Puerto Rico's New Era: A Crisis in Crisis Management
Bernabe, Rafael
NOVEMBER/DECEMBER 2007 report : puerto rico
Puerto Rico’s New Era: A Crisis in Crisis Management A Puerto Rican union marches in May 2006, after thousands of public workers were laid off....
...Operation indication of Bootstrap’s original goals—drastically reducing unemployment, freeing the the colonial island from reliance on U.S...
...welfare funds spent in Puerto Rico...
...if calculated with an LFPR similar to that of the United States (66%), unemployment would be around 30%.9 Meanwhile, the billions in corporate 936 funds deposited in island banks ebbed out of Puerto Rico, never having been efficiently chanelled into a coordinated economic development project...
...capital investment...
...Through the mid-1960s the growth of factory employment did not compensate for the reduction in agricultural and other employment...
...The island’s rapid post-war growth first faltered in the mid-1970s, and several policy initiatives since then have partially held up its cracking structure—an experiment in crisis management that is now itself in crisis...
...But CAOS had a brief life...
...Fragmentation in the labor movement has made a coordinated response to these measures very difficult...
...Whereas before 1945 Puerto Rico had lacked a significant industrial sector, industrialization was now coupled with the atrophy of agriculture and by even greater dependence on food imports...
...By 2006, Section 936, representing the centerpiece of the PPD’s industrial policy, had been eliminated...
...and unem welfare funds ployment increased, surpassing 20% are needed to during recession years.1 Per capita income was barely half that of the pooravert misery est state (Mississippi), and enduring for many is, if poverty still kept many dependent on federal funds to maintain a minimum anything, an of purchasing power...
...The new factories were enclave operations that imported their raw materials and shipped out their output...
...As progressive forces brace for future battles, it is important to remember that a century of colonial misdevelopment is not easily superseded...
...They are now evenly matched, with elections at all levels often decided by less than 1% of the votes cast...
...Nevertheless, by the late 1940s the notion of both political independence and self-centered economic development were abandoned...
...Meanwhile, residents control a decreasing portion of the island’s productive assets, a process of denationalization that continues to this day...
...Quite the contrary: Crisis management crucially included a deepening of tax exemption policies intended to attract U.S...
...It will require an expanded public sector, led by the imperatives of social well-being and ecological protection, the democratic determination of priorities and participatory administration, none of which is possible without taking on the prerogatives of corporate capital and the logic of the market—the very opposite of the neoliberal agenda favored by both major parties...
...competitors...
...Some progressives mix their support for independence with a narrow-minded indifference to the evolution of social struggles in the United States, while others wish to unite with progressive struggles in the United States, hurriedly concluding that the goal of independence is obsolete...
...These incentives, which included the nonapplication of U.S...
...But the fact that billions are needed to avert misery for many is, if anything, an indication of the limits of the colonial economy resulting from a century of U.S...
...Indeed, the fiscal crisis of 2006 is best understood as the dramatic end of an era, one that began in 1950 with Puerto Rico’s rapid industrialization and political reorganization as a U.S...
...From this perspective, the struggle of immigrant communities (including Puerto Ricans) in the United States, the fight to remake the economies and polities of the independent Caribbean (like the Dominican Republic), and the search for Puerto Rico’s self-determination can be seen as facets of a complex international movement to remake, indeed unmake, the hierarchies erected by more than a century of colonial, imperial, and capitalist rule.16 Embracing such an internationalist vision and giving it concrete shape is one of the central challenges for Puerto Rico’s progressive forces as we move into the second decade of the 21st century...
...truck drivers blocked the main roads into Old San Juan...
...This was, they explained, a concert for all public workers who, like them, had been recently laid off as a result of a government budget crisis...
...It is also present in the erosion of support for Puerto Rico’s political arrangement, known as the Estado Libre Asociado (ELA), or, as the term is officially translated, the Commonwealth of Puerto Rico, coupled with a paralyzing deadlock between the PPD and its major rival, the pro-statehood PNP, both of which are, in turn, largely discredited among the electorate...
...A regressive 7% sales tax has been decreed, while the negotiations with public sector unions have been paralyzed and their leaders put under extreme pressure (suspension of union leaves, threats of union decertification...
...Beginning in 1983, Puerto Rico’s government repeatedly mobilized its lobbying muscle to salvage all or part of Section 936 from the attacks of U.S...
...Pro-market recipes are rather a means of levereging the cost of the crisis of a market and colonial economy onto the shoulders of the unemployed or wage-earning majority...
...investors, who controlled a growing portion of the island’s productive assets...
...B ut the widespread feeling of crisis is not only connected to the uncertain economic landscape...
...Since the 1974–75 recession, Puerto Rico’s unions have remained split among several federations and have steadily lost ground in the private sector, where only 2% of the labor force is now organized.14 Three orientations coexist within model of urban sprawl and the displacement of poor communities by “developers”—underlies the early emergence and resilience of environmental-community struggles...
...capital, an increase in the flow of welfare and other federal funds to the island (both to individuals and the government), and expanding public employment partly financed by increased government borrowing helped stabilize the economy...
...The ELA government had jurisdiction only over insular matters, while all issues pertaining to Puerto Rico’s relations with the United States remained off-limits...
...The task at hand is to turn these fragmented initiatives into a wider movement for public democratic sovereignty over key economic decisions...
...One current seeks a return to the past routine negotiation of collective agreements and has been amenable to the government’s proposed solution to the fiscal crisis, including the regressive sales tax...
...colonialism to this day often refer to the several billions in U.S...
...Many among the protesters opposed the government’s solution to the crisis— a 7% sales tax—and proclaimed, “Let the rich pay for the crisis...
...The listeners formed different groups, often identified by distinctive T-shirts, and the square was bordered by makeshift stands and tents sporting the names of several organizations, most of them labor unions...
...Since the phaseout began, about 40,000 manufacturing jobs have been lost.8 Today the official unemployment rate hovers around 12%, with a 46% LFPR...
...NOVEMBER/DECEMBER 2007 report : puerto rico Puerto Rico’s New Era: A Crisis in Crisis Management A Puerto Rican union marches in May 2006, after thousands of public workers were laid off...
...Nor did industrial growth solve Puerto Rico’s productive imbalances or the colonial and dependent nature of its economic dynamics...
...As even mainstream econ report: puerto rico the four federations and independent unions...
...Governor Aníbal Acevedo Vilá, of the Partido Popular Democrático (PPD), blamed the opposition-led House of Representatives for not agreeing to his budget, tax, and refinancing proposals, which, he argued, would have permitted the government to issue new bonds, thus averting the crisis...
...Between 1950 and 1970 net out-migration was equal to 20% of Puerto Rico’s population in 1950...
...Spiraling borrowing has led to a downgrading of Puerto Rico government bonds on Wall Street, while federal funds to state agencies and individuals have been cut or frozen...
...The problems posed by colonial capitalism are part of a larger and layered whole, and contrary to all simplistic approaches, the alternatives to it cannot be any less international or nuanced...
...market for products manufactured in Puerto Rico, and exemption from federal and insular taxes, attracted massive new U.S...
...Yet even at its brightest, Puerto Rico’s growing economy had clear limits...
...The PPD instead adopted a program known as Operation Bootstrap, which offered tax and other incentives to U.S...
...Independentistas denounced this as simply a reorganization of the colonial relation, and the Nationalist Party launched an armed insurrection in 1950...
...Most Puerto Ricans would admit the ELA is a colonial form of government, and it is increasingly hard to find policy makers in Washington who still describe it as a compact.11 But the impasse remains: Statehooders failed to win either of the two plebiscites sponsored by the PNP in 1993 and 1998 (obtaining around 46% of the vote on both occasions), and none of the several bills sponsored by both parties to allegedly solve the “status question” have made much progress in Congress...
...Several times, after a forceful performance, the conductor, as well as some of the musicians, stepped up to the microphone...
...federal legislation extended to Puerto Rico, overriding the ELA constitution in cases of conflict...
...Things gradually shifted, as the economy stagnated in the late 1960s...
...and increasing charges for public utilities...
...The fragility of Puerto Rico’s prosperity, easily ignored in the context of rapid growth and improved living standards, was dramatically put on the display during the global recession of 1974–75, which ended the Puerto Rican “miracle...
...Puerto Rico is today the largest exporter of legal drugs into the United States...
...several tendencies...
...The growing questioning of the status quo was accompanied by the rise of a lively independence current that to this day plays a major role in labor and social struggles...
...While electorally weak, inWhile dependence activists have played electorally weak, a key role in Puerto Rico’s labor and social movements since their independentistas revival in the 1960s...
...In 1950 Congress allowed Puerto Rico’s voters to elect a constituent assembly to write a constitution that was ratified by plebiscite in 1952...
...Others simply demanded an end to government infighting...
...But as much as Few policy the PPD, the PNP remained a party makers in organically connected to sectors of the Puerto Rican possessing classes, Washington and while in office it responded as still describe sternly as the PPD did to labor and social movements from below...
...By Rafael Bernabe A visitor strolling past the walls of the San Cristóbal fort in Old San Juan on May 2, 2006, would have readily heard the pleasant strains of live classical music...
...After a lackluster four years of PPD rule, the 2004 election resulted in near total deadlock: The PNP obtained more party votes and secured majorities in the legislature, but the PPD won the governorship...
...The ecological consequences of Puerto Rico’s road to modernity—from the misuse of land and water resources to the adoption of the U.S...
...Symptoms of resistance can be discerned in dozens of community, environmental, labor, and other initiatives that perpetuate a long string of battles going back to the early environmental movement in the 1960s and the housing struggles and land occupations (rescates) of the 1970s, among others...
...automobile-centered omists admit, Puerto Rico’s economy is one of the most “open” in the world, while the size of government expenditures relative to its economy is comparable to those of many developed countries.13 Its welfare and public service provisions, palpably inferior to their U.S...
...It is therefore necessary and possible to work toward constructing new social and political projects in collaboration with similar forces in the United States and the Caribbean...
...relief economy’s funds (which had expanded during limits...
...n the 1930s, economic hardship and stagna tion in the troubled sugar industry, as well as the Roosevelt administration’s New Deal, fostered state led economic reconstruction projects that many hoped would prepare Puerto Rico for independence by creating a more balanced, diversified economy...
...This is also a challenge for the independence move ment...
...The labor movement has been further weakened by the government’s ability to discredit it through indicting undoubtedly corrupt union officials...
...The second includes unions like the UTIER (electrical workers) and the Federation of Teachers, which resisted the tax and the privatization measures, but their efforts remain isolated...
...Both the manufacturing and the petrochemical sectors went into crisis...
...The mainstream press insisted that such talk of “class struggle” was dangerous and misplaced...
...Such a project is unviable in strictly insular terms, but neither is the need for radical change exclusive to Puerto Rico...
...Any blow dealt to the ELA, even by statehooders, and its exclusion from a future plebiscite, can only hasten that outcome...
...For many in the street, both parties were taking public employees Rafael Bernabe is the author, with César Ayala, of Puerto Rico in the American Century: A History Since 1898 (University of North Carolina Press, 2007).He teaches at the University of Puerto Rico, Río Piedras, and is a spokesperson for the Frente Socialista...
...Af the ElA as a ter an interlude of two PPD admin compact...
...Between 1950 and 1970, output grew, per capita income increased considerably, and most Puerto Ricans experienced notable improvements in their standards of living, which helps explain the party’s overwhelming support until the late 1960s...
...corporations to avoid paying hundreds of millions of dollars in taxes each year.6 And because many of the “936 corporations” were pharmaceuticals, the tax exemption was even more vulnerable: The relatively few jobs the companies offered did not seem to justify the sacrifice in federal revenue, while the parent companies’ pricing policies made them the object of strong attacks in the name of consumers and other sectors of U.S...
...Unrestricted trade between the United States and Puerto Rico was still the rule, and the insular government remained powerless to protect the island market from well-established U.S...
...Meanwhile, the legitimacy of have succeeded...
...Treasury officials and congressional representatives who in some cases sincerely questioned, and in others opportunistically denounced, “corporate welfare...
...mainland—had not, and still have not been achieved...
...courteSy of claridad NACLA REPORT ON THE AMERICAS report: puerto rico as virtual hostages, as they blamed each other for the crisis...
...They are all, in that sense, struggles for self-determination...
...real yearly That billions average GNP growth fell from 7% in the 1960s to 3.5% (and less than 3% of dollars of in the 1980s and 1990s...
...Finally, two opposed but equally one-sided perspectives must be overcome...
...equivalents, can hardly be described as overgenerous...
...By the end of the week, as the country became increasingly exasperated, the executive and the legislature hammered out an agreement that, with the conditional blessing of Wall Street rating agencies, made it possible for most workers to return to work by May 16...
...Despite the sudden economic downturn of the mid1970s, the PPD did not reconsider its past economic strategy...
...funds and federal tax incentives to U.S...
...But these policies were at best a stopgap solution, and the crisis of 2006 served as but a first moment of reckoning...
...internationals must not exclude the cementing of bonds with progressive forces within the U.S...
...A third approach would seek to transform future working peoples’ self-organization in Puerto Rico into a movement for political sovereignty in close association with progressive forces in the United States, whose program must include restructuring relations with the Caribbean...
...Qué la crisis la paguen los ricos...
...By 2006, for many, the infighting between and within the dominant parties, combined with the unprecedented budget crisis, widespread factory closures, and a wave of corruption scandals, signaled a new low in Puerto Rico’s social and political crisis...
...NACLA REPORT ON THE AMERICAS report: puerto rico In sum, the mid-1970s rescue operation has failed, and the fiscal crisis and government lockout of May 2006 served notice of this fact to anyone requiring a dramatic indication of the gathering storm...
...A third current is not as yielding to government pressures as the first, but is often at odds with the second...
...Seen as threat by part of the labor leadership, it collapsed soon after the hard-fought but defeated telephone workers’ strike against privatization in 1998.15 A similar, more durable coalition must now be rebuilt, a daunting but urgent task, if fragmentation and demobilization are to be transcended...
...In contrast, the Frente Socialista and the Movimiento Socialista de Trabajadores emphasize linking the anti-colonial struggle to constructing working-class and poor people’s movements...
...While they support labor and other social struggles, the PIP and the MINH center their attention on the status issue...
...The resulting ELA was presented as a “compact” between Puerto Rico and the United States, yet the U.S...
...Government employment grew to a third of the labor force by 1992, partially compensating for low employment growth in the private sector.3 Meanwhile, the island’s public debt rose from $1.6 billion in 1970 to $12.5 billion in 1990, and to more than $30 billion by 2004.4 Federal funds received by the insular government, $261 million in 1970, reached $2.9 billion in 2000.5 This triad of expanded tax incentives to U.S...
...But this current was more evidently reflected in the gradual electoral rise of the statehood movement that was reorganized through the creation of the Partido Nuevo Progresista, which in 1968 dealt a divided PPD its first electoral defeat since 1940.10 Since then the PPD and the PNP have alternated in office, each winning four elections...
...minimum wage legislation, unrestricted access to the U.S...
...During the 1980s unemployment rarely fell below 15%, and the labor force participation rate (LFPR) fell to less than 50...
...commonwealth...
...labor movement...
...teachers carried out a massive protest...
...The setting—clear night, bathed by a warm breeze from the ocean—could not have been lovelier...
...capital, for which high medicine prices are a source of rising costs, not profits...
...No well-defined alternative projects have risen to challenge the status quo and the old political machines, heightening a widespread frustration regarding the island’s future...
...corporations were vulnerable to political shifts in Washington...
...They have have played a often been the most consistent and dynamic participants, advis key role in Puerto ers, and supporters of a variety Rico’s labor and of struggles...
...The Partido Independentista Puertorriqueño (PIP) remains convinced that congressional opposition makes statehood impossible, while the ELA is increasingly unviable: Even Congress will eventually opt for independence...
...Today, almost half the population (45%) lives under the federal poverty line, compared to 13% in the mainland United States.2 Apologists for U.S...
...José Aponte, president of the House and a member of the Partido Nuevo Progresista (PNP), blamed the governor for his unwillingness to negotiate an agreement incorporating some of the opposition’s concerns, creating an impasse and making the crisis inevitable...
...Such was the initial perspective of the PPD, led by Luis Muñoz Marín...
...All who went through this unprecedented experience could not help feeling that its significance went beyond the events of those two eventful weeks...
...Yet a few moments of observation would have soon revealed that this was not a typical musical offering in the often tourist-filled part of the city...
...While the struggle against the U.S...
...The crowd surrounding the musicians was much larger than one would expect and their mood far too serious...
...But in a context of rapid growth and improving living standards, combined with the repression of dissidents, the PPD was able to gather solid support for the ELA, presenting it as a step toward self-government...
...rule...
...The impact of late-capitalist crisis and social deterioration cannot but pose the same problem within the United States...
...By then, even some PPD leaders began acknowledging that the ELA was far from perfect...
...It demanded essential services for all, questioned the expansion of multinational corporate control of Puerto Rico’s economy, insisted on the right of citizens to have a say on key policy decisions, and implicitly and often explicitly criticized the logic of competition as a desirable means of regulating human and social relations...
...consolidating or eliminating some government agencies...
...There is more ideology than substance behind these policies...
...A few days earlier, after months of speculation about the precarious state of the government’s finances, the governor of Puerto Rico had announced that at the end of April, many of Puerto Rico’s government agencies would run out of funds for the fiscal year ending June 30, and operations would be shut down for two months...
...Since the early 1980s a budget-conscious and increasingly fiscally conservative Congress had looked unfavorably upon a tax loophole that allowed U.S...
...Bringing together labor, student, community, environmental, religious, political, and other organizations, CAOS led two public sector general strikes in October 1997 and July 1998...
...According to elite sectors, Puerto Rico’s economic crisis resulted from the erosion of competitiveness and lack of “work incentives” due to public sector overexpansion, over-regulation (zoning, environmental permits), over-generous welfare and public service provisions, the “inflexible” work rules imposed by unions, and other obstacles to “entrepreneurial initiative...
...While small, they play a visible role in social and labor organizations, like the Federation of Teachers and the student and community-environmental movements...
...The official unemployment rate never fell below 10% and would have been much higher had it not been for another feature of Puerto Rico’s modernization: mass migration to the United States...
...A few more steps would have led him or her to the square in front of the Capitol building, where the Orquesta Sinfónica de Puerto Rico was giving a free open-air concert...
...Yet today the independence movement is split into social movements...
...7 In 1996, Congress began phasing out Section 936, to be concluded in 2006...
...gradually eliminating subsidies to public corporations...
...Whatever hooders have his populist flourishes, Rosselló embraced a neoliberal agenda cen failed to win tered on privatizing Puerto Rico’s two plebiscites, large public sector, leading to repeated clashes with unions, while and none of the his administration was plagued by congressional a string of unprecedented corrup“status” bills tion scandals...
...investments...
...Revenue Code proved quite attractive to high-tech operations (especially pharmaceuticals and precision instruments...
...While reluctant to use the term colony, some of its leaders grudgingly admitted that Puerto Rico still lacked many of the features that would make it a truly self-governing entity...
...It was fitting that the orchestra performed for the workers camping out to protest their uncertain situation, unable as the musicians were to rehearse in their usual venue...
...Back in 1950, the state counterpart of Operation Bootstrap was the rearrangement of the colonial government, which until 1948 had been headed by governors appointed by the U.S...
...After Monday morning, May 1, when close to 80,000 workers found themselves laid off until further notice, there followed a week of wide and varied initiatives: A militant march made its way to the center of Puerto Rico’s banking district, while unions set up permanent tents in front of the Capitol...
...Navy presence in Vieques has received well-deserved attention, the experience of the Comité Amplio de Organizaciones Sociales y Sindi tomAS vAn houtryve / pAnoS NACLA REPORT ON THE AMERICAS report: puerto rico cales (CAOS) as an anti-privatization coalition in 1997–98 may be equally significant for the future...
...The banner reads “let the rich pay for the crisis...
...As it emerged in the late 1960s and early 1970s, the PNP presented itself as a party of the poor, even embracing the anti-discrimination discourse of the civil rights movement...
...investors...
...Although essential and emergency services would continue, at least 80,000 public employees would be sent home come May 1, including almost 40,000 teachers...
...Nevertheless, since these operations are capital-intensive, Section 936 only led to a slight expansion in employment...
...NOVEMBER/DECEMBER 2007 R egardless of differences on the status issue, both major parties and key corporate and banking in terests agree on the main lines of a response to the recent budget crisis: freezing government recruitment and salary increases...
...But there are hopeful signs in this landscape...
...and several marches went past the Capitol and the Fortaleza, the governor’s mansion...
...Yet istrations, the PNP regained control the impasse of the insular government under the leadership of Governor Pedro remains: StateRosselló (1993–2000...
...All of these movements, along with labor unions, share one characteristic: They all embody the struggle of people to more directly control their lives, from their work conditions, the quality of the environment, the way their communities are policed, or how the state budget is distributed...
...Government borrowing could not increase indefinitely, while the flow of U.S...
...the Great Depression), and attaining living standards comparable to those in the U.S...
...Meanwhile, different sectors of a divided labor movement debated and, at times, quarreled about how best to respond to the crisis, making a joint and coordinated mass response impossible...
...president...
...federal government retained all its prerogatives...
...The need to oppose, for example, the bureaucratic control of Puerto Rican unions by U.S...
...12 The solution is a new round of privatizing, pro-market, deregulating reforms, which Wall Street rating firms stand fully behind...
...The impact on Puerto Rico’s economy was profound...
...The PPD-led industrialization had a major impact...
...the existing status has deteriorated...
...Meanwhile, ecomomic expansion or contraction remained linked to the preferences courteSy of claridad NOVEMBER/DECEMBER 2007 report: puerto rico and moods of U.S...
...Beginning in 1976 and lasting until the mid-1990s, new incentives enacted under Section 936 of the U.S...
...The Movimiento Independentista Nacional Hostosiano (MINH, a fusion incorporating currents emanating from the old Partido Socialista Puertorriqueño and other sectors), less convinced of the impossibility of statehood, wagers on the fact that the PPD now needs the votes of many independentistas to prevail over the PNP: The independentista minority creates a fulcrum for sliding a wing of the autonomist current into a broad anti-annexation alliance...
Vol. 40 • November 2007 • No. 6
