Trouble in Paradise: Puerto Rico’s Political, Social, Economic and Financial Crises
Addendum:
Puerto Rico was already in a state of crisis unprecedented in its history when it was devastated by Hurricane María. What happened immediately after, and continues to this day, makes clear the colonial status of the island nation of Puerto Rico, if there had been any doubt. The shameful, dismissive treatment of 3.4 million citizens of the United States, brings into sharp focus the harsh, cruel reality of what it means to be a colonized country in the 21st century. With virtually every aspect of the daily lives of the people now made into a daily struggle, from access to vital needs, from energy to education to employment, the decision to take only minimal action to alleviate this unlivable situation only demonstrates the US government does not consider the Puerto Rican people equal citizens worthy of its full support. The difference between what could have and should have been done and what was, and continues to be not done, is nothing less than purposeful and blatant maltreatment of an entire people in absolutely desperate need. To say it is unconscionable is an understatement. Add to the situation the fact that the US, in collaboration with the government of Puerto Rico, has historically worked to eliminate alternatives to the dictates and vagaries of the capitalist needs of the day, even to the point of assassinations and destruction of alternative groups. The result has been that there are no viable alternative remedies within the current system to the crises: economy, energy, water, agriculture, reconstruction of homes and neighborhoods, environmental degradation, to name a few. The people’s responses have been suppressed through every means available. The change that is required to overcome this condition of historical oppression and manipulation is daunting, but the people’s spirit cannot be broken, as evidenced by the teachers’ strike and the general strike of May 1 and beyond. Latin American Perspectives is soliciting articles that inform and support the valiant struggle of the people of Puerto Rico to overcome the limits imposed upon them through over a century (120 years) of colonial exploitation; and most recently emphasized by approval and implementation of the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) that created a Financial Oversight and Management Board controlling government decision making. Basically a supra national government responding to the needs of the financiers controlling PR debt.
Since 1898 the history of the Puerto Rican people, in all spheres of their lives, has been dominated by the economic, political and military imperatives of the United States, living under an evolving colonialism which has consistently served to more deeply entrench Puerto Rico into the stranglehold of U.S. political control and economic domination by U.S. corporations and international finance capital.
As the first formalized free trade partner for U.S. economic interests, emanating both from the colonial state itself and the dictates of private enterprises based in the U.S., its current crises (social, political, economic) are prophetic for the neoliberal model of international trade and financial relations. The organization of the Puerto Rican economy is indicative of its colonial status/function, which has been to maximize the profitability of foreign investments, evidenced in its flexibility in transitioning from sugar production to manufacturing to hi-tech industries as it has adapted to market needs. Today we see that it now represents the best-case scenario for “disaster capitalism” to dictate the terms of its recovery in every social, economic, and political spheres. It appears that every aspect of its recovery will be determined by forces outside of the control of its own people.
During all of this history, the people of Puerto Rico have been struggling against their subservient position as a colony. This has been a life-and-death struggle, with brutally repressive policies ensuring defeat for the forces of liberation. After over half a century of struggle, the invention of a new system of government, the Estado Libre Asociado (ELA), or Free Associated State/Commonwealth, was implemented in 1952, primarily for the purpose of subduing and controlling popular sentiment for independence. This new status was also used by the U.S. to successfully claim at the U.N. that Puerto Rico had gained sufficient autonomy to be taken off the list of colonial territories.
Over a century ago, in the aftermath of the Spanish American War, the U.S. Supreme Court legitimated the island’s subordination as an “unincorporated territory” whose inhabitants did not enjoy full constitutional rights. Today, after 117 years of US colonialism and 64 years of the ELA, Puerto Rico is still a de facto colony, the U.S. Congress controls crucial decisions, the federal presence intrudes into all spheres of everyday life, like the Federal courts and FBI involvement in local cases, and the ELA is socially, politically and financially bankrupt.
The current crisis has deep roots. From the sugar monoculture that enriched U.S. corporations in the early decades of the 20th century through the Kennedy administration’s “Operation Bootstrap,” whose industrialization model based on cheap labor and tax breaks was intended to showcase the benefits of the ELA, the Puerto Rican economy has been distorted by U.S. interests and priorities. The skewed outcome was evident long before the present debt crisis. From 1959 to 1984 the percent of the nation’s wealth controlled by Puerto Ricans decreased from a high of 81% in 1950 to 59% in 1959, to 38% in 1970, and only 19% by 1984. Although the profits of U,S. industries in 2014 were estimated at more than $25 billion, the Island suffers from chronic unemployment and underemployment, despite using emigration to the U.S. mainland as an escape valve to relieve the pressure on the economy and reduce social unrest. Compared to the 50 U.S. states, Puerto Rico enters the current crisis with the lowest per capita income and the highest unemployment rate. It’s 45% poverty rate is approximately three times that of average for the continental U.S.
Debt has been a consistent burden on the Puerto Rican people. By the mid-70s the Island public debt was already 35% of the Internal National Product, most of it used then, as now, to finance public expenditures rather than for economic development. Responding to the effects of the 2008 U.S. financial crisis, the Puerto Rican government of the neoliberal, pro-statehood PNP relied on increasing debt while undertaking counterproductive neoliberal austerity measures such as mass firings of public employees and privatization of public assets like the airport in San Juan in conjunction with tax cuts for the rich. The predictable reduction in revenue led to increased reliance on debt, which increased by $17 billion. Election of the pro-ELA PDP in 2013, with a slightly less drastic austerity program, triggered credit downgrades by the U.S. rating agencies which ultimately doubled debt servicing costs and generated further austerity. In recent years some borrowing has involved one government agency or authority issuing bonds and lending part of the proceeds to another to make its debt payments in a risky and unsustainable shell game. By the time Governor Garcia Padilla declared the total debt unpayable, Moody’s calculated that Puerto Rico has a per-capita debt 15 times greater than the median bond debt in the 50 U.S. states.
The crisis is exacerbated by Puerto Rico’s lack of control over important areas of public and fiscal policy. Tax breaks to attract industry created by the U.S. Congress were allowed to expire in 2006 and corporations moved to lower cost countries, a flight also encouraged by international neoliberal trade agreements. The Jones Act requires Puerto Rico to use expensive U.S.-flagged vessels to ship exports to the U.S., raising costs and reducing competitiveness. With the dollar as its currency, Puerto Rico cannot resort to devaluation. U.S. bankruptcy law prevents Puerto Rico from restructuring its debt, although proposals have been introduced in the U.S. Congress to change the law. The Debt Enforcement and Recovery Act, passed by the Puerto Rican Congress to allow the island to renegotiate the debt without U.S, approval, was declared unconstitutional. The Obama administration has ruled out a bailout. Efforts to deal with the crisis are also hamstrung by the Puerto Rican constitution which gives debt repayment the highest priority in government expenditures.
Approximately 50% of the debt is held by U.S. hedge and vulture funds, which have rejected the government’s call for negotiations to write down the principal and demanded full payment. One of the leaders of the funds’ legal offensive against the government’s principal-reduction proposals is Marc Lasry, a major Obama and Hillary Clinton fund-raiser and former associate in Donald Trump’s casino business. Debt holders are also engaged in massive lobbying efforts to protect their interests.
A report commissioned by the Puerto Rican government from former IMF officials, costing $400,000 for a 26 page document, recommended typical neoliberal austerity measures, including cutting public spending and lowering the minimum wage or at least preventing its rise if it rose in the U.S. (both of which would currently be illegal since P.R. is covered by U.S. minimum wage law.) By the time of the looming default, the government had already raised the regressive value-added (sales) tax from 6% to an unprecedented 10.5% (11.5% when municipal sales taxes are included) and announced plans to close 100 schools. Although in part a response to the large-scale emigration to the U.S. mainland provoked by the crisis, the school closures compound a crisis in public education that under the previous administration drastically raised fees at the public University of Puerto Rico, generating mass student protests.
As this call is written, despite the enormous hardships the dominant political and economic forces on the mainland and the island have inflicted or propose to inflict on the Puerto Rican population, the crisis has not yet generated militant, mass resistance.
The issue seeks contributions that recognize the current financial crisis is a manifestation of deeper, interrelated structural political and economic factors including Puerto Rico’s colonial status, the correlation of political and economic forces on the island, and trends in the global economy and that it takes place in the context of powerful anti-neoliberal movements in Latin America and elsewhere in the world. It seeks to address the crisis broadly, examining not only its complex causes and wide ranging effects across Puerto Rican society but solutions that address the underlying structural conditions. We want contributions that are historically grounded, theoretically strong, and empirically rich.
Possible topics include but are not limited to:
- How Puerto Rico’s colonial/ELA status contributes to the crisis and affects its ability to solve it
- How neoliberalism, including austerity, privatizations, and regressive tax policies, contribute to the current financial crisis and shapes possible responses
- How both the U.S. and Puerto Rican financial sectors contributed to the crisis
- How U.S. legislation on trade, investment, and taxation interacts with trends in the global economy and impacts the Puerto Rican economy
- How the governing parties are entangled with Puerto Rican and U.S. interests that have benefitted from the policies that produced the crisis
- How U.S. policy on the financial crisis is affected by political, economic, and military interests
- How the crisis is affecting poverty, income inequality, race and gender issues, employment, education, health, other public services, and government responsibilities, such as environmental protection
- How migration is related to the crisis, both as an effect and as a factor in potential solutions
- The solutions proposed by progressive forces and the obstacles to implementing them including state repression
- This issue would also like to be used to facilitate dialogue around these issues and could include statements from activist groups. Artistic and cultural representations which reflect political perspectives are invited.
- How the PROMESA statue and the financial Oversight and Management Board for Puerto Rico (Junta de Supervisión fiscal) is controlling and usurping PR government decision making capabilities
- How the pro annexation government of Governor Ricardo Roselló decisions to substitute key members of his cabinet with American personnel is causing a shift in the paradigm of government to a pre-1952 condition of pure colonialism of the military governor’s years.
- Is there a policy of population substitution to facilitate annexation ala Texas, Hawaii and California?
- Is privatization of the basic governmental services of electricity, water, education and health systems the coup de grace to the Puerto Rican Society?
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