Thursday, January 26, 2006

More thoughts on the embargo

Robert at 26th parallel has made a great post in response to an email he received about the embargo. Similarly I recently read a post on the blog of The Progress & Freedom Foundation about economic engagement with China. In the post, which is an interview with Jim Harper of the Cato institute, Harper makes a comment about Cuba that I disagree with.

Below is the response I sent via email.

First off I want to say that consider myself a libertarian and I have bachelor in Economics from the University of Florida. But I want to take issue with the following quote from your discussion with Jim Harper about trade with China. Mr. Harper said:

"The U.S. trade embargo toward Cuba has been a dismal failure. We've had some level of trade restrictions with Cuba for more than 40 years and, if anything, it has helped Castro by pauperizing the Cubans, demoralizing them, and shielding them from knowledge about the benefits of freedom. Heck, if we had had trade with Cuba the last 40 years, a steady diet of fast food probably would have killed off Fidel by now..."
I want to dispute that assertion. For one thing it assumes that free trade is what both parties want. For more than 30 years, as we all know, Cuba was a client state of the USSR. As such it had no need for trade with the United States and you never heard any complaints out of Havana. With the collapse of the Soviet Union and the massive subsidies it provided, Cuba's economy went into a tailspin which resulted in widespread shortages and what castro called the "special period." For the first time civilians got up the courage to violently resist the regime. In 1994 a small uprising in Havana resulted. This was known as the "Maleconazo" because it occurred along Cuba's famous waterfront boulevard "El Malecon".

In response to the crisis Cuba began to liberalize it's economy for the first time ever. Several steps were taken to create an influx of hard currency. Cuba began investing in its tourist sector for the first time in years. This was done with the aid of foreign companies. But in order to fill the short term need for restaurant and hotel space, Cuba allowed "paladares" to exist. These were home-based restaurants and boarding houses. Highly taxed and regulated, it was a beginning towards some kind of privatization. But as western countries began to invest in Cuba and the situation leveled off (with a large amount of outgoing migration towards the United States in the form of the rafter crisis) castro has recently begun to roll back some of the reforms he instituted during the special period. Many of the small private businesses have been shut down and the small and medium sized joint ventures have been unilaterally shut down by Cuba, often leaving investors holding the bag.

Cuba currently trades with almost every country other than the U.S. Yet none of this trade has done anything to relieve the suffering of the Cuban people. I'm not an expert on China but I think that China's leaders have a long term goal of economic viability that supersedes ideology. They haven't found a way to shed the authoritarian nature of their regime but they are motivated by something other than a deep hatred for the United States. Cuba is another matter. castro irrationally avoids reforms that will help his people because it's more important for him to "win" the ideological war.

Assuming that the embargo were completely dropped tomorrow, what evidence do we have that the human rights situation would get better? What makes any of us think that he would allow American fast food restaurants into his country (outside of the tourist areas which are off limits to ordinary Cubans). Isn't past performance the best indicator of future performance? As long as Cuba has a leader that wants to control all of the distribution of goods and resources to the country's citizens, his having more goods and services to offer only gives him more power. My point is that castro wants trade but only on his terms. Terms that limit the natural democratizing effect that trade usually creates between countries.

Another issue is credit. Cuba has zero. Cuba's external debt is monumental. How can there be trade with a country that has nothing to trade? Outside of Cigars and tourism Cuba has no real industries to speak of. Cuba's Sugar harvest last year was the smallest in something like 100 years. Opponents of the embargo have varying reasons for wanting to dump the policy. Some are more ideologically in sync with castro than they are with Bush. So they have a desire to help castro in any way they can. Others want their constituents to reap the rewards of trade with Cuba. Not an altogether bad reason. But the reality is that the U.S. Cuba's largest food supplier today. And that's with the "cash up front" provision that is currently in place. What these politicians really want is credit for castro so they're farmers can sell ever increasing quantities to Cuba. But who is going to pay the farmers when castro defaults like he has with so many of his other financial obligations? What I certainly don't want is for the US government to have to pay those farmers in a perverted farm subsidy where the farmers and castro win and the cuban people and American taxpayers lose.

With castro's modus operandi of resorting to minimal reforms when his country is literally on the verge of disaster and then rolling back those same reforms once the situation is only marginally better, I don't think free trade with cuba will result in significant changes in the social situation unless the castro brothers are out of power. Somebody else that isn't so ideologically intransigent will have to be the one that opens the window to true free trade coupled with real economic reforms.

Thank you for your attention.

Henry L. Gomez


Juan Paxety said...

Very well said.

What so many people fail to understand is that fidel takes action solely to maintain his own power. He's not interested in ideology, as such, nor in long-term consequences. His motivation is his own power, and if he can bash the US at the same time, so be it.

La Ventanita said...

I second Juan, what well said, well versed, and factual account. And Paxety, to support your view of Fidel I give you my Dad's - Fidel got himself a house and made Cuba his backyard.