The Costs of the Embargo

The 47-year-old blockade now costs the United States far more than it costs Cuba.

By Margot Pepper

This article is from the March/April 2009 issue of Dollars & Sense: Real World Economics available at http://www.dollarsandsense.org

This article is from the March/April 2009 issue of Dollars & Sense magazine.

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On January 1, Cuba celebrated the 50th anniversary of the revolution against the U.S.-backed Batista regime. For 47 of those years, Cuba has suffered under what U.S. officials call an “embargo” against the Caribbean nation. Cubans’ name for the embargo—el bloqueo (the blockade)—is arguably more apt, given that the U.S. policy also aims to restrict other countries from engaging in business with Cuba.

What’s surprising is that while the blockade continues to take a considerable toll on the Cuban people, it costs the United States far more, and the gap is widening. Given the economic meltdown, it is only fitting that a growing chorus of diverse voices is calling for an end to the costly vendetta.

The original justification for the embargo was Cuba’s expropriation of “some $1.8 billion worth of U.S.-owned property,” according to the U.S. Foreign Claims Settlement Commission. In turn, Cubans argue that early in the century, the United States had seized control of 70% of Cuban land and three-quarters of Cuba’s primary industry. By the 1950s, as a result of U.S. colonialism and preceding Spanish rule, five out of six Cubans lived in shacks or were homeless, 80% of Havana suffered from hunger and unemployment, and two out of three Cuban children didn’t attend school. Cubans say such conditions left them no recourse but to expel the Yanquis, just as the Yankees had expelled the British in 1776.

Today, U.S. public opinion is turning against the embargo. A majority—52%—wants the embargo to be lifted, with 67% favoring an immediate end to the travel restrictions, according to the Cuba Policy Foundation (CPF), a nonprofit run by a former U.S. ambassador. Recent polls have even shown that a majority of Miami Cubans now support lifting the embargo.

These percentages might be even higher if the U.S. public were aware that the blockade is actually costing them more than the Cubans, something that is finally beginning to dawn on the U.S. business community. Representatives of a dozen leading U.S. business organizations, including the U.S. Chamber of Commerce, signed a letter in December urging Barack Obama to scrap the embargo. The letter pegs the cost to the U.S. economy at $1.2 billion per year. The CPF’s estimates are much higher: up to $4.84 billion annually in lost sales and exports. The Cuban government estimates the loss to Cuba at about $685 million annually. Thus the blockade costs the United States up to $4.155 billion more a year than it costs Cuba.

The U. S. government also spends $27 million each year to broadcast Radio and TV Martí, even though the television signal is effectively blocked by the Cuban government. The largely futile propaganda effort has cost U.S. taxpayers half a billion dollars over the last twenty years, according to the Council on Hemispheric Affairs.

Beyond the economic costs, the blockade has deprived U.S. citizens of Cuba’s medical breakthroughs. Cuba has developed the first meningitis B vaccine; treatments for the eye disease retinitis pigmentosa; a preservative for un-refrigerated milk; and PPG, a cholesterol-reducing drug gobbled up by foreigners for its side effect: increased sexual potency. And last summer Cuba released CimaVax EGF, the first therapeutic vaccine for lung cancer. The drug triggers an immune response that extends life in lung cancer patients and can ease breathing and restore appetite.

The blockade has always cost the United States more, but the gap has widened considerably. By 1992, U.S. businesses had lost over $30 billion in trade over the previous thirty years, according to researchers from Johns Hopkins. At that time, Cuba’s loss for the same period was smaller, but not by much: $28.6 billion, according to Cuba’s Institute of Economic Research. Following the dissolution of the Soviet Union in 1991, Cuba’s diversification and increased trade with other countries has widened the gap between the costs to Cuba and the costs to the United States.

While the dollar cost to the United States may be higher, Cuba has suffered a greater economic hit relative to its size and resources. Although lifting the blockade will inevitably boost Cubans’ living standard, the Cuban economy will still be saddled with its colonial legacy as a mono-crop producer. Unequal trade terms enforced by treaties and organizations such as the World Trade Organization, the World Bank, and the International Monetary Fund maintain formerly colonized countries as underdeveloped purveyors of raw materials, subsidizing the high standard of living in industrialized countries. It is useful to remember this uneven playing field whenever making U.S.-Cuba comparisons.

Regardless of all these obstacles, the socialist island has managed to provide its inhabitants with what the United States, one of the most affluent countries in the world, so far has not: free top-notch health care, free university and graduate school education, and subsidized food and utilities. Meanwhile, 36.2 million people go hungry in the United States and 47 million lack health coverage. Indeed, Cuba compares favorably to the United States on a number of basic social factors:

• Housing: There is virtually no homelessness in Cuba. Thanks to the 1960 Urban Reform law, 85% of Cubans own their own homes and pay no property taxes or interest on their mortgages. Mortgage payments can’t exceed 10% of the combined household income.
• Employment: Cuba’s unemployment rate is only 1.8% according to CIA data, compared with 7.6% (and rising) in the United States. One factor contributing to Cuba’s low unemployment is undoubtedly the 350,000 jobs that have been recently created by the burgeoning sustainable urban agriculture program, one of the most successful in the world, according to U.S.-based economist Sinan Koont.
• Literacy: The adult literacy rate in Cuba (99.8%) is higher than the United States’ rate (97%), according to the United Nations Development Programme (UNDP).
• Infant mortality: Cuba has a lower infant mortality rate (4.7 per 1000 live births) than the United States’ (6.0).
• Prisons: Cuba even does better on prisons. Its rate of incarceration—estimated at around 487 per 100,000 by the UNDP—is among the highest in the world, yet it is considerably lower than the U.S. rate of 738 per 100,000. Now that the number of political prisoners Cuba locks up is in decline, according to a February Associated Press news release, there is even less justification for the blockade.

The fact that a poor, formerly colonized country can meet its citizens’ basic needs, while outperforming the United States on key measures, underscores how inexpensively the United States could follow suit. Cuba’s example could prove instructive to President Obama and his constituents as the United States faces economic collapse. And herein may lie the real motivation of the blockade, and its most significant cost: it keeps people from making such comparisons first-hand. If the only concrete threat the Cuban Revolution poses to the United States these days is the threat of a good example, isn’t it high time we bury the blockade?

Margot Pepper is the Mexican-born author of Through the Wall: A Year in Havana, a memoir about working in Cuba during the “Special Period.” Her work has appeared in the Utne Reader and Monthly Review and on Z-net, Counterpunch, and elsewhere, and can be found at margotpepper.com and at freedomvoices.org.

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