I returned to Cuba in November for the first time in two years. On the surface, not much had changed. From my room in the Riviera Hotel on the Havana waterfront, I could still see vintage 1950s American cars driving down the Malecón. On television I watched the Cuban national baseball team win another international tournament. Just up the street a billboard next to the old U.S. embassy building denounced “U.S. imperialism.” Beneath the surface, though, the country was in the middle of several important changes. Fidel Castro was gravely ill. When he could not even appear at his own birthday celebration, Cubans were forced to accept the reality that the man who had led them for forty-seven years would not likely be returning to power.

Many of the Cubans I spoke with during my visit were prepared to acknowledge that some kind of transition was underway. The transition they seemed to have in mind, though, was not the one spelled out in the U.S. government’s July 2006 report from the Commission for Assistance to a Free Cuba. According to the report, the only acceptable transition would be one that excluded all current Communist Party leaders from political leadership, including Raúl Castro. But the changes expected by the Cubans I spoke with might well happen under the current leadership, which is headed by Raúl and also includes Ricardo Alarcón, president of the National Assembly; Carlos Lage, minister of finance and planning; and Felipe Pérez Roque, foreign minister. These three are all younger than Raúl and have been exercising important day-to-day leadership roles for the last several years.

One thing that probably will not change anytime soon is the Cuban political system. An end to one-party rule is simply not in the offing. The model that a Raúl-led government will likely follow is that of the People’s Republic of China, where the Chinese Communist Party maintains complete political control even as it adopts many features of a market economy. The Cuban leadership does not want to repeat the history of the Soviet Union and Nicaragua, where multiparty elections led to the defeat of the revolutionary government. A colleague of mine from the University of Havana told me that he thought economic changes are inevitable, but not political ones.

By legalizing the dollar, creating agricultural co-ops, encouraging tourism, and allowing people to start small businesses in the service sector, the Cuban government was able to survive the collapse of the Soviet Union and stabilize Cuba’s standard of living. The government was also able to persuade the Cuban people of the necessity and nobility of shared sacrifice; this helped it maintain its legitimacy in the face of difficult economic challenges. Despite the gradual economic adjustments-and the remittance payments that many Cubans receive from relatives in the United States-daily life for most Cubans is a struggle. It is true that they do not go hungry, as people in much of Latin America do, but food rations and low wages are not enough to provide all of the basics. Cubans resort to a variety of schemes-legal and illegal-to make ends meet. As one of my Cuban friends explained, the Cuban weekly ration provides cigarettes; so, if you do not smoke, you trade the allotment for more rice and beans. But there are other, more serious problems with the system. For example, many necessary items never reach the ration stores because of theft before delivery. In the last two years, the government has openly discussed the problem of petty corruption. In a November 2005 speech, Fidel even declared that such corruption could lead to the downfall of the revolutionary system. The current government’s primary response to this problem has been a combination of harsh legal measures against those involved in corruption and the mobilization of over twenty thousand young “social workers” whose job it is to discourage illegal practices.

The long-term effectiveness of this approach is questionable because it does not address the root of the problem, which is the inefficiency of the official peso economy. Despite the growing importance of the dollar, the peso economy is still the economy most Cubans depend on. The government has attempted to improve efficiency by pressing reform on the labor unions, an effort that has led to the election of a new leader of the Central Workers Confederation. But this is not the first time the government has tried to increase productivity by means of exhortation, and there is only so much that can be done within the framework of an underdeveloped industrial system that relies on often-outdated Soviet equipment.

But the Cuban government, led by Raúl, may soon attempt more substantial economic changes. For example, it may encourage not only more small businesses but also-and more important-medium-sized operations that could employ workers from outside the owner’s family. It is not clear exactly what shape this new policy would take, but if the Chinese model were adopted, such businesses would be freer to pursue profits. Still, it is unlikely that Cuban reforms will be quite as radical as China’s. Although it may slowly adopt more flexible laws, the government will still want to maintain tight control of the country’s market. Most Cubans are still deeply committed to an egalitarian society. This means that conspicuous displays of wealth like those in the cities and suburbs of China will probably not appear in Cuba.

Certain segments of Cuban society, especially the trade unions, will no doubt resist any efforts at serious reform. Their resistance often bolstered Fidel’s own opposition to reform, but Raúl may prove to be less rigid and less idealistic than his brother. He shares his brother’s general ideological commitments, but he may be less interested in theoretical purity and more interested in feasibility. His no-nonsense, practical approach to solving problems in Cuba’s armed forces has been successful for more than forty years. Twice in the 1990s, the army cut its budget dramatically at his command. (As a result, many ex-army officers were put to work in the tourism sector.) Budget cuts are almost certain to be an important part of whatever reforms the government undertakes under Raúl’s leadership, though it is far from certain that tough cost-cutting alone will solve Cuba’s serious economic problems.

No less important than such internal reforms are Cuba’s economic ties to other countries. Cuba’s exchange of technical assistance for Venezuelan oil, for example, has been crucial to protecting the island from rising world oil prices. Thousands of Cuban doctors and teachers now work in Venezuela as part of the recently adopted Bolivarian Alternative for the Americas, a plan of solidarity that includes Bolivia and may soon include Nicaragua. Cuba is also trying to cultivate a stronger economic relationship with China, which wants to invest in potential oil reserves in the Straits of Florida as part of its worldwide energy strategy. There is even talk of a joint Cuban-Chinese venture to manufacture Cuban biomedical products in China. The Chinese hope to make Cuba a platform for their commercial projects in Latin America. There are plans for the construction of two Chinese plants on the island to manufacture household appliances for both Cuba and the rest of the Latin American market. China has also chosen Cuba as the place to send thousands of its young people to learn Spanish, another part of its plan to expand its commercial and political influence in South and Central America. The students are being trained in a special new school at the University of Havana, which is headed by the former dean of the university’s School of Modern Languages. Cuban economists argue that economic relations with China are especially good for Cuba because they run little risk of interference from the U.S. Helms/Burton Law that was designed to block foreign investment in Cuba: the U.S. is famously reluctant to enforce economic sanctions against China, one of its main trading partners.

It is unclear whether the Cuban government will be as open to investment by Cubans in the United States. Such investment could be an important help to Cuba’s economy, but it would depend on changes in U.S. policy and in the attitudes of the Cuban-American political leadership in Florida, which has traditionally rejected any engagement with the Communist government. But among younger Cuban Americans there is less resistance to such engagement.

What are the chances that U.S. policy toward Cuba will change as Raúl and the younger generation of Communist leaders assume control? This gradual transition within the Cuban government will provide just one more proof of how profoundly the U.S. government has misunderstood Cuban politics. From the beginning, the United States misjudged the strength of the 1959 revolution. It assumed, disastrously, that an invasion of exiled Cubans at the Bay of Pigs would be successful. Later, in the early 1990s, the conventional wisdom in Washington was that Cuba would not survive the fall of the Soviet Union. On top of those particular miscalculations, there was the recurrent assurance that Fidel Castro’s death would bring a quick end to Cuba’s long Communist experiment and restore U.S. influence on the island. Will the almost-certain prospect of a Raúl-led government finally convince U.S. leaders that Cuba is not about to return to its pre-revolutionary past?

Whenever the United States has judged the Cuban regime to be strong enough to endure, there has been a greater openness to diplomatic and economic engagement. There were real efforts at such engagement during the presidencies of Jimmy Carter and Bill Clinton. The first of these began only after it had become clear that Cuba had survived its early difficulties and could go on indefinitely as part of the Soviet economic bloc. President Clinton undertook his own program of greater cultural and economic exchange with Cuba only after it became clear that Cuba had survived the collapse of the Soviet Union. Clinton was particularly interested in increasing food and medical exports to Cuba. In 2004, the Bush administration terminated some of the Clinton-era engagement policies, though it did allow the politically popular food exports to continue. The shift in policy had something to do with the power of uncompromising neoconservatives within the Bush administration, but it was also based on a new reading of the situation in Cuba. The 2004 Powell Commission report argued that growing weakness in the Cuban economy together with a tighter U.S. embargo might put an end to the Castro government. The report failed to take into account Cuba’s growing relationship with Venezuela and the generally leftward trend of recent Latin American elections. Just as the alliance between Cuba and Venezuela has kept inflated world energy prices from hobbling the Cuban economy, electoral victories by the Left in Bolivia, Brazil, Ecuador, Nicaragua, Uruguay, Argentina, and Chile have worked to Cuba’s political advantage.

A dramatic change in U.S. policy toward Cuba probably won’t happen as long as Fidel Castro is alive. There are still some U.S. officials who are confident that the Cuban people will suddenly overturn the Communist regime once the charismatic Fidel is out of the way. These officials will not budge until political developments in Cuba prove them wrong. But that may happen fairly soon. The hard-line community in Miami will no doubt object to any kind of engagement with the Cuban government, but the eight hundred thousand Cuban exiles in South Florida do not have complete control over U.S. policy toward the island, a fact forcefully illustrated by the return of Elián González to Cuba over their strong objections. The same part of the Cuban-American community vigorously opposed the sale of U.S. products to the island, arguing that Cuba was an unreliable customer. But their voices were drowned out by powerful agribusiness groups, and now there is $400 million of agricultural trade between the United States and Cuba each year. If Washington were to choose greater engagement with a post-Fidel Cuba, the hard-line Cuban leadership in Florida could be bypassed: the U.S. government would have no trouble finding other Cuban Americans who would support greater cooperation between the two countries.

A policy of renewed engagement could be led by either major party. In fact, a real change of policy will likely be bipartisan. Some Republican Cuban Americans in Florida may feel betrayed by such a change, but their voices will be balanced by other GOP constituencies-in particular, business and farm interests. Protectionists in the Democratic Party may be reluctant to lift the ban on Cuban goods, but other powerful Democrats-including Charlie Rangel, chair of the House Ways and Means Committee-are strongly opposed to the embargo. Of course, for the next two years President Bush’s potential veto remains an issue, but it shouldn’t be forgotten that it was the staunch cold warrior Richard Nixon who finally recognized Chinese Communist leadership and began the long process of normalizing our relations with that country. President Bush may yet deliver a similar surprise.