Now that America is back in bed with Cuba, it’s a good time to reflect on my trip there earlier this year and just how 100 flights a days from the U.S. will affect this interesting little country just south of Florida.
After more than 20 years of crippling poverty and over 60 years of exclusion for the United States, Cuba and the U.S. have reopened diplomatic relations. To understand how Cuba came to be and just why it’s relationship with the United States crumbled in the 1950’s*, it’s important to understand a little about Cuba’s history. In short, Cuba has long been controlled by various countries throughout the last six hundred years**. Spanish conquistadors were the first to enter Cuba, enslaving much of the indigenous population and killing off the rest. Following the Spanish American War, Cuba was declared an independent republic in 1899. American influence took over as a series of revolutions within the country saw power chop and change over the next fifty years.
In the 1950s, Cuba was seized by Fidel Castro along with his brother Raul and Che Guevara. Fidel wasn’t a fan of America and proceeded to buddy up with Russia. The missile crisis occured amongst a number of other politically divisive events. For a full historically accurate summary of this period, listen to Billy Joel’s We Didn’t Start The Fire. Eventually, America cut off all diplomatic ties with communist Cuba.
In the late 1980’s and early 1990’s after the fall of the Soviet Union, Russia pulled support from Cuba, plunging Cuba into a period of extended economic austerity aptly named “The Special Period.” Fast forward twenty years, and there I was on a plane to Havana.
Starting in September, over 100 commerical flights a day will head directly to Cuba from a number of locations in the U.S. This is a big deal. Though the U.S. has already loosened laws on how Americans can travel to Cuba, namely through education visas and guided tours, the changes this year will represent the first real opportunity for Americans to explore Cuba freely without having to dodge passport stamps or spend a night in a weird hostel in Panama.
The question on everyones lips is how will a sudden influx of Uncle Sam affect the fragile economy of a still-very-much communist Cuba. The tourism dollars will help, but it’s not like there hasn’t been any tourism in Cuba. There’s hundreds of flights a day in and out of Havana airport from the U.K., Europe, and South America. Cuba has plenty of tourism already. The issue isn’t revenue, or economic stimulus in the form of tourism.
Cuba’s economic problems stem from two key issues that, regardless of American influence, will continue to see Cuba experience third world poverty only miles away from the biggest economy in the world.
Issue #1 – Earning Inequality
Cuba’s employment opportunities are divided up in to two distinct industries: those who work for the government – which in a communist country includes jobs like builders, nurses, teachers and the like; and those who work in tourism – such as taxi drivers, people who rent their homes and tour guides. Though there’s plenty of work in Cuba (apparently they have 0% unemployment), the earning potential is night and day between these two industries. Cuba is unique in that it has two functioning currencies: the Cuban Peso and the Cuban Convertible. The Peso is an inflated currency that the locals use. The Convertible is pinned to the U.S. dollar and is the currency that tourists use. Those who work in tourism are paid in Cuban Convertibles. The exchange rate between the two currencies is about 25 Pesos = 1 Convertible
To highlight why this is such a huge issue, let’s compare the lives of two Cubans; one that works for the government and the other that works in tourism; and how their line of work affects their quality of life in Cuba:
- Works for the government – our first worker is a skilled builder who works on restoring old buildings in Havana and is paid 375 Pesos a month, or about 15 Convertibles. That’s right, $15 USD a month. This is pretty standard.
- Works in tourism – Our second Cuban has a small home she rents Airbnb style to tourists. Her home has been passed down through her family for generations. She is paid 25 Convertibles A NIGHT.
Assuming our second Cuban friend rents out her room to sunburnt Germans 25 times a month, she is making a whopping 42 times what our first Cuban friend made working for the government.
Those who work in tourism make a shitload more than their counterparts who work for the government. If anything, American tourism will further inflate this disparity between these two industries.
Issue #2 – Lack of Competition
Since we’re Making America Great Again, let’s highlight how we were made great the first time. America’s economic policy throughout the industrial revolution lended itself to rapid growth. Build more, build faster, build better. Companies like Coca-Cola would never be the international conglomerates they are today without Pepsi, Apple wouldn’t have built better products if it didn’t have Microsoft to compete with as a benchmark. Competition is key. It’s what drives improvement in products and services. If what you offer isn’t as good as the competition, then you won’t be around long.
The issue with Cuba, and communism in general, is that there’s no competition. There’s one government owned entity for each industry that produces one product. There’s no incentive for R&D, so nothing gets better.
The same argument can be made for the government. Since there’s no political competition, there’s no incentive for progressive policy or investment into things that the public care about most.
Unfortunately, American reintroduction doesn’t really mean this will change. It’s possible that down the road, Raul Castro (who took over from Fidel in 2009***) will slowly start to move Cuba towards a free market.
America’s return to Cuba will certainly have some positive effects. But it’s hard to see why more white people in flip flops will change Cuba in any meaningful way. Raul Castro is known to be far more open to reforming Cuba for the 21st century, but I wouldn’t hold your breath.
*Possibly the 1960’s. I’m writing this on a plane and can’t fact check.
**Possibly five hundred years. Same reason.
***Or thereabouts. ^.