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“Live so that no one blames the rest of us nor finds fault with our work.” —2 Corinthians 6:3 |
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Understanding Puerto Rico's Economic Crisis By Dr. José M. Vadi Dr.Vadi holds a Doctorate Degree in political science from the University of Wisconsin at Madison. He has been a National Endowment for the Humanities Fellow and a Ford Foundation Foreign Affairs Scholar. He currently specializes in the politics of Latin America and heads the Cuba Program at the California State Polytechnic University at Pomona.   ince the mid-1970's, Puerto Rico has been in a severe economic
crisis that is structural in nature. The Puerto Rican economic model that
pioneered the maquiladora industry had run its course. Starting in the
nineteen- fifties, government development agencies (Fomento) engaged in a
program of "industrialization by invitation" helping mostly American companies with plant, infrastructure, and low wages relative to the United States wage levels. Competition from the NICS (Newly Industrializing Countries) of Asia and the end of the scheduled tax holidays in Puerto Rico led many companies to leave the island. The new strategy adopted was to invite capital intensive companies that required less labor to establish themselves in Puerto Rico attracted by a relatively educated work force and the ability to repatriate profits back to the United States without paying taxes on these profits (Section 936 of the Tax Code). The profit rates in Puerto Rico for these companies, like the pharmaceuticals, were astronomical. However, neither the early or later strategy of "industrialization by invitation" employed workers. In fact, only one new job was created for every three agricultural jobs that were lost. Without the Puerto Rican migration, Puerto Rico's economy would not be sustainable. More recently, economic globalization and neo-liberal economics, characterized by open markets, the lowering of tariff barriers, and the crushing of governmental assistance to the poor, have become the norm in a world increasingly dominated by seven or eight countries. This puts Puerto Rico at a disadvantage with low wage economies that attract foreign investment more readily. The growth of the government employment sector is common in poor countries as a strategy for absorbing labor. Government employment is crucial in maintaining social peace by providing employment to middle classes that, by virtue of their education and organizational skills, could become a source of trouble. Puerto Rico has a swollen governmental sector for this reason and also because Puerto Rico is a classic "partidocracia" (partyocracy) where two major parties alternate office and maintain their followings via redundant government employment. Moreover, as is true of poor nations, the government has borrowed far beyond its capacity to pay and the banks are then in a strategic position to impose their recipe: fewer social services to the population, regressive taxes that hurt the poor like the sales tax now being imposed in the island, and a more business-friendly approach by government. We can see all of these same patterns taking place in other Latin American countries. In Bolivia, foreign companies tried to privatize the water and attempted to gain control of Bolivia's huge gas reserves in a manner that yielded about 15 cents on the dollar value of gas. Foreign banks imposed austerity programs onto Argentina that crushed the middle class and increased unemployment to more than twenty percent. In Venezuela, a partidocracia that resembles that of Puerto Rico, raided oil resources and collapsed under the pressure of an elected populist government. What started out as a financial and economic crisis ended up in a crisis of governability and a crisis of legitimacy. Puerto is at such a crossroad today and for many of the same reasons as the countries just cited. Sales taxes hurt the poor more because the poor consume all of their income and thus all of their income is taxed. Puerto Rico's per capita income might be $12,000 but that means nothing unless we examine how that income is maldistributed and skewed to the disadvantage of the majority. Cutting spending on education is short-sighted and destructive because most economic experts perceive educational spending as spending that yields the largest "bang for the buck." If Puerto Rico is going to advance in an era of computer technology and high end manufacturing, it must increase and not decrease its education funding. The "solutions" being offered by the partidocracia are not solutions at all but rather weak attempts to placate financial institutions by showing that they are "credit worthy." What is needed is not more "politiqueria" (low level politics for electoral advantage) but statesmanship. There needs to be a coalition of national salvation that cuts across the partisan divides and that goes to the root of the national malaise. And Puerto Ricans in the Puerto Rican Diaspora need to be a part of that discussion. This calls for a national consensus like the one developed around the issue of Vieques. Without such a consensus more plebiscites are useless, as the U.S. Congress has never defined Puerto Rico as anything other than an unincorporated territory subject to the control of a Congress not bound by any plebiscite undertaken by the Puerto Rican people. Congress is even under less pressure given the partisan divisions and the lack of any national consensus. There is a whole range of questions that beg for answers. Where have all of the billions of dollars borrowed been spent and for what purpose? Why do we import food that we can grow? Must everything be deferred until the status issue is "resolved" or can Puerto Rico be governed in a way that satisfies the needs to the majority of the Puerto Rican people now? We can approach the impending crisis of governability in fear or we can see it as an opportunity to get past the usual political game to deal with the real problems that confront the island. I am encouraged by the unmasking of the political class and by the awakened civil society that is now confronting the partidocracia that offers no solutions to Puerto Rico's most pressing problems. Those of us in the Diaspora can play a constructive role. Mexican migrants send 12 to 14 billion dollars per year back to Mexico.  Home
town organizations of Mexican migrants also build roads, schools, and public
facilities in Mexico. Can we learn something from these migrants?
"Don forget about truth and mercy; tie them around your neck; write them upon the tablet of your heart; and you'll find favor and good understanding with both God and man." —Proverbs 3:3-4 (Sponsor) LP Puerto Rican Flag Congas
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