Food shortages in Cuba: Another warning signal

To say that Cuba is not a “food country” is quite an understatement, given the seemingly ever-present food shortages. Delicious food is one thing, but many people in Cuba may not have anything to eat at all.

Most people in Cuba skip meals – out of necessity, not dietary or nutritional reasons – and live in “extreme poverty.” Rather than starving or facing increasing violence and power outages, reports on the ground suggest that 20 percent of the population will have left the country between 2022 and 2023.

These consequences – especially the shortages – are closely linked to socialist governments, the economic policies associated with them and, in particular, price controls. In July, Cuban authorities imposed a new round of price controls on powdered milk, chicken meat and pasta, to name a few. Traders in Cuba are now prohibited from selling chicken parts for more than 680 pesos, while market prices are normally around 700 pesos.

The availability of food follows changes in supply and demand. For example, there may be less food after a drought or flood. However, markets mitigate these shocks through prices: when food becomes (relatively) scarce, prices rise, and when it is relatively abundant, they fall. Price controls prevent the market process and prices from working – they throw a spanner in the works of trade – and make things worse.

Price controls are huge red flags. These are not red flags that celebrate socialism. These are red flags that he doesn’t like your best friend. These are red flags that he manipulates you all the time. These are red flags that she always picks out your outfits. If any of these red flags were on display on a date, most of us would walk away. Unfortunately, we don’t often let price controls go. We allow them to ruin our lives.

The most dire warning signs of price controls relate to the nature of exchange, morality, and freedom. If consenting adults realize that mutually beneficial trade is possible, who are we to stop them? Blocking such exchanges prevents both trading partners from improving their lives and should therefore be considered an injustice.

Government officials are obviously willing to restrict people’s freedoms, so this may not be a (sufficient) crushing argument. Can we say more about price controls? Hold my beer, says the economist.

Price controls not only arouse our moral fears, but also have demonstrable effects on our well-being: they increase poverty and hunger. Contrary to the utopian dreams of politicians, price controls distort market processes in perverse ways. They are designed to lower the price of goods and make it easier for people to buy them. And they may help some people and bring political favors – both of which are temporary – but instead they create shortages.

Price controls lead to shortages and, in the case of food, increase the likelihood that people will go hungry. Such measures sow the seeds of discoordination, not of nutrition. Instead of fried chickens flying into the mouths of comrades, price controls empty the cupboards and deplete food stocks (this is an allusion to Mises’ Economic calculation in the socialist Commonwealth, medieval myths about the land of milk and honey and The birds, a play by the Greek dramatist Aristophanes).

Legally binding price controls – in this case, price ceilings – make it illegal to voluntarily sell food above the maximum price. Although enforcement varies – and there is likely a growing black market in Cuba to avoid the watchful eyes of prying government officials – many vendors are fined for offering their wares. Over 4,000 fines were issued to those who violated the July price controls.

When ceiling prices are lower than market prices, shortages occur. Consumers are encouraged to buy more goods at lower prices; as a result, fewer goods may be available. If they cannot charge market prices, producers are discouraged from bringing their goods to market or they offer lower quality goods; as a result, fewer goods may be available. None of these behaviors ensure that (good) food stays in the stomach for very long.

Unfortunately, this is nothing new for people in Cuba, who have lived with price controls on food and other goods like taxi rides, drinks and haircuts for over a decade. Food rations, once a relic of the Cold War, are also making a comeback.

In Deficiencies and upper limitsChristopher and Rachel Coyne point out that price controls have disastrous effects on markets. This logic is a cornerstone of economics, whether people live in Cuba, China, California, or Canada. It is a logic that remains valid regardless of a country’s economic system. In summary, Coyne and Coyne state:

What is clear is that price controls trigger a number of unintended consequences as producers and consumers respond to the new incentives created by the imposition of controls. In most cases, these unintended consequences exacerbate the very problem that proponents of controls claim to solve.

The injustices associated with price controls and the resulting food shortages are, in this case, warning signals that we can now observe again in Cuba.

Add in taxes and tariffs on food in Cuba, and it should come as no surprise that food markets are increasingly distorted, shortages are frequent, and people remain impoverished. Perhaps we should leave food markets alone and let consumers and producers coordinate their wants and needs through voluntary exchange.