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King Banaian: Let Cigars and Rum Lead the Way to Freedom for Cuba

I love when Kim Crockett calls my show, and usually it’s to amplify a point I was making.  I was a bit surprised by her calling while I was doing a segment on Pres. Obama’s policy directive on Friday that allowed, among other things, American citizens to purchase Cuban cigars and rum anywhere in the world and bring them to the U.S.  I celebrate the opening of trade with Cuba; Kim’s concern is with the means of doing so, by administrative fiat rather than by passing a law.  This is a bypass of the Constitution.

The promotion of trade with Cuba is a means to an end.  In his Capitalism and Freedom, Milton Friedman argued that economic freedom “is an indispensable means toward the achievement of political freedom.” (p. 8)  Kim and many others use the argument that the funds will largely flow to the Castros and the supporters of their totalitarian government.  But Cuba’s cash-strapped economy has had to lay off tens of thousands of government workers and instead has provided them with entry into markets as entrepreneurs.  Those opportunities include restaurants, taxis, and lodging.  As you add more trade to that place, Friedman’s precondition develops inside Cuba.

The stories of Cuban rum and cigars are interesting.  The two largest rum families of pre-Castro Cuba — the Bacardis and the Arechabalas – were forced out by the revolution.  The Bacardi many rum drinkers in the USA buy is actually made in the Bahamas.  The Arecehabalas’ rum, known as Havana Club, was reborn in a link-up between the Castros and the French liquor maker Pernod Ricard.  Both may be very decent rums (here’s a taste test and long history of the two rums) but having the two compete with each other for the U.S. market will make them better.  That’s what competition does.

Cuban cigars tell a similar story.  Cuban soil creates tobacco that is considered among the best in the world.  Small farms still exist and are owned by families, though some larger tobacco fields were nationalized.  But between the barn where tobacco is cured and cigar box there is only one maker in Cuba, the government-owned Cubatabaco.  Castro used Cubatabaco to advance social causes, for example replacing male with female cigar rollers to improve female employment ratios.  Experts in the production of cigars left in droves.  Inconsistent quality of tobacco led one famous Cuban cigar maker, Davidoff, to move its tobacco purchases to the Dominican Republic.  After the fall of the Soviet Union, which greatly harmed Cuban exports and earnings of hard currency, Cubatabaco tried to greatly expand production.  Quality suffered as a result.

This story occurs again and again – socialism corrodes the ability of a nation to produce the best and stay ahead of others in the world of trade.  Cuba’s national baseball team, once a fearsome team that won many international competitions, has not won an international title since 2007 as more of its players leave for the U.S., overcoming great obstacles to getting out of the country.  Saturday night I watched Aroldis Chapman of the Chicago Cubs pitch to Yasiel Puig of the Los Angeles Dodgers.  Both escaped Cuba.  If both were still there on the national team, might they have won?

But, says the constitutional scholar, can I really support this when President Obama has violated the Constitution?  I will refrain from getting into a Constitutional argument with Kim – I’m untrained in legal theory.  But it is worth noting that the Trading with the Enemies Act of 1917 has permitted many presidents to define and offer regulations governing embargoes.  True, there is also a second act particularly to Cuba – the Helms-Burton Act of 1996, which says you cannot remove the embargo without Congressional approval – but there is a real difference between an embargo and a travel restriction that forbids bringing a box of Cuban cigars from the duty-free shop at Heathrow.

Closing off a country to trade is often done by socialist countries, but this leads to even greater poverty for its citizens.  To expand cigars into the U.S. market the Cuban cigar will have to improve, and the only way to do that will be to increase competition.  To do that requires property rights, a rule of law that puts the Castros on equal footing with other Cuban citizens, and light regulation.  As some entrepreneurs succeed, others will clamor for the economic and political freedom that Friedman hypothesized over 50 years ago.  If you support freedom for the Cuban people, trade with them and let capitalism pave the way.

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