Cuban Food Shortages: Another Red Flag

By Byron B. Carson, III.

"To say that Cuba is not a “food country” is quite an understatement, now that food shortages are seemingly commonplace. Tasty food is one thing, but many people in Cuba might not have any food to begin with.

Most people in Cuba are skipping meals — out of necessity, not for dietary or nutritional reasons — and live in “extreme poverty.” Rather than starve, or face increasing rates of violence and electrical blackouts, an on-the ground reporting indicates that 20 percent of the population left the country between 2022 and 2023.

These outcomes — especially shortages — are intimately linked with socialist governments, related economic policies, and, in particular, price controls. In July, Cuban authorities imposed a new round of price controls on powdered milk, chicken, and pasta, among other goods. Vendors in Cuba are now not allowed to sell chicken parts above a price of 680 pesos, whereas market prices are typically around 700 pesos."

"Legally binding price controls — in this case price ceilings — make it illegal to voluntarily exchange food above the capped price. While enforcement varies — and there is likely a growing black market in Cuba to avoid the watchful eye of nosy government officials — many vendors are fined for offering their goods. Over 4,000 fines were issued for those who broke the July price controls.

When capped prices are below market prevailing prices, shortages follow. Consumers are encouraged to buy more goods at lower prices; as a result, there might be fewer goods available. If they can’t charge market prices, producers are discouraged from bringing their goods to market, or they provide lower quality goods; as a result, there might be fewer goods available. None of these behaviors put (good) food in bellies for very long.

Unfortunately, none of this is new for people living in Cuba, as they’ve lived with price controls on food and other goods like taxi rides, beverages, and haircuts for over a decade. Food rations, once a relic of the Cold War, are also making a comeback.

In Flaws and Ceilings, Christopher and Rachel Coyne note that price controls have disastrous effects on markets. This logic is a cornerstone of economic science, whether people live in Cuba, China, California, or Canada. It is a logic that remains valid regardless of a country’s economic system. To summarize, Coyne and Coyne state that,

What is clear is that price controls set in motion a series of unintended consequences as producers and consumers respond to the new incentives created by the introduction of controls. More often than not, these unintended consequences exacerbate the very problem that proponents of controls claim to correct.

The injustices associated with price controls and the resulting food shortages, in this case, are red flags we are now seeing play out, once again, in Cuba."