The Cuban embargo and transportation costs

One of the cruelest long-term policies of the US government is the embargo against Cuba. It was enacted in 1960 as a reaction to the nationalization of US property by the Castro government. This was a foolish move on the part of the Castro government, but one in keeping with its other policies. It has been periodically strengthened since then, and rarely very slightly relaxed. The ostensible purpose of the embargo is to force Cuba to democratize, and if this is truly the main reason for the embargo it has been an utter failure. While in the US John Kennedy, Lyndon Johnson, Richard Nixon, Gerald Ford, Jimmy Carter, Ronald Reagan, George H.W. Bush, and Bill Clinton successively left office, Fidel Castro continued. Only ill health forced him to end his term before George W. Bush ended his own. All throughout Castro’s term, poverty for the many and wealth for a select few government officials was the norm. He himself was estimated by Forbes magazine to have personal wealth of $900m in 2006.

It is cold comfort that Cuba still has the rest of the world to trade with. The US is both the wealthiest country in the world and a natural trading partner of Cuba, lying geographically beside it. The volume of trade would be vastly greater than that with its other neighbors: Mexico, Jamaica, Haiti, and the Bahamas. Transportation costs for Cuban products would be a fraction of what they are for countries like the UK, Germany, or China. Likewise, Cubans could afford more American goods for the same reason. This would make small production—the kind Cubans are currently better suited for—far more feasible economically. Products could be loaded into small boats and shipped multiple times a day over calm waters to Florida, or flown in small aircraft operated out of the US. This scenario would benefit small producers who are currently left out of the mix when only a very large vessel to Canada, Colombia, or China makes the transportation costs worthwhile.

The regime could not control this even if they wanted to. A large ship must dock at a visible port, there slowly to be filled with products that the government can monitor. A small boat or even a small plane could avoid detection. Perhaps not all the time, but frequently. (Then only US commissions like the USDA would stand in the way, as many but not all of the possible products are agricultural.)

That, I believe, is the best argument for why the regime in its current form would not survive the lifting of the embargo. Raúl Castro has made several small reforms, which I support, but the basic structure of the regime persists. A unilateral declaration of trade with Cuba would almost overnight encourage small-scale production and exchange that would immediately improve Cubans’ well-being and hunger for more freedoms, even if it were only on the black market.

It’s easy to see how the embargo aided Fidel Castro in keeping Cubans poor for so long. Not only is the government-run economy naturally inefficient, but when combined with the US government’s refusal to allow mutually beneficial exchange between Americans and Cubans, what is left for the average Cuban citizen? By all accounts, very little.

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Author: rfmcelroyiii

Student and instructor of economics.

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