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February 21, 2008

End the Cuban Embargo


David R. Henderson

Celebrate Good Times

Whenever a bloodthirsty dictator resigns or, even better, dies, I pause to celebrate. I would have celebrated at Hitler's death had I been alive then. Ditto Stalin. And I did celebrate when Mao died. I look forward to Fidel Castro's death. After all the murders he has committed, he deserves it.

End the Embargo

At the same time, despite the knee-jerk reaction of the Bush administration in favor of keeping the embargo, this is a good time to end the U.S. embargo on Cuba. Actually, it has always been a good time. The case for ending the embargo has little to do with making Americans better off and lots to do with spreading American values – the good ones, not the bad ones – to make Cubans better off, both in their degree of freedom and in their economic well-being. And now that Fidel Castro is officially out of commission, ending the embargo would be easier because the U.S. government would not have to worry so much about saving face.

The Moral Case for the Embargo

Let's step back and consider the proponents' case for the embargo. They make two arguments. The first is a straight moral argument: Castro (we need not quibble with whether it's Raúl or Fidel) is an evil man who heads an evil regime. The Castros have murdered many innocent people, stolen a lot of property, and put many innocent people, including homosexuals, in prison. So far, I agree with the argument. But here's the non sequitur: because of all this, the U.S. government should forcibly prevent Americans from trading with Cuba. Why is it a non sequitur? Because for the trade embargo to be a logical response to the vicious facts about the Cuban government, one would have to show that the embargo would speed the end of the Cuban government. No one has done that. Jeff Jacoby, in a 1998 article in the Boston Globe, made the moral argument above. He ended his article with the following flourish:

"The key to Cuba's salvation does not lie in constantly attacking U.S. policy. It lies in washing away the corrupt and fetid stain of Fidelismo. The embargo is regrettable and has its costs, but it is not what keeps Cubans on their knees. The dictator is. Instead of harping on the embargo, American leaders should be saying, loudly and insistently, what every Cuban yearns to hear:

"'Castro must go.'''

But notice something interesting. American leaders did say, loudly and insistently, that Castro must go. And, at the same time, President Bush II strengthened the embargo. What happened to Castro? He lasted more years in power. His leaving power had nothing to do with the embargo; it was caused by his bad health. It is possible that Castro's bad health is due to lousy socialized medicine, but, if so, that's more his fault than it is the effect of the embargo. If your moral argument is that a policy must be kept in place to achieve a certain end, and the policy clearly does not achieve that end, aren't you morally obligated to reconsider the policy?

Make the Victims Hurt More

Which brings us to the second argument for the embargo, which seems to go as follows.

By squeezing the Cuban economy enough, the U.S. government can make Cubans even poorer than Fidel Castro has managed to over the past 48 years, through his imposition of Stalin-style socialism. Ultimately, the theory goes, some desperate Cubans will rise up and overthrow Castro.

There are at least three problems with this "make the victims hurt more" strategy. First, it's profoundly immoral. It could succeed only by making average Cubans – already living in grinding poverty – even poorer. Most of them are completely innocent and, indeed, many of them already want to get rid of Castro. And consider the irony: A defining feature of socialism is the prohibition of voluntary exchange between people. Pro-embargo Americans typically want to get rid of socialism in Cuba. Yet their solution – prohibiting trade with Americans – is the very essence of socialism.

The second problem is more practical: It hasn't worked. To be effective, an embargo must prevent people in the target country from getting goods, or at least substantially increase the cost of getting goods. But competition is a hardy weed that shrugs off governmental attempts to suppress it. Companies in many countries, especially Canada, produce and sell goods that are close substitutes for the U.S. goods that can't be sold to Cuba. Wander around Cuba, and you're likely to see beach umbrellas advertising Labatt's beer, McCain's (no relation) French fries, and President's Choice cola. Moreover, even U.S. goods for which there are no close substitutes are often sold to buyers in other countries, who then resell to Cuba. A layer of otherwise unnecessary middlemen is added, pushing up prices somewhat, but the price increase is probably small for most goods.

Some observers have argued that the very fact that the embargo does little harm means that it should be kept because it's a cheap way for U.S. politicians to express moral outrage against Castro. But arguing for a policy on the grounds that it's ineffective should make people question the policy's wisdom.

Third, the policy is politically effective, but not in the way the embargo's proponents would wish. The embargo surely makes Cubans somewhat more anti-American than they would be otherwise, and it makes them somewhat more in favor of – or at least less against – Castro. Castro has never talked honestly about the embargo: he has always called it a blockade, which it manifestly is not. But he has gotten political mileage by blaming the embargo, rather than socialism, for Cuba's awful economic plight and reminds his subjects ceaselessly that the U.S. government is the instigator. Some Cubans probably believe him.

Moreover, there is another negative political effect. The embargo prohibits Americans, other than journalists, academics, and a few others, from traveling to Cuba. Imagine what would happen if the U.S. government completely ended this restriction. The U.S. dollar, though weak in Europe, is strong in Cuba. Many Americans would travel to Cuba, spending money and showing Cubans what normal Americans can afford. It's true that Raúl Castro, like his brother, would try to control exchange. Currently, foreign investors don't hire Cubans. Instead, Castro has implemented the system that the Nazis used in Poland when Oskar Schindler hired Jews. Rather than paying the Jews, Schindler had to pay the Nazis, who paid the Jews nothing. Rather than hiring Cubans, foreign investors pay the Ministry of Labor, which keeps a large percent of it, and gives the workers a wage comparable to the best they could earn in the Cuban economy. In 2006, incidentally, Forbes estimated Fidel Castro's net worth to be a cool $900 million, based on the state-owned companies he controlled for his own purposes.

Although the Cuban government would try to control exchange, it would not be completely successful. There would be all kinds of leakages to normal Cuban citizens. This travel by Americans would not make Cuba as free as, say, Venezuela, but average Cubans would be freer nevertheless. Competing decentralized nodes break down centralized control.

The Conquest of the United States by Cuba

In 1996, far from ending the embargo, the U.S. government moved in the other direction with the Helms-Burton Act, named for then Senator Jesse Helms (R-North Carolina) and then Representative Dan Burton (R-Indiana). Its most controversial provision permits U.S. lawsuits against foreign companies if they use any property in Cuba that was confiscated from U.S. citizens.

To enforce this provision of the Helms-Burton law, the U.S. government makes America off-limits to corporate officers, principals, or shareholders with a controlling interest in firms that profit from confiscated U.S. property in Cuba. The government used the law against a handful of Canadian and Mexican executives. Not just the violators, but also their spouses, minor children, and agents are to be kept out of the U.S. Again, note the irony. One of the most important achievements of free societies – one that distinguishes them most from totalitarian regimes – is that when one family member breaks the law, that person, not the other family members, pays the penalty. Totalitarian governments violate this principle of individual responsibility all the time, and Castro was one of the main such violators left. The U.S. government joined him. Helms and Burton said they wanted to beat Castro. Castro beat them – and us.

The more open trade is between Cuba and the rest of the world, the more experience Cubans will have with foreigners and foreign goods. They will learn that they don't have to be poor, that meat once a day doesn't have to be a luxury, and that they don't have to die from socialized medicine. The "dollarization" of the Cuban economy, under which Castro allowed people to exchange dollars for goods, has already started this process. The more dollars that flow into Cuba, even with the nasty government taking a big cut, the less dependent Cubans are on the Cuban government for their daily bread. When President Bush reduced the amount Cuban-Americans and other Americans can spend in Cuba from $164 a day to $50 a day, whatever his intention, he made Cubans more dependent on their vicious government.

One piece of evidence that advocates of the embargo must confront is Castro's own actions just before Congress voted on the Helms-Burton Act. Here was a law that President Clinton had opposed and that, therefore, faced an uphill battle. Yet on Feb. 24, 1996, just days before the vote, Castro had his air force shoot down two unarmed civilian airplanes piloted by members of the Miami-based exile group Brothers to the Rescue. I've heard many people claim, correctly, that Castro is evil; I haven't heard many people say that he's stupid. Surely he knew that shooting down the plane would cause the Helms-Burton Act to be passed, which is exactly what it did. It seems much more reasonable to assume that Castro wanted the Helms-Burton Act to pass so that he could use it as new ammo for his propaganda.

A Double Standard?

The Bush administration, in wanting to keep the embargo on Cuba, is applying a double standard. Many other governments in the world repress their citizens as much as Cuba's does, or at least have done so in the recent past. Exhibit A is China. But the U.S. government has imposed no embargo on China.

One of the strangest recent arguments for keeping the embargo is that of Henry Louis Gomez. Gomez wrote:

"For once I'd like for someone to explain how U.S. policy toward Cuba prevents the Castro regime from restoring basic freedoms? How exactly does the U.S. create a situation in which political opposition in Cuba must be silenced or jailed? The answer is obvious: it doesn't."

Mr. Gomez is absolutely right in one regard. U.S. policy doesn't prevent the Castro regime from restoring basic freedoms. It's not as if Fidel and Raúl are looking for ways to restore freedom. But Mr. Gomez is attacking a straw man. The argument that we free-market opponents of the embargo make has never been that the embargo prevents the Cuban government from restoring freedom: the Castros want to keep restrictions on freedom. Our argument, rather, is that the embargo makes it easier for the Castros to keep their country repressed. For Mr. Gomez and those who agree with him to make their case, they must confront the point I made above – namely, that Castro is not dumb and, therefore, his shooting down of the airplanes just before Congress voted was his purposeful way of getting Congress to keep and tighten the embargo.

Conclusion

Some advocates of the embargo have pointed out that if full trade relations are resumed between the U.S. and Cuba, then Cuba's government will qualify for U.S. government aid. Such aid would definitely prop up Castro's regime, as similar aid has done for tyrants in Africa and elsewhere. So let's end the embargo and not give foreign aid to Cuba. Will this guarantee that the Castros fade into much deserved oblivion? No it won't. But it will increase the odds.

Cuba Si, Castros No, Embargo No.

Copyright © 2008 by David R. Henderson. Requests for permission to reprint should be directed to the author or Antiwar.com.

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David R. Henderson is a research fellow with the Hoover Institution and an associate professor of economics in the Graduate School of Business and Public Policy at the Naval Postgraduate School. He is author of The Joy of Freedom: An Economist’s Odyssey and co-author, with Charles L. Hooper, of Making Great Decisions in Business and Life (Chicago Park Press.) His latest book is The Concise Encyclopedia of Economics (Liberty Fund, 2008.)

He has appeared on The O’Reilly Factor, the Jim Lehrer Newshour, CNN, and C-SPAN. He has had over 100 articles published in Fortune, the Wall Street Journal, Red Herring, Barron’s, National Review, Reason, the Los Angeles Times, USA Today, and the Christian Science Monitor. He has also testified before the House Ways and Means Committee, the Senate Armed Services Committee, and the Senate Committee on Labor and Human Resources. Visit his Web site.

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