Last week, to mark the 51st anniversary of Fidel Castro's revolution, a couple of thousand Cubans assembled on a plaza facing the American diplomatic mission in Havana. They danced to amplified salsa music and paid little heed when a man on stage tried to excite them with shouts of "Viva Fidel! Viva Raúl! Viva la Revolución!"

It was a far cry from the days when vast crowds gathered to hear Castro deliver extended rants against imperialism and promise his people a glorious future. Today Castro is frail and out of sight. His elderly brother, Raúl, did not turn out for this year's anniversary either. Their sclerotic immobility aptly reflects the collapse of hope that defines Cuba today.

Vestiges of revolutionary enthusiasm survived into the 1980s, when I last visited Cuba. Millions had already lost faith in the promise of Caribbean communism, but millions still clung to it. Today believers are hard to find. People I met told me that they had a burst of hope two years ago, when Castro retired from active politics and turned the regime over to his brother. But life remains much as before, and the island has slipped into paralysing lassitude. "Finding enough food for our families and a roof over our heads is the extent of our dreams these days," one man sighed.

Who would have imagined that Cuba would become an importer of food – even importing sugar, of all things, from the United States, of all places? Or that an entire generation of Cubans – those born in the early 1990s, when the end of Soviet subsidies brought a plague of hunger to the island – would be born malnourished and grow up stunted? Or that the birth rate would plummet, leaving the prospect of an aging population without working people to support it? Or that most groceries would be for sale only in hard currency, which is unavailable to most Cubans? Or that fishing would be all but forbidden because the regime fears that anyone with a boat will make straight for Florida? Or that the country Americans once treated as a giant bordello, a hotbed of degradation that Castro set out to wipe away, would once again become the hemisphere's leading destination for sex tourists?

Cuba's tragedy is different from the one that envelops nearby countries such as Haiti or Honduras. This country has both the human and natural resources to become happy and prosperous. What stands in its way is the regime's stubborn insistence that private enterprise is by nature evil.

"We have three successes: education, health care and social equality," one Cuban told me. "And we have three big problems: breakfast, lunch and dinner." Another put it more directly. "In 51 years of revolution, we have not learned that agriculture is what keeps a country alive."

Most Cubans are desperate for work, and vast amounts of land lie fallow. If allowed to plant food and sell it freely, people here could once again feed themselves. The regime, however, realises that this would be a profound capitulation to history. Better to let a nation waste away than to compromise the principle that the state must control everything.

What does the future hold for this benighted island? With President Obama facing a host of more important challenges, a quick change in the foolish American policy of isolating Cuba is unlikely. Nor does anyone here expect a transition to democracy after the Castro brothers die. There is little prospect that a Havel or Mandela or Walesa could emerge here.

The military will likely remain Cuba's dominant institution. It will allow a managed opening, and will become the business partner of foreign investors – including Cuban-Americans – in a variety of joint ventures. Tourism will flourish. There will be space for private enterprise. A decade from now Cuba will be a better place than it is now. It will remain, however, far from fulfilling its enormous potential. Few outsiders will care, because Cuba, once a powerful force whose revolution inspired the world, has become poor and insignificant.