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By Christian Monson*
Cuba is such an impoverished country that people don’t ask for money in the streets, they ask for underwear, pencils and aspirin. And this is a country that was one of the richest in Latin America before the Cuban communist revolution, not to mention a famous tourist destination known for glamour and luxury, all of which can now be seen in decay on the streets of Havana.
Of course, if you ask the Cuban government, its difficult economic situation is due to U.S. sanctions. Enacted in 1960 in response to the Castro government’s nationalization of U.S.-owned oil refineries, as well as the seizure of other American-owned property and businesses, the Cuban embargo is the longest of its kind in modern history and is famous for preventing U.S. citizens from traveling to the country except in special circumstances.
On July 11, 2021, mass protests erupted across 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 evident than ever that it is time for the embargo to end. Not only it is costing U.S. and Cuban citizens alike, aggravating the poverty of a nation already suffering from communist policies, but it is counterproductive.
It is actually helping the Castro regime stay in power.
A sinking economy and “the blockade”
Cuba is the quintessential example of an economy based on the consumption of its harvest. 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 the limit and are in bad shape.
In an expert survey conducted at the University of Chicago Booth School of Business, 98% agreed that Cuba’s economic difficulties were due to the Cuban government’s own policies, not to U.S. sanctions. This is because, while it is true that there is an embargo that interrupts trade between the US and Cuba, it is not the blockade that the Cuban government claims it is.
In fact, the U.S. government even gave its approval to a U.S. company to build an agricultural machinery plant in Cuba, the kind of capital the country desperately needs. However, the Cuban government turned it down because private individuals are not allowed to have factories in the country. In fact, a Cuban citizen claimed that the frequent water shortages they suffer, even in favored tourist areas, were due to the fact that although Cuba has plenty of water, it does not even has enough industrial infrastructure to produce something as simple as plastic bottles.
With absolute state planning which has destroyed almost all production on the island, Cuba must rely on imports for almost everything. However, importing is difficult because no one trusts the Cuban government to pay due to decades of debt defaults. For example, China has had to forgive nearly $5 billion of debt to Cuba, just half of the total debt it has forgiven its trading partners. As a result, trade with China has declined as it has with many other nations that have tried to come to Cuba’s aid, such as Russia, Venezuela and Mexico.
A State Department memorandum reveals the purpose of the embargo: “The only predictable means of alienating domestic support [for the Castro regime] is through disenchantment and disaffection based on dissatisfaction and economic hardship.”
But if the Cuban government itself is responsible for the nation’s poverty (Cuba’s poverty rate is estimated at around 50%) and the regime has remained in power for more than six decades, the embargo has accomplished little. Meanwhile, it has had a number of negative consequences.
Punishing Cubans and Americans alike
Although Cuba’s economic problems are the result of its communist policies, not the U.S. embargo, it cannot be denied that sanctions do little to help the island’s situation. Estimates abound. Some claim that the embargo has cost the Cuban economy well over a trillion dollars; the Cuba Policy Foundation offers a lower figure of $685 million a year, or nearly $50 billion in total.
Moreover, with the lousy economy of the Castro regime, the only way for Cubans to purchase quality foreign goods is with foreign currency. U.S. tourists could put dollars in the pockets of private Cuban citizens if they did not have to face the bureaucratic absurdity of getting a “license” just to travel there and submit to a possible audit.
Of course, it is not just about Cubans. Free trade is always economically beneficial, so it is ironic that a country like the United States, which generally advocates global free trade (with notable exceptions), is willing to stifle it for its own citizens by prohibiting them from trading with Cubans. The U.S. Chamber of Commerce estimates that the embargo costs Americans $1.2 billion a year, which means it has cost approximately $75 billion since its inception.
It also puts Americans at a serious disadvantage in the future. During my visit, I spoke to no one in Cuba who had anything positive to say about their own government, and it is unlikely that the communist regime will last much longer. When it inevitably falls, investors from other developed nations will have an advantage. Following Raul Castro’s decision to allow home purchases, Cubans are selling their homes to Europeans en masse for next to nothing in order to get euros to feed their families. Americans do not have the same opportunities because of our own government.
The embargo only supports the Castro regime
However, the economic costs are the least important. The worst effect of the U.S. embargo on Cuba is that it helps keep the Castro regime in power. This is because the Cuban Communist Party – not to mention its supporters around the world – can use it as a scapegoat for all its problems.
The 11J protests and the general anti-government sentiment of the Cuban people are perfect proof of this. Now that the Internet has provided Cubans with a means to see the outside world and disseminate information, such as the underground news outlet Cibernoticias, Cubans believe less and less in the blockade excuse. One particularly passionate citizen went so far as to tell me: “Blockade? There is no blockade. The chickens say ‘USA Product’ right on the side.”
Nonetheless, until recently, Cubans had no 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 remove this excuse and prove that Cuba is yet another example of a failed communist state.
The definition of madness
The U.S. sanctions against Cuba have simply not worked. Sixty-three years later, the communists are still in power, while most of those involved in the original revolution have long since died on both sides.
Despite the total failure of the U.S embargo on Cuba, to the point of leading to the opposite of its stated purpose, politicians have been eager to repeat the strategy whenever possible. Just consider the Biden administration’s response to the Russian invasion of Ukraine: “unprecedented sanctions”. These were supposedly going to turn the Russian people against Putin. However, by April 2022, Putin’s domestic approval rating had risen to nearly 82% from 67% prior to the invasion.
The Biden Administration did not need to have looked as far ahead as Cuba to know this would happen. They could have looked at the sanctions the U.S. and EU applied to Russia and Putin following the annexation of Crimea in 2014. In this case, Putin’s approval rating soared from one of its lowest points to 89 %.
There seems to be a pattern when it comes to sanctions. They help the regime in power. However, our governments keep telling us that they are the solution to thwart authoritarian regimes.
If officials really want to help to put an end to the authoritarian regimes, whether in Cuba or Russia, it would be far better to get out of the way and let the free market work.
If peace, free trade and immigration are encouraged, it will become very clear what creates prosperity and what inflicts poverty. These regimes will not survive the truth.
*Christian Monson is a writer and journalist covering subjects from motorcycles and guns to economics and European history. You can see more of his work at ChristianMonson.com.