Many have denounced the counterproductive nature of American foreign policy towards Cuba and its people. In fact, the policy remains one of the most nonsensical and severe policies of the United States, one passed on through numerous administrations out of political convenience. However, the failures of the Cuban government are also some of the key factors in the country’s ongoing crisis. Were it not for its radically anti-American and anti-capitalist political and economic persuasions, the sanctions on the country would likely not exist. The country remains a one-party state with a state-dominated economy, the kind which the communist Chinese and Vietnamese reformed decades ago to great success.
Ultimately, the respective status-quos of both the governments of the United States and Cuba are failing to meet their countries’ potentials. While the US should drop its counterproductive embargo, the Cuban government should accelerate and transform its approach to economic reform, moving away from the dysfunctional system of the past into a more progressive form of economic governance. Both governments can afford to make these political changes if they are bold enough. To understand why these reforms are needed, it is important to understand the history of the conflict.
In 1962, President John F. Kennedy implemented a broad and intense embargo on Cuba, preventing American firms and individuals from economically engaging with the country. The American-owned companies in the infrastructure, utilities, and natural resource sectors that had dominated Cuba’s economy have since been nationalized. As a result, Cuba and the US dropped almost all ties to each other’s economies. The legal frameworks implemented as part of this embargo remain largely intact to this day.
Cuba’s economy has changed significantly from its classical soviet-style command economy of the 60s. Before the fall of the Soviet Union, the country was run as a command economy, with state-owned firms dominating the economy and fixing prices. The country’s economy relied on soviet subsidies and aid to stay afloat, but after its collapse, the country entered what is now known as the ‘Special Period.’ During this time, temporary emergency reforms resembling market-oriented policies were implemented; specifically, private land ownership and private sector employment.
The country coasted like this for a long time, but after signing a new constitution in 2018, Cuba implemented key economic reforms like recognizing private property and allowing foreign direct investment into the country. Finally, in 2021, the country finally rid itself of its dual currency system, which consisted of one normal currency, the national Peso, and a convertible Peso to bring US Dollars under state control. This system had been established during the Special Period to promote remittance inflows and tourism, but created a two-tiered society with gross inequality.
All these reforms are positive steps forward, but the country’s economy remains overly dominated by state institutions. Most employment is in the state sector, where wages are much worse than in the private sector. Specifically, leading private-public wage discrepancies as seen between taxi drivers and nurses highlight how while the former get paid well by tourists, the latter get measly stipends from the state.
Before recent reforms, private small- and medium-sized firms struggled to get legal status. Getting credit and supplies to run their businesses was also difficult. Only in 2021 did a system come into place to streamline these processes. Unfortunately, there remains much room for improvement. The state should reduce its insistence on regulating every single aspect of the private sector. Instead of seeing it as a threat to itself, the regime should see private enterprise as an opportunity for growth and prosperity. Because of the slow pace of reform, the black market has continued to thrive as it has for decades, undermining the ability of the state to fund itself or reasonably regulate commerce. Relaxing laws on private businesses would dissolve black markets by allowing them to operate in the open while helping to boost the economy.
Even so, Cuba does not need to emulate American capitalism entirely. There are benefits to market-oriented yet state-directed economies. These kinds of structures, which the Chinese and Vietnamese have skillfully implemented, can give the Cuban regime its desired control without stifling the power and benefits of markets, private enterprise, and other capitalist institutions. These reforms could be implemented if the regime adopted a reformist, progressive mindset and dropped its orthodox, ideological tendencies.
On the international front, Cuba’s new alliances with Iran, Venezuela, and Russia form the opposite pole in an emerging international competition. It’s not likely that the Cuban government will relinquish its monopoly on political power, nor will the US really be able to influence this pole. It has been and will likely continue to be a one-party state led by the Communist Party of Cuba. The previously mentioned examples of economic reformist communist states– Vietnam and China– both kept their autocratic, one-party governance models. However, the United States routinely engages with these autocratic countries out of convenience, so there is no reason it should not follow the pattern in this case.
American foreign policy has approached Cuba in outdated terms, as if it were still in this Cold War-era ideological battle for survival. The problem is that the Soviet Union stopped existing in 1991, along with the radical vision of global communism. Now in the 21st century, Cuba no longer poses an existential or ideological threat to the US. A small country in population, economic size, and military, it has no real potential to harm the US.
Ultimately, if the US cares about seeing political reform in Cuba, it would drop the brutal sanctions since they counterintuitively empower the regime. By giving it a scapegoat for the country’s problems, namely the American sanctions, the Cuban people’s attention is diverted away from their own government’s failings. The US can ‘disarm’ this propaganda by engaging with Cuba on friendly terms.
In fact, the US did just that in 2016. The ‘Cuban thaw’ marked a moment of increased diplomatic and economic engagement with the country. Then led by the Obama administration, the embargo was loosened, and the leaders of the respective states met for the first time. It was a moment of positivism: Cubans and Americans alike, including the Cuban-American population, were optimistic about the future of the countries’ relations. Cubans wanted reform in their country while Americans grew more skeptical about the efficacy and necessity of the embargo. Then, when Donald Trump was elected he re-imposed harsh sanctions, destroying years of progress. Despite that, the future of reform in Cuba-US relations is not totally dead, considering the defeat of Republican Trump and the election of Democrat Joe Biden.
In May of 2022, the US decided to drop the harshest of sanctions on the country, including restrictions on remittances, which are US Dollars earned by workers in the US and subsequently transferred to relatives or loved ones back in Cuba. They are essential to sustain the well-being of over two-thirds of the island’s population. Furthermore, travel between the countries has been made easier. This is a positive step forward, but not nearly far enough. Further moves should involve reducing restrictions on American business involvement on the island since economic interconnections and growth benefit both sides.
However, this kind of reform will require the political will of American leadership. In 2020, Trump won the state of Florida with the help of many Cuban-Americans around the city of Miami, the home of many Cuban refugees. Trump’s campaign used ‘socialist’ smears against then-candidate Joe Biden to bolster his support among this electoral block. If Biden wishes to put country over politics, he will need to consider the possibility of facing down these voters who have historically backed Republicans by large margins. Time may vindicate Biden, as another ‘Cuban thaw’ may emerge out of newer, more progressive generations in both countries.
There are plenty of political and economic opportunities for closer cooperation with the Caribbean island. For the United States, continuing to keep Cuba under sanction does not make Americans safer and actually empowers the regime. For Cuba, the economic and political status quo fails to meet the global economic moment. Its policy is outdated and far behind other nominally socialist countries. The regime does not necessarily stand to lose politically from economic reform, but its existing minor reforms are insufficient to fix its current humanitarian crisis. There is room for reasonable reform on both sides of the conflict and more to gain from cooperation. The Cuban and American people stand to gain the most from a reformist future.
William Gilbert is in his fourth year at McGill University, pursuing a B.A. Joint Honors in Political Science and International Development. He is a staff writer for Catalyst. He is particularly interested in structural transformation for economic development in Sub-Saharan Africa.
Well written and very true. Coorporation can be a mutual benefit.
Cuba could as well be important for us in the green transition. They should have some interesting nickel mining for EV, which both nations should benefit from instead of us getting supply from Russia.
We need to step much closer to our neighbor Cuba!