The Ongoing Tragedy of Cuban Socialism

August 25, 2025 by Dan Mitchell @ International Liberty 

I’ve written several articles about the failure of Cuban socialism (2024, 2022, 2021, 2019, and 2016).  My leftist friends almost always respond by claiming that U.S.-imposed trade restrictions are the primary reason for Cuba’s terrible economy.

Since I like free trade, I certainly agree that trade restrictions are bad for growth (a lesson I wish Trump would learn). But I’ve always assumed – given socialism’s terrible track record – that the U.S. embargo has not been a big factor in Cuba’s economic malaise.

Editor's Note: Dan Mitchell has great information, but Dan is a Libertarian and beats this free trade drum unendingly, but that's a delusion.  Free trade ends up being free to the world and costly to America, as Trump's tariffs are fixing and proving to be the right thing to do.  I do wish that was a lesson Dan would learn. RK) 

It appears my assumption was correct. Here’s a chart showing Cuba’s economic performance compared to what would have happened under different scenarios.

The chart comes from a new scholarly study by three economists (João Pedro Bastos, Vincent Geloso, and Jamie Bologna Pavlik).

They crunched the data a found that Cuba’s experiment with socialism has been a disaster, with per-capita GDP barely half as high as it would have been without Castro.

They also found that U.S. embargo has had a very small impact.

Here are excerpts from their research.

 

The dashed red line represents the counterfactual Cuba — that is, Cuba without the Revolution, the U.S. trade embargo, or Soviet aid. The orange line shows the “conventional” data, while the green line depicts the corrected estimates… As shown, under the corrected series, Cuban GDP per capita is 46.7% below the counterfactual by 1975 and 44.3% below by 1989… 

The blue line in Figure 1, which removes the effect of Soviet subsidies, shows that by 1975 Cuban GDP is 52.1% below the counterfactual, and by 1989 the gap is 55.4%. These figures reflect the combined impact of the Revolution and the U.S. trade embargo (net of Soviet Aid which amounted generally to 20% of GDP).  This leaves only the issue of isolating the effect of the US trade embargo. … 

Here we use three sets of trade data (i.e., total trade in the form of exports plus imports) to create a range of estimates. …We adjust the GDP number to work in the lost trade and find that GDP per capita would have been 3.3% higher without the embargo– accounting for a trivial portion of the Revolution’s effect.

Sadly, the economic cost of Cuban socialism is still with us.

Let’s look at some passages from a recent column by Mary Anastasia O’Grady in the Wall Street Journal.

 

Cuba’s communist dictatorship is broke and seems to have run out of suckers who might lend it more. This month we learned that it’s turned to confiscating dollars and euros from foreign businesses on the island. …going after corporate profits is like hanging a “closed” sign on the moribund economy. …medicine, housing and fuel are in short supply. 

Inflation is galloping. Parents find it hard to feed their children. In September the government cut back bread rations to 60 grams a day from 80 grams. …it cannot provide even a skimpy list of staples. …The infrastructure, from roads to electricity, has collapsed. One demographer estimates 18% of the population emigrated between 2022 and 2023. 

Those left behind stare into an abyss of hopelessness. …Havana wants to blame its poverty on the U.S. embargo. But Cuba’s dismal track record with sovereign lenders and the private sector goes a lot further in explaining why capital steers clear of the island.

Even CNN has noticed the economic carnage.

Here are excerpts from a report by Gonzalo Zegarra.

 

The smell of garbage is overwhelming and intense under the Caribbean sun. The accumulated waste is such that an entire street in Havana, far from its tourist district, was blocked to traffic. Yet garbage collectors here aren’t on strike; they simply don’t come often enough. 

It’s just another example of Cuba’s decline over the past year, alongside blackouts and water cuts… The Unión Eléctrica de Cuba, part of the Ministry of Energy and Mines, reports daily about the energy deficit between supply and demand on its social media pages. It is already common for simultaneous blackouts to cover over 40% of the country…  

This week, a group of residents blocked the streets of Havana for hours to protest the lack of drinking water. …“Cuba has a collapsed productive sector, meaning it faces a serious problem of supply shortages,” De Miranda said. …The availability of subsidized food has decreased in recent months.

I want to close by updating a chart I first shared back in 2010.

It uses the Maddison data to compared Chile and Cuba. As you can see, Chile leapt way ahead after shifting to free markets about 50 years ago.

Cuba, by contrast, has endured anemic economic performance.

P.S. On the issue of long-run economic performance, I have a column comparing Taiwan and Cuba and two columns (here and here) comparing Hong Kong and Cuba.

P.P.S. Folks on the left are very sensitive about being accused of being Cuba apologists, My advice to them is to stop being pimps for Cuba (see here, here, here, here, here, here, and here).