Is It Time to End the Cuban Embargo?

For almost a decade, Nobel laureate Gary S. Becker, University Professor of Economics and of Sociology, and Richard Posner, senior lecturer at the University of Chicago Law School, published the Becker-Posner Blog, where they debated topics ranging from drug penalties to the minimum wage to food prices. Becker died in May. Below is their final pair of posts.

Becker: The embargo of Cuba—Time to go

The US embargo of Cuba began in 1960, a year after Fidel Castro turned this island toward communism. It was extended to food and medicines in 1962, the same year as the showdown with Russia over the installation of missiles there. The embargo has prevented American companies from doing business with Cuba, and discouraged tourism to Cuba. The American government also tried with quite limited success to prevent other countries from trading with Cuba.

In general economic embargoes are undesirable because they interfere with free trade among countries. Yet a case could be made for an embargo against Cuba. Castro not only allowed Russian missiles to be installed in Cuba, just 90 miles from Florida, but was also actively trying to interfere in other countries by sending troops and so-called advisors. The aim of the embargo was to impose economic hardship on Cuba that would force Castro to drop these international actions, and possibly even lead to the toppling of his government and the end of communism in Cuba. Castro did stop his international adventurism, but he and communism remained firmly entrenched for decades.

The Cuban economy has done badly, and has fallen behind the economies of many comparable countries. For example, in 1959, Cuban per capita income was above that of Taiwan, another island close by a hostile superpower. Cuba’s two main exports were sugar and tobacco, while Taiwan’s were sugar and rice. At that time, Taiwan began its transition toward a private-market system and globally oriented economy, whereas Cuba abolished private property and the government took charge of the economy with central planning and central organization. Since then Cuba’s economy has fallen far behind Taiwan’s, as Taiwan has taken advantage of world markets to grow at a remarkable rate while Cuba has chugged along with very slow growth. Cuba’s per capita income is a fifth or less that of Taiwan’s. Sugar and tobacco remain important exports of Cuba, while Taiwan has shifted toward complex electronic and industrial goods. Fidel Castro was a charismatic leader who mesmerized audiences with his oratory, but he utterly failed to deliver the goods to the Cuban people.

Cuba’s weak economic performance is in small part due to the embargo, since the United States would be a natural, important trading partner for the island, as it is for other nearby Caribbean countries, and for Mexico and other Central American countries. Yet communism itself is the main cause of its poor economic performance. One can say this with complete confidence since communism has utterly failed as an economic system in every country where it has been tried.

One only need look at the difference between the economies of South and North Korea for a clear natural experiment on the disadvantages of an economic system with no private property and central direction of the economy. Prior to the Korean War, the backward part of the Korean economy was in the south and the advanced, industrial part was in the north. The roles are now radically reversed since South Korea and its private-enterprise system are far ahead economically (and in other dimensions as well) of North Korea.

In the last decade, with Fidel Castro ailing and his brother Raúl taking over leadership, the Cuban government has begun to realize what the Cuban people long ago learned, that communism is responsible for the vast majority of its economic weakness. Despite the opposition of hard-liners, Cuba is allowing very small-scale private firms in retailing and other sectors, and houses can be bought and sold to a limited extent. These are only baby steps away from communism, but they put Cuba on a slippery slope toward a more market-based economy that will be hard to reverse.

Free trade is a principle that the US should follow except in extraordinary circumstances. Cuba under Fidel, especially in his early days, may have provided enough of these circumstances to justify the embargo. Since Cuba no longer provides any significant threat to American interests, there is no sense in continuing to punish the Cuban people with an embargo on trade, nor to provide excuses to its leaders for the poor performance of the Cuban economy.

It is time to end the embargo on the export and import of goods and services between the US and Cuba. The Cuban people will benefit almost immediately. This may just be the time when such a move puts added pressure on the Cuban government to end its failed experiment with communism.

Posner: End the Cuban embargo

I agree with Becker that we should end the embargo. It was first imposed in 1960, two years after Castro took power, and strengthened after the Cuban missile crisis in 1962, and thereafter modified from time to time—and recently somewhat relaxed, so that today in fact we have several billions of dollars in trade with Cuba each year.

Communist Cuba in Castro’s heyday—before the collapse of the Soviet Union, followed by the rapid collapse of communism in all countries except North Korea and Cuba—was, even apart from the missile crisis, an active although not dangerous enemy of the United States, supporting and fomenting communist subversion against a variety of nations, some of them US allies. But the embargo was never much more than an annoyance to Cuba, because the embargo was not joined by other nations. And it is not as if the US were the only source of a raw material or manufactured good essential to the Cuban economy. Or that the US was the sole destination for goods produced by Cuba that Cuba had to export in order to obtain foreign currency. Cuba’s principal exports were and are sugar and tobacco. When the US, as part of the embargo, stopped importing these products from Cuba, it increased its imports of them from elsewhere, which meant that other nations that produced those goods diverted some of their output to the US. The countries that had been buying sugar and tobacco from these other exporting countries had either to pay a higher price to them so that they would not divert output to the US—or buy from Cuba. So the embargo closed one destination for Cuban exports, the US, but opened up others.

Apparently the embargo had some small negative effects on the Cuban economy, but one imagines that its major effect was actually to bolster Castro by giving him an excuse for the awful performance of the Cuban economy—the US embargo. The true cause of that awful performance was communism, for we know from the economic performance of the other communist countries—before communism collapsed almost everywhere— that communist economies, by suppressing the operation of free markets in goods and services, are grossly inefficient. Castro hurt Cuba with his policies, but actually helped the US by impelling the emigration of many of Cuba’s ablest, most energetic citizens to the US.

But to all this, the embargo was and continues to be almost completely irrelevant. Its persistence is probably owed largely to the political influence of Cuban Americans, who will do anything to hurt Castro’s regime and who live (and vote) mainly in Florida, where they form a significant electoral bloc. The nation’s fourth largest state by population, Florida is the most important swing state in the American electoral system.

Reprinted with permission from the Becker-Posner Blog.