In late September 2009, shortly after Fidel Castro and I exchanged hugs of greeting, I flashed back to my first visits to Cuba, in 1960 and 1961. In the six months I spent there, I experienced a sense of creative anarchy in which people my age (I was 24) ran government ministries and the revolutionary leader was only 33. Hundreds of thousands showed support at rallies where Fidel announced expropriations of U.S. property. Not all Cubans felt this way. Hundreds of thousands fled the island for Miami.

In February 1961, when I left Havana after my second visit, I had doubts whether the revolution could survive. Two months later, Fidel declared himself a socialist, and shortly afterward some who had fled returned to Cuba, backed by the CIA, in an incursion at the Bay of Pigs, a development that became known as a fiasco.

Forty-nine years and dozens of visits later, a small group—which included myself; Harry Belafonte; his wife, Pam; his daughter, Shari; Danny Glover; and James Early—went to Fidel Castro’s house on the outskirts of Havana. After his wife, Dalia, and his grandsons and youngest son had greeted us, we sat and listened to Fidel talk. On each side of his chair sat piles of books. He had read Barack Obama’s autobiographies, installing heavy underlining and margin notes on most pages. He praised the U.S. president on his writing style, honesty and intelligence, recognizing the difficulties he faced trying to make even the smallest changes.

After three hours of conversation, in which he did most of the talking, as we all had hoped, several things became clear. First, Fidel had definitely retired, thanks to a near-death surgical trauma, followed by serious infections.

The revolution he directed until 2006 when the illness obliged him to pass the reins to his younger brother, Raul, his close partner since 1953, had achieved its goals, but was also in serious economic difficulty.

Cuba had survived a half-century of U.S. hostility and remained a sovereign nation, with a healthy and educated population that played many roles in world geopolitics—unknown even to most educated Americans. Moreover, people from an island nation without strategic resources danced on the stage of history.

Some know of Che Guevara’s failed 1965 guerrilla mission in the Congo. Few know that in 1963, Cuban troops helped Algeria deflect an invasion threat from Tunisia; or that Cuban doctors served as battlefield medical personnel in the Vietnam War. In 1973, Fidel dispatched a 1,500-man tank division to fight alongside Syria against Israel.

In 1975, Cuban soldiers fought U.S.-backed forces from Zaire and South African armored divisions to maintain the integrity of Angola, and later helped bring about Namibian independence. Cuba’s successful military engagement against the South African apartheid regime in the 1987-88 battles of Cuito Cuanavale in southern Angola helped shape the future of the region. Just four years later, at his inauguration, Nelson Mandela shook the hands of heads of state but grabbed Fidel in a bear hug and said in a voice audible to the network microphones: “You made this possible.”

This history has given Cubans a sense of pride—not to be mistaken for democracy. But Fidel now avoids discussions of Cuban politics or policy, making it clear he has retired and his brother now presides. Rather, in the discussion with us he focused his intellect on how climate change threatened future life on the planet and how the situation demanded unity among nations and people to stop the process. He described the contemporary world as being full of daunting “challenges facing today’s politicians.”

He leaned forward as if confiding in us and said: “I pity them, you know. I used to be a politician also.”

Over the decades he outfoxed U.S. strategists. Like a modern Machiavelli he exported his enemies to his larger enemy—or induced Washington to import more than 1 million Cubans who opposed revolutionary policies. When resources became scarce after 1991, hundreds of thousands more left the island for the United States.

His other side, a modern Don Quixote, inspired young Cubans—and others—to look to the “new man,” modeled on the legendary Che Guevara, building a just and egalitarian society.

This politician who outlasted 10 U.S. presidents bent on overthrowing him now spins his worldly concerns to those who publicize them. Two weeks ago Fidel gave long interviews to Jeffrey Goldbergof The Atlantic and Julia Sweigof the Council on Foreign Relations in which he discussed his appreciation for Jews, among other topics.

I recall him telling me during a 1968 film trip (“Fidel,” broadcast on PBS in 1969) of his admiration for Israelis, “surrounded by enemies and showing determination to defend themselves.” He also referred to their “initiative in making the desert bloom.” The Israeli ambassador to Cuba was an ex-kibbutznik who distinguished himself also as a champion volunteer cane-cutter. Israeli policy, however, clashed with Cuba’s interests and Fidel thought it might lead the world into nuclear war by 2010.

In 1991, when the Soviet Union disappeared, Cuba no longer possessed the resources to maintain a military role in world affairs (it now exports doctors). This “special period” (beginning in 1991 with the Soviet demise), as Fidel dubbed it, meant the state could no longer fulfill its commitment to provide for the needs of the people with fully subsidized food. The population also faced prolonged power outages, a scarce water supply and growing inequality as those with relatives in Miami began receiving remittances from them.

The heroic language of the revolution no longer applied. The play, to use a metaphor, was over. The revolution had achieved success in the world and in health and education at home, but, as the Cuban joke goes, there are three minor problems: breakfast, lunch and dinner.

In the late 1990s, with the rise of Hugo Chavez in Venezuela as a Cuban ally, money again began to flow into the island’s economy and material life improved. But it’s a far cry from the cradle-to-grave security days of the 1970s.

In 2010, Cuba still faces an intimidating U.S. embargo, or blockade as they call it because it reaches beyond bilateral lengths and punishes countries and businesses that do business with Cuba.

With Cuba no longer receiving Soviet aid, the U.S. embargo interferes not only with the needs of daily life—some products are hard or impossible to get—but demoralizes the population. “No hay” (there isn’t any) has become the daily cliché. U.S. recalcitrance has made it more difficult for Cubans to write the script for the next period: how does the revolution convert from a highly centralized and authoritarian model into a functional society where the healthy and educated population can take initiative, without falling into capitalism, which Fidel and Raul Castro hate. Incidentally, Cuban newspapers don’t hesitate to report facts about U.S. hunger, unemployment, foreclosures (300,000 in July), homelessness and the massive and unmet needs of the American infrastructure over the past two years.

The Cuban economy suffers, as Raul related in his August 2009 speech, from serious problems: 1 million superfluous workers on the state payroll while there exists an acute shortage of labor in agriculture and construction. In recent weeks, 500,000 workers received notice of their impending layoff and were told to start looking for private sector jobs, and to form private cooperatives.

“Our state cannot and should not continue maintaining companies, productive entities, services and budgeted sectors with bloated payrolls [and] losses that hurt the economy,” said the official Cuban labor federation statement that announced the layoffs. “We have to erase forever the notion that Cuba is the only country in the world in which people can live without working.”

The sight of idle Cubans on the street in the middle of the workday, drinking beer, playing dominoes, listening to music on boomboxes and basking in the sunshine had become an omnipresent irritant to working Cubans. From an apartment balcony in Playa, a Havana neighborhood, earlier this year, a 55-year-old working woman sneered at the young men on the corner. “Look at those bums, living off the state and not working. Where do they get the money to buy the beer?”

I thought about the “welfare cheat” clichés heard at times in the U.S. What became clear to me in my recent visits to Cuba, which I make at least once a year, was that the economy had become dysfunctional. Centralized authority—the political companion of the state-controlled economy—had also become a cruel joke.

Over the years I asked people I knew why they didn’t organize activities for the kids playing amid rocks and rubble, and why neighbors didn’t clear the streets. I got the same answer I received from people who would not allow me to film: “It isn’t authorized.”

Nor is the black market authorized, I thought. But it functions very well. Under the state-controlled system, thieves stole material, exacerbating the already difficult shortages, and sold the stolen goods back to the people for higher prices. Farmers could make more selling privately than through state-controlled prices, so, duh, that’s what they did.

Raul Castro’s initiative involves not only laying off unproductive workers from state payroll and pushing them toward the private sector—especially agriculture, where the labor shortage is acute—but decentralizing as well

Anyone who thinks Cuba is going capitalist, however, should check more carefully with the facts and the half-century dedication of its leaders to socialism. The small private sector that will gradually reopen, under President Raul’s announced reforms, existed until 1968 when the “revolutionary offensive” shut down the small stores, street peddlers, service providers and artisans.

The changes, compelled by economic reality, should not blind observers to the fact the generation that made the revolution had pledged to carry out the goals that their revolutionary ancestors had in the 1860s, 1890s and 1930s. Under Fidel, Cubans’ deep sense of their role in the island’s history helped them to have the courage to commit the unpardonable sin: disobedience to the United States.

Cuba is still paying the price. The embargo is 50 years old. Hey! Give it time!

Saul Landau is finishing a film with Jack Willis, “Will the Real Terrorist Please Stand Up,” about 50 years of U.S.-Cuba relations and five Cuban spies in U.S. prisons. He is a fellow of the Institute for Policy Studies.