If anybody is curious, the average productivity in the US is 2-6 tons of corn per acre. Cuba has 1 ton per acre, in other words between 50-15% of US productivity.
That's right. It's actually quite easy to increase corn yield per acre. Basically labor intensive solutions gets you more yield per acre, and capital intensive solutions gets you less yield per acre - but with capital intensive solutions you can cultivate that much more land so if you've got a lot of cheap land then that becomes your best approach. So you would expect the US to have lower productivity than Cuba - but instead the US has much higher productivity.
Yeah, it's clear that the "trade and engagement will lead to reform" theory failed with China.
But it's not like that had no basis -- we have multiple examples of countries that have become liberal democratic peers over time, where it at least _seems_ like US engagement played a role in helping that happen. South Korea, South Africa after apartheid, Taiwan... Vietnam seems to be on the path. It seems plausible that size is the issue here. China is just too big for trade engagement with us to change their behavior much, which means we have to come up with something else. (Though what that is, who knows... At this point the people with power are pretty sure that they can keep control indefinitely through surveillance, repression, and giving the middle and working classes just enough to get by. And they could be right.)
"Dear Hong Kong, would you like to move to America? Like, all of you. The whole city. There are places like Ohio and Indiana and Michigan that have quite a lot of open land. Love, Real Americans who care about making sure our values -- which are about ideas, not blood and soil -- survive into the next century."
But do most experts say the Cuban embargo has _no_ harmful effect? Noah here is saying the effect is probably relatively small compared to other factors, but he doesn't say it's zero. I feel like the vast majority of experts on trade and economics basically said that the embargo is bad, from the first time I ever read about the issue, in maybe the late '80s or early '90s. Even the consensus of the foreign policy establishment has been trending against the embargo for years. The reason the embargo has survived as long as it has is that there's a bloc of rabidly anti-Castro voters in Florida. Dems are afraid to piss them off because they're trying to win FL's electoral votes, and Repubs like how those people play into their larger "fear socialism!" rhetorical framework (and never mind that Repubs aren't rushing to implement a matching embargo on, say, Vietnam).
To be fair, there is a difference between autarky and very strictly managed trade. Even isolationist communist regimes like North Korea and Albania's under Hoxha were primarily responding to political conditions. Cuba's great problem, as trade goes, is not, even after 30 years of favored trade with the Soviet Block markets, have been able to expand, diversify and make more complex its exports. Actually, I am kinda surprise to learn Cuban soil is fertile because the standard pro-Cuban propaganda I have heard for ages is that poor Cuba can't export anything but sugar and cigars because... reasons, maybe the soil?
It's kind of funny that every accounting of communist countries tends to leave out Portugal and Kerala (Indian states are largely autonomous.) The communist parties in those two places are hugely influential. The difference from other places is that they're also solidly democratic.
Perhaps the issue isn't fundamentally communism vs. socialism vs. capitalism, but democracy vs. autocracy.
Does West Bengal count as well? I forget the differences between the relevant communist parties in Kerala and West Bengal, and the different periods they have been in power.
Have you ever thought writing about Turkey? At the moment it’s a going through a currency crisis of its own. Obviously not as bad as Cuba’s, and probably won’t get to that level, I hope, but they kind of cornered themselves in the hopes of shoring up the Lira and securing another election.
If you want to read about a crazy currency system read Andrew Holloway's "A Year in Pyongyang." In the 70s/80s DPRK had their internal currency, the currency they gave Westerners, and a third for those from Soviet countries, all with different official and black market exchange rates. I think they called them green won, blue won, and red won. Cigarettes were almost a separate currency unto themselves.
Overall that book is a phenomenal detailed travelogue about a British communist/juche idealist getting a job in North Korea and uh... changing some of his views.
The egg rationing numbers don’t seem to add up. If Cuba produces 2.4 billion eggs a year, then with its 11 million population, that should work out to 220 eggs per person per year. That would imply a ration of 18 eggs per person per month, substantially more than the official ration of 5. Where are the remaining eggs going?
Ok, lets go with the assertion that even though the world's most powerful and vindictive country has been out to screw you for 50 years, it hasn't made any difference to your economic performance or potential.
Instead let's speculate on this: if the US were to lift the sanctions and change its obstructive policies, would that make any difference to conditions in Cuba?
100%. You'd have a flood of tourists, factories built, manufacturing plants and so on in Cuba, if there were no sanctions. You'd have tonnes of US investment flows into Cuba. You'd have Trump Hotels and golf courses lol! You'd probably have a wave of medical tourists given the sorry state of healthcare for poor and middle class Americans! The author reckons their currency peg would hurt BOP but help GDP. Not if they devalue. If there was no embargo, why would they keep the peg in place?
Presumably having unified the two currencies might also enable more people to take part in this boom, but going through the process during a pandemic may not be great.
Great piece, having spent a bit of time in Cuba it seems pretty astute. One thing to note is how successfully the embargo has become the villain, and indeed is used in propaganda in Cuba (and abroad) as such. It's ended up being a fantastic tool for Cuba-regime sympathisers everywhere to just blame the US and give the Cuban gov's shitty and corrupt policies a pass.
As for the advance to capitalism, isn't one thing giving potential investors pause the idea that a pre-revolutionary property claimant is going to materialise? I'd be reluctant to sink cash into something that I might not legally own....
How the former communist East European countries dealt with it? A post-communist Cuban government can adopt the same guidelines. And a still communist Cuban government liberalizing slightly the economy to atract investments wouldn't have problems to enforce its deals with investors. So either way, investors can be pleased as long as they don't annoy the government -- which is a standard clause (if often unwritten) in any deal with a Latin American government.
“Probably not. Cuba can and does export stuff to China and Europe, but it runs a chronic huge trade deficit”
I agree that the peg is the issue in terms of foreign exchange, but trade between the US and Cuba would likely be much more valuable than their trade with Europe and China. That’s because trade kind of resembles gravity and economic size and distance explain a lot of trade variation around the world. Basically the US has a huge economy and is super close and so would likely become Cuba’s largest trading partner barring the embargo.
American tourism and cigar purchases by US consumers wouldn’t hurt their BOP. Just the opposite it would provide dollars. The problem is that their peg would make US goods cheaper for Cuban consumers while making Cuban goods more expensive for US consumers. That means we’re likely to end up with a large trade surplus with Cuba which would hurt their BOP.
I don't follow the Cuba situation so I can't comment on the merits, or otherwise, of the author's arguments. However, concerning the US economic sanctions - It begs the question doesn't it? If the US unilateral sanctions are so inconsequential or ineffective or immaterial to Cuba's economic wellbeing, why even have them? Particularly when the international community is overwhelmingly against them.
Isn't this what the last paragraph is referring to? The sanctions/blockade is almost entirely a political statement against the Cuban government. There's an electorally important slice of voters for whom opposing the Cuban government is a high-salience issue. Therefore, the sanctions/blockade remains.
I actually think this is a poor argument. The sanctions do bite. Being prevented from trading meaningfully with your closest neighbor, who also happens to be an economic superpower, for decades, does a lot of sustained economic damage. Imagine the opportunity cost that Cuba has suffered over those years, the lost revenue, all because of a vendetta. This is pure vindictive behavior that is outright condemned by even US allies, save for its vassal state Israel. The revolution in Cuba could not have been successful without the support of its people. To continue to punish Cuba in this way is just almost sadististical. It should stop. You'd find those same Cuban Americans, who this course of action is meant to be appeasing, would actually be the first to travel and invest back in their homeland. I think it's ludicrous and illegal to continue this course of action. Big states like the US don't feel the need to follow international consensus unfortunately. So this sorry state of affairs continues. Until when? Until Cuba has another right wing military dictatorship that is acceptable to Washington? Someone like Duque in Colombia. Another Pinochet? The US is so strong in that part of the world that there is no need to even have the facade of being principled. They simply smash Latin America when they don't do what Washington wants. And in Cuba's case, they keep smashing and smashing them. We can only hope for a multipolar world where this type of bullying is constrained.
Thanks for the thorough, well-researched post Noahpinion. As a Cuban American democrat it's been frustrating seeing people on the right and far left scream half-truths at eachother with little discussion of what would actually help in the long term. While I agree with you that ending the embargo would be the set of action on behalf of the Cuban people, I am honestly not sure if it truly lead to China style liberalization of the Cuban economy. You added a level of precision to what is necessary for that kind of liberalization by mentioning the need for foreign investors instead of just internal free markets. On that point, what is it that has stopped the other top 5 economic partners from having investors in Cuba? If they do invest, why hasn't it lead to liberalization already? Perhaps it is about beating out Chinese investors which may be more capable of working with illiberal economies via support from their government.
The American Embargo has basically made that sort of large scale FDI and infrastructure investment impossible, as no government or major corporation would want to be subject to sanctions from the US. Yes, trading companies can im/ex some consumer goods and commodities, and there are some loopholes for tourism... but nobody is going to be doing billion-dollar investments in Cuba until the embargo is lifted. And this has largely prevented the country from seeing the kind of takeoff that it should. (Though it is an interesting question - as the US slaps sanctions on more and more large Chinese companies, might some of them decide to make big investments in Cuba?)
If anybody is curious, the average productivity in the US is 2-6 tons of corn per acre. Cuba has 1 ton per acre, in other words between 50-15% of US productivity.
Thank you, I get that if you're well-versed in corn production statistics that 1-ton-per-acre meant something, but all I got from it was "bad"
Record corn yield in US. 616 bushels. ~17 tons.
https://www.agriculture.com/news/crops/how-david-hula-grows-600-bushel-plus-corn
All other things being equal, you would think an island would be more concerned about productivity than a country with massive amounts of land, right?
That's right. It's actually quite easy to increase corn yield per acre. Basically labor intensive solutions gets you more yield per acre, and capital intensive solutions gets you less yield per acre - but with capital intensive solutions you can cultivate that much more land so if you've got a lot of cheap land then that becomes your best approach. So you would expect the US to have lower productivity than Cuba - but instead the US has much higher productivity.
Leftist: Cuba isn't an example of why communism is bad because the US hurt them with sanctions.
Normie: Doesn't that prove international trade and more open markets are good?
Leftist: ....noOooOoo......
Hahaha truth
Intimidation isn’t a good thing you nutjob
Yeah, it's clear that the "trade and engagement will lead to reform" theory failed with China.
But it's not like that had no basis -- we have multiple examples of countries that have become liberal democratic peers over time, where it at least _seems_ like US engagement played a role in helping that happen. South Korea, South Africa after apartheid, Taiwan... Vietnam seems to be on the path. It seems plausible that size is the issue here. China is just too big for trade engagement with us to change their behavior much, which means we have to come up with something else. (Though what that is, who knows... At this point the people with power are pretty sure that they can keep control indefinitely through surveillance, repression, and giving the middle and working classes just enough to get by. And they could be right.)
The only thing that can stop one billion authoritarians is...
ONE BILLION AMERICANS
https://www.amazon.com/One-Billion-Americans-Thinking-Bigger/dp/0593190211
"Dear Hong Kong, would you like to move to America? Like, all of you. The whole city. There are places like Ohio and Indiana and Michigan that have quite a lot of open land. Love, Real Americans who care about making sure our values -- which are about ideas, not blood and soil -- survive into the next century."
PS: Can Cincinnati Chili Baozi be a thing? That would be delicious.
"South Korea, South Africa after apartheid, Taiwan" None of which were Communist.
Communist regimes are a different beast (we'll see about Vietnam but I doubt they turn from Communism unless a Viet Gorbachev comes along).
Experts: the embargoes have absolutely no harmful effect.
Normies: then what's the point of them?
Experts: umm... stuff
But do most experts say the Cuban embargo has _no_ harmful effect? Noah here is saying the effect is probably relatively small compared to other factors, but he doesn't say it's zero. I feel like the vast majority of experts on trade and economics basically said that the embargo is bad, from the first time I ever read about the issue, in maybe the late '80s or early '90s. Even the consensus of the foreign policy establishment has been trending against the embargo for years. The reason the embargo has survived as long as it has is that there's a bloc of rabidly anti-Castro voters in Florida. Dems are afraid to piss them off because they're trying to win FL's electoral votes, and Repubs like how those people play into their larger "fear socialism!" rhetorical framework (and never mind that Repubs aren't rushing to implement a matching embargo on, say, Vietnam).
You are a disgusting piece of shit trying to justify rape and imperialism.
That’s called strong-arming and mafia tactics, you psychopath
They would say selling is good, it’s the buying that’s bad. This is the sort of nonsense Republicans believe also, thanks to Trump.
To be fair, there is a difference between autarky and very strictly managed trade. Even isolationist communist regimes like North Korea and Albania's under Hoxha were primarily responding to political conditions. Cuba's great problem, as trade goes, is not, even after 30 years of favored trade with the Soviet Block markets, have been able to expand, diversify and make more complex its exports. Actually, I am kinda surprise to learn Cuban soil is fertile because the standard pro-Cuban propaganda I have heard for ages is that poor Cuba can't export anything but sugar and cigars because... reasons, maybe the soil?
It's kind of funny that every accounting of communist countries tends to leave out Portugal and Kerala (Indian states are largely autonomous.) The communist parties in those two places are hugely influential. The difference from other places is that they're also solidly democratic.
Perhaps the issue isn't fundamentally communism vs. socialism vs. capitalism, but democracy vs. autocracy.
Does West Bengal count as well? I forget the differences between the relevant communist parties in Kerala and West Bengal, and the different periods they have been in power.
Loved this piece.
Have you ever thought writing about Turkey? At the moment it’s a going through a currency crisis of its own. Obviously not as bad as Cuba’s, and probably won’t get to that level, I hope, but they kind of cornered themselves in the hopes of shoring up the Lira and securing another election.
Yep I'll write about it.
If you want to read about a crazy currency system read Andrew Holloway's "A Year in Pyongyang." In the 70s/80s DPRK had their internal currency, the currency they gave Westerners, and a third for those from Soviet countries, all with different official and black market exchange rates. I think they called them green won, blue won, and red won. Cigarettes were almost a separate currency unto themselves.
Overall that book is a phenomenal detailed travelogue about a British communist/juche idealist getting a job in North Korea and uh... changing some of his views.
It's free online, though it would be worth buying if it weren't: http://www.aidanfc.net/?page_id=54
The egg rationing numbers don’t seem to add up. If Cuba produces 2.4 billion eggs a year, then with its 11 million population, that should work out to 220 eggs per person per year. That would imply a ration of 18 eggs per person per month, substantially more than the official ration of 5. Where are the remaining eggs going?
Perhaps they had to make an omelette
From https://nationalpost.com/news/world/cuba-launches-rationing-in-face-of-economic-crisis (2019), Cuba may not have a strictly uniform rationing system. The article suggests that rations apply at a low price floor, but after that extra goods can be purchased at something closer to a market rate.
Another article (https://www.cubaheadlines.com/2019-03-14-p1-the-egg-in-cuba-only-by-the-notebook) specifically on egg production notes that the island's poultry farms were hit badly by Hurricane Irma and had not recovered as of 2019. I think the 2.4bn eggs/yr statistic is pre-hurricane.
Thanks for the info and links. Probably the remaining eggs are being sold at "liberated" prices as the national post article mentions.
Mr. Noah, I have a question regarding the last paragraph. What is the danger in the US just reversing it's refugee policy and allowing them in?
No danger, we should do it.
If socialism doesn’t work, why have we been imposing restrictions for so long?
https://en.wikipedia.org/wiki/Washington_Consensus
Great article.
Great article. Agree with the solutions.
Thanks!!
Great article
Thanks!!
Ok, lets go with the assertion that even though the world's most powerful and vindictive country has been out to screw you for 50 years, it hasn't made any difference to your economic performance or potential.
Instead let's speculate on this: if the US were to lift the sanctions and change its obstructive policies, would that make any difference to conditions in Cuba?
100%. You'd have a flood of tourists, factories built, manufacturing plants and so on in Cuba, if there were no sanctions. You'd have tonnes of US investment flows into Cuba. You'd have Trump Hotels and golf courses lol! You'd probably have a wave of medical tourists given the sorry state of healthcare for poor and middle class Americans! The author reckons their currency peg would hurt BOP but help GDP. Not if they devalue. If there was no embargo, why would they keep the peg in place?
Presumably having unified the two currencies might also enable more people to take part in this boom, but going through the process during a pandemic may not be great.
Great piece, having spent a bit of time in Cuba it seems pretty astute. One thing to note is how successfully the embargo has become the villain, and indeed is used in propaganda in Cuba (and abroad) as such. It's ended up being a fantastic tool for Cuba-regime sympathisers everywhere to just blame the US and give the Cuban gov's shitty and corrupt policies a pass.
As for the advance to capitalism, isn't one thing giving potential investors pause the idea that a pre-revolutionary property claimant is going to materialise? I'd be reluctant to sink cash into something that I might not legally own....
How the former communist East European countries dealt with it? A post-communist Cuban government can adopt the same guidelines. And a still communist Cuban government liberalizing slightly the economy to atract investments wouldn't have problems to enforce its deals with investors. So either way, investors can be pleased as long as they don't annoy the government -- which is a standard clause (if often unwritten) in any deal with a Latin American government.
“Probably not. Cuba can and does export stuff to China and Europe, but it runs a chronic huge trade deficit”
I agree that the peg is the issue in terms of foreign exchange, but trade between the US and Cuba would likely be much more valuable than their trade with Europe and China. That’s because trade kind of resembles gravity and economic size and distance explain a lot of trade variation around the world. Basically the US has a huge economy and is super close and so would likely become Cuba’s largest trading partner barring the embargo.
Agreed, it would help their GDP, but I think it would hurt their BOP, which is the reason for the food crisis.
How would American tourism and cigar purchases hurt Cuba’s BOP?
Because they'd import even more than they exported, because of the peg.
They do already. Not sure why it should be worse.
American tourism and cigar purchases by US consumers wouldn’t hurt their BOP. Just the opposite it would provide dollars. The problem is that their peg would make US goods cheaper for Cuban consumers while making Cuban goods more expensive for US consumers. That means we’re likely to end up with a large trade surplus with Cuba which would hurt their BOP.
OK. Next question is why should they care, as long as GDP is gained. Isn’t GDP net of import/export?
I don't follow the Cuba situation so I can't comment on the merits, or otherwise, of the author's arguments. However, concerning the US economic sanctions - It begs the question doesn't it? If the US unilateral sanctions are so inconsequential or ineffective or immaterial to Cuba's economic wellbeing, why even have them? Particularly when the international community is overwhelmingly against them.
Isn't this what the last paragraph is referring to? The sanctions/blockade is almost entirely a political statement against the Cuban government. There's an electorally important slice of voters for whom opposing the Cuban government is a high-salience issue. Therefore, the sanctions/blockade remains.
I actually think this is a poor argument. The sanctions do bite. Being prevented from trading meaningfully with your closest neighbor, who also happens to be an economic superpower, for decades, does a lot of sustained economic damage. Imagine the opportunity cost that Cuba has suffered over those years, the lost revenue, all because of a vendetta. This is pure vindictive behavior that is outright condemned by even US allies, save for its vassal state Israel. The revolution in Cuba could not have been successful without the support of its people. To continue to punish Cuba in this way is just almost sadististical. It should stop. You'd find those same Cuban Americans, who this course of action is meant to be appeasing, would actually be the first to travel and invest back in their homeland. I think it's ludicrous and illegal to continue this course of action. Big states like the US don't feel the need to follow international consensus unfortunately. So this sorry state of affairs continues. Until when? Until Cuba has another right wing military dictatorship that is acceptable to Washington? Someone like Duque in Colombia. Another Pinochet? The US is so strong in that part of the world that there is no need to even have the facade of being principled. They simply smash Latin America when they don't do what Washington wants. And in Cuba's case, they keep smashing and smashing them. We can only hope for a multipolar world where this type of bullying is constrained.
Thanks for the thorough, well-researched post Noahpinion. As a Cuban American democrat it's been frustrating seeing people on the right and far left scream half-truths at eachother with little discussion of what would actually help in the long term. While I agree with you that ending the embargo would be the set of action on behalf of the Cuban people, I am honestly not sure if it truly lead to China style liberalization of the Cuban economy. You added a level of precision to what is necessary for that kind of liberalization by mentioning the need for foreign investors instead of just internal free markets. On that point, what is it that has stopped the other top 5 economic partners from having investors in Cuba? If they do invest, why hasn't it lead to liberalization already? Perhaps it is about beating out Chinese investors which may be more capable of working with illiberal economies via support from their government.
The American Embargo has basically made that sort of large scale FDI and infrastructure investment impossible, as no government or major corporation would want to be subject to sanctions from the US. Yes, trading companies can im/ex some consumer goods and commodities, and there are some loopholes for tourism... but nobody is going to be doing billion-dollar investments in Cuba until the embargo is lifted. And this has largely prevented the country from seeing the kind of takeoff that it should. (Though it is an interesting question - as the US slaps sanctions on more and more large Chinese companies, might some of them decide to make big investments in Cuba?)