in a shambles, or at least its “official” economy is a wreck. Cuba actually has three economies. The first is the socialist one faced by ordinary Cubans, those who don’t have the opportunity to earn dollars and other “hard” currencies by working in the tourist industries or have the good fortune of having relatives living in Miami. (One of the great ironies of the tourist boom in Cuba is that well_trained professionals such as doctors and engineers take second jobs as waiters, clerks, taxi drivers, and even prostitutes in hotels that cater to westerners.)
This first economy encompasses all of the gross inefficiencies of socialism. Nearly everything ordinary Cubans must buy, including sugar, is rationed. Store shelves are empty and people either do without or jury_rig things to keep them going. That is why Cuba is frozen in time, a land of steam_powered locomotives and 1957 Chevys.
Cuba’s second economy serves western tourists with luxury hotels and gambling casinos at beaches off_limits to regular Cuban citizens. From what I hear, they are comfortable (and somewhat overpriced) lodgings, but certainly no better than other Caribbean getaways.
However, Castro said he wanted to eliminate this sector of the economy when he seized power in 1959. The hotels, with Cuban bellhops, busboys, and stage dancers, representing all that Communists believed was evil about the imperialistic western world, stripped Cubans of their inherent dignity, said Castro. Today, Cuba desperately depends upon luxury tourism.
The third sector is the absolutely essential underground economy, despite the fact that it is illegal. Communism holds that buying and selling in a market setting is evil and exploitative (they call it “speculation”), and it was even punishable by death in the USSR. Yet, this is the only market open to ordinary Cubans that actually works. If it were not for the underground market, many Cubans could not purchase basic staples like cooking oil and other foods, not to mention “luxury goods” such as shoes and shirts.
The Left says that Cuba s economy is in shambles because of the US economic embargo. While popular with many groups, this is fraught with logical errors. The Left says that poverty in poor nations, such as some in Africa or Latin America, exists because the wealthy trade with them. Thus, leftists believe, exchange is a win lose affair. In any trading relationship, there are always winners and losers, a belief that unites many rightists such as Pat Buchanan and Ross Perot as well.
However, if they were right, the Cuban economy would be booming, since the evil USA doesn’t allow its exploitative multinational enterprises to impoverish Cuba. Obviously, the Left cannot have it both ways. If trade is always exploitative and the cause of poverty, then not trading should have the opposite effect.
Conversely, rightists say that trade relations with Cuba would legitimize Castro’s rule and indicate that this nation supports him. It is obvious that this argument has not been applied elsewhere. Before the Gulf War of 1990, Americans freely traded with Iraq despite Saddam’s murderous and oppressive regime. It was only when George H.W. Bush punished Iraq s invasion of Kuwait, forcing up gasoline prices that trading with Iraq became a sin.
Others, like Sen. Jesse Helms and Rep. Dan Burton, say that trading with Cuba strengthens Castro and communism. Like the bogus reasoning of the Left, economic analysis exposes the lie of this argument. Free trade with Cuba-- or any other socialist economy-- is much more subversive than any of the ridiculous CIA plots to overthrow someone’s government.
Those who prosper in a market economy do so by satisfying customers. The successful presence of a capitalist firm in a communist state like Cuba drives a wedge into the socialist system, which tries to stifle innovation and is based upon raw political connections. The Cuban system regularly rewards incompetence and slothfulness; market capitalism does not.
Socialism, with its twisted system of incentives, can never compete directly with capitalism. As pointed out earlier, Cubans regularly leave supposedly prestigious professions to become waiters and bellhops; can one imagine that occurring elsewhere? Castro most likely will occupy his “throne” for life. Let him. Our embargo has kept him in power, making him a hero in the eyes of those who hate capitalism.
I would rather honor our own legacy of freedom and free markets by allowing Americans to travel to Cuba and trade openly with its people. The prospect of US firms “occupying” Havana would be a much greater victory over Castro and socialism than the hoped-for successes of our failed military incursions into Cuba.
William L. Anderson teaches economics at North Greenville College (anderwl@prodigy.net).
