14 August 2015

We're Close to Cuban Cigars (Why Trade Embargoes are Bad Ideas)

After we'd taken over, we were sitting around a table defining the new government. Castro asked "Who is an economist," but I thought he'd asked, "Who is a communist," so I said, "I am."
"Good," he said. "You'll be in charge of the economy."
 - Che Guevara

I was standing on the steps of the Hanoi Opera House when I first heard that Richard Nixon had died.

I was with a group hosting the first trade show to feature American companies since the fall of Saigon. We were told that it was the first time that the American and Vietnamese flags had flown side by side over the soil of North Vietnam. One of my highlights of that fascinating year was what I learned just as I was to announce our upcoming trade show back in the US, in Chicago. I was to speak just after the man who was the closest thing to Vietnamese ambassador given that stage of normalization. And just before he went on, Clinton announced from the White House that the US was moving towards trade normalization with Vietnam. That felt like an historic moment.

Since then, Vietnam has prospered. According to at least one forecast, it is the economy expected to grow the most rapidly in the next decade. And Vietnamese have the most favorable impression of Americans of any Asians. When I was in Hanoi in 1994, you could still see the scars of war in the city. Buildings were still pock marked from American attacks. And yet the Vietnamese could not have been more friendly or more happy to see us there. One group told us that they would rather do business with Americans than Europeans, Chinese, or Japanese. They claimed that the Japanese and Chinese were only interested in their own profits whereas the Americans seemed interested in setting up relationships that both made the Americans a profit and their Vietnamese partners.

Which brings me to today's embassy opening in Cuba. The trade embargo against Cuba that is older than Obama is about to end.

From everything I've read of history and development, one thing seems true: if you want to disperse power, encourage widespread economic development. When the early merchants began to gain wealth at the dawn of capitalism in the 16th and 17th centuries, they successfully challenged the landed aristocracy for political power. People with economic options demand political options.

Trade embargoes sound like a nice alternative to war. No bombs are dropped but regimes feel pressure to change. Or so the theory goes, but I don't buy it. Inevitably, when an economy is isolated from global markets and stagnates, the powers-that-be lock their control over the people. No new resources are flowing into the country to enable new groups to make new demands. Economic progress inevitably begets political progress. If you are sincere about wanting the democratization of a political system, you should work towards opening up the economy, not shutting it off. The Taliban realized how dangerous trade is to autocratic regimes; it was no coincidence that they flew planes into the World Trade Center. You buy a computer to automate your accounting and the next thing you know your daughter is learning Beyonce dance moves. Trade transforms.

Since Nixon visited China, that country has gone through an amazing transformation. In 1990, 60% of China's population was categorized as extremely poor; today it is only 4%. It is true that China's government shows less regard for human rights than, say, Sweden's. It is not true that the average Chinese citizen is worse off than they were when Nixon visited in 1972. Progress is not an on / off switch; progress is a dimmer switch.

Opening up Cuba is a wonderful thing and will mean that the country will make more progress in the next decade that it has in the last half century. That's good for everyone. a

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