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Cuba - Then & Now
Reminiscence & Analysis of The Changes in Cuba Over the past Five Years
By Doug Casey
Of course, that was 1993 , and things were especially grim because the recent collapse of the USSR was starting to bite in earnest. The bankrupt Soviet government had been subsidizing the even more bankrupt Cuban government for the equivalent of billions of dollars a year for several decades, in a historic example of the blind leading the doubly dismembered. The cut-off of Soviet subsidies resulted in an acute depression within the chronic depression Cuba had experienced since 1960.

Because the prime directive of all living things (or institutions) is to survive, the Cuban government has had to make enough changes, however ideologically unpalatable, to allow itself and the society upon which it is a parasite to survive.

The most important changes were probably allowing the US dollar to circulate as the de facto national currency, and allowing Cubans to set up (very) small businesses.

This isn’t to say Cuba has finally become the Workers Paradise. Foreigners who employ Cubans must pay their wages (generally a minimum of about $600, but infrequently more than $1000 a month) to the State in dollars, which then pays workers in pesos at the official rate of one to one; the free market rate is about 25-1, which amounts to a 95%+ tax rate.

When I first visited you saw very few vehicles on the streets, and they were all either Russian Ladas or US cars from the 50’s that were just too junky to have been fixed up and sold to collectors years before; now there are plenty of new taxis. The propaganda billboards (“Socialism or Death” -- what a set of alternatives-- used to be a big favorite); have largely been replaced with ads from Gucci, Bulgari, and the rest. Everybody now has plenty to eat. And there are loads of locals in the nightclubs, which typically charge a $10 cover. In today’s world, it’s no big thing to see an ex-People’s Republic undergo a boom; I’ve described lots of them in these pages over the years.

What surprises most people is how Cuba can not only survive, but have a boom in the face of the vaunted US embargo.

THE EMBARGO

The US embargo on trade with Cuba was put in place by Kennedy in 196x. A window into Kennedy’s venal character is offered by his having sent Pierre Salinger out to scrounge up scores of boxes of Cuban cigars the day before he announced the embargo; JFK didn’t want to be even slightly inconvenienced by something he hoped would devastate thousands. Perversely, the embargo has helped those it was intended to hurt, and hurt those it was intended to help.

In theory, the embargo was supposed to economically strangle Cuba, and help unseat Castro.

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In fact, it’s helped entrench him, because Castro has effectively been able to blame the country’s myriad economic problems on an outside source—instead of the idiotic economic policies he’s instituted. And it had the additional advantage of making the Americans look like aggressive and irrational bullies.

The embargo has mainly hurt Americans, and the poorest Cubans. The absence of Cuban cigars and sugar haven’t Americans much; there are plenty of adequate substitutes. Nor has the fact Americans couldn’t vacation here; until fairly recent years, most of the foreign tourists were ideologically driven students who came to help bring in the sugar cane harvest. (Talk about a stupid way to spend your summer vacation!). The embargo has mainly hurt American business.

By keeping them out, the US Government has ensured that when millions of American do tourists pile in a few years hence, they’ll all be staying in hotels owned by Canadian and European groups. If the US Government really wanted to see Castro deposed, it would instead have encouraged travel to Cuba. Cubans would have discovered that the average American doesn’t grow horns and have a forked tale.

His ideological purity would have been corrupted with imported books, magazines, and videos, and his revolutionary fervor dulled by the prospect of wearing Italian shoes, driving a German car, and taking pictures with a Japanese camcorder. It was these things, not just the internal contradictions of socialism, and far more than the insane levels of military spending under Reagan, that caused the collapse of the Soviet empire.

In reality, the embargo has just been a silly, destructive, and massively inconvenient public relations scheme. The Cubans have been at liberty to buy anything in the world they wanted over the last 40 years, including American products, as long as they didn’t buy from an American. They lacked goods not because of the US embargo, but because they simply didn’t have the money to buy from anyone. But the embargo is soon going to be history, for the reasons I’ll explain below.

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THE CATALYST

Most of the changes in Cuba have really just taken place since January 1998, when the Pope visited. The direct result of his visit was several hundred million much needed dollars flowing into Cuba, but more important it served to legitimize the place to many who were used to thinking of it mainly as a tropical gulag. 

I know the whole world loves the avuncular John Paul II, and certainly he’s a far cry from people like Alexander VI and xx, as popes go. But popes have never been friends of either free minds or free markets, as JPII evidenced in his most important sermon in Havana, where he excoriated the evils of classical liberalism, “which subordinates the human person to blind market forces and conditions the development of peoples to those forces”. It’s amazing he’d say something as dim as that, implying that wise, selfless, and judicious bureaucrats are needed to approve commerce between consenting adults. And say it while in Cuba, of all places. 

Of course the Church has always had, at best, a rather mechanistic view of how the economic world works. Somehow it seems stuck in the 13th century, which many Catholic theologians still fondly recall as the “greatest” of centuries, when guilds controlled the marketplace, usury was a crime, the peasants were quiescent, and Rome pretty well called the shots. My choice, however, might be its antithesis, the 14th, which overturned the entire constipated order of the Middle Ages.

The bad news about the 14th was the Black Death, one of history’s great catastrophes, which carried away over 25% of the population. But the good news was the plague not only shattered the concrete-bound feudal system, but caused a labor shortage, with concommitent higher wages and labor mobility. The plague, to use Schumpeter’s phrase, resulted in a gigantic wave of “creative destruction”. The cities started growing and castles (which were really just dungeons surrounded by rural concentration camps) started to disappear, paving the way for the Renaissance, the Reformation, and the overthrow of the Established Order. Notwithstanding its great wealth and prestige, the Church has been in decline ever since. 

Far be it from me to accuse the Pope of insincerity, but if JPII really wanted to alleviate the sufferings of the poor, the equalize of the distribution of wealth, and get the attention of those of us who are driven by blind market forces, etc., etc., he might consider liquidating the Church’s immense assets for the benefit of those in need. At least that’s what any reading of the words of the Church’s founder might have you believe should be done. But I wouldn’t hold my breath. Just as most people seem to want to clutch the material world ever more closely to their breasts as they age, when they should be lightening up, the same is true of institutions. And the older the institution, the more calcified, and distant from their founding principles, they inevitably get. Like most everybody in a position of power, I’m afraid JPII talks the talk better than he walks the walk.

In any event, the Pope came not to free the serfs in Cuba, but to bring the Catholic Church back into the public arena. He may, or may not, have succeeded in that. As far as I can determine, most educated Cubans are very secular in outlook, and the uneducated are mostly partial to Santeria, an eclectic admixture of voodoo and Catholicism. But in terms of doing good for millions of people, JPII should be canonized as Cuba’s patron saint. His visit singlehandedly ignited a boom both in tourism, and the investment to handle it. The boom is an unintended consequence; but most major events, whether a visit from the Black Death or JPII, tend to have unintended consequences. And in both cases the net result was positive. Viva el Papa!

In 1996 Cuba saw one million visitors, 1.3 million in 1997 and over 2 million in 1998. At this point, it’s impossible to get a hotel room without an advance reservation. The cat’s out of the bag; the world is starting to become aware of Cuba as on of the truly great travel destinations. And I expect growth to be hyperbolic from this point. 

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