[News] Puerto Ricans are suffering from intense exploitation and a lack of democratic control over the island’s wealth

Anti-Imperialist News news at freedomarchives.org
Tue Sep 13 12:33:28 EDT 2016


https://www.jacobinmag.com/2016/09/puerto-rico-debt-promesa-oversight-obama-crisis/ 



  Puerto Rico’s One-Sided Class War

by Hugo J. Delgado-Martí 
<https://www.jacobinmag.com/author/hugo-j-delgado-marti/> - September 
13, 2016


      Puerto Ricans are suffering from intense exploitation and a lack
      of democratic control over the island’s wealth

Puerto Rico — a group of islands in the center of the Caribbean and a 
colony of the United States since 1898 — has recently come to the 
attention of the United States Congress due to its inability to pay over 
$72 billion dollars in public debt 
<https://www.jacobinmag.com/2015/06/puerto-rico-garcia-padilla-debt-austerity/>.

The passage of the Puerto Rico Oversight, Management, and Economic 
Stability Act (PROMESA) in June — which established a seven-member 
federal oversight board 
<http://www.theatlantic.com/business/archive/2016/07/puerto-rico-promesa-debt/489797/> 
to supervise the island government — did more than just demonstrate 
Puerto Rico’s lack of sovereignty. It also opened the door to the 
imposition of extreme austerity measures on a territory already hard-hit 
by a decade-long recession.

The oversight board has one priority — to ensure that Puerto Rico makes 
good on its obligations to its creditors, many of whom are private 
American investors.


        The Investors’ Colony

Of course, the oversight board won’t do or say much about the social 
effects of the crisis — like the disappearance of nearly three hundred 
thousand jobs, the steep loss of population due to emigration, and the 
ongoing foreclosure crisis 
<http://money.cnn.com/2016/02/21/investing/puerto-rico-foreclosure-crisis/> 
that affects thousands of ordinary Puerto Ricans. Nor will it accurately 
diagnose the problem — what’s really going on in Puerto Rico is an 
intensification of the level of exploitation, both of the workforce and 
of natural resources.

This intensified exploitation has taken many forms — layoffs; the 
expansion of low-wage part-time work; the privatization of social 
services; and the dismantling of the welfare state, to name a few.

Political elites justify austerity by appealing to the government 
financial crisis and the public debt default, and cutbacks are enforced 
by the receivership of public authorities and the destruction 
<http://www.cnbc.com/2016/05/01/puerto-rico-says-will-default-on-government-development-bank-debt-monday.html> 
of the Puerto Rico Development Bank. But the beginnings of Puerto Rico’s 
predicament go way beyond the current crisis.

The financial crisis of the central government is, at its root, the most 
recent and evident symptom of hundreds of years of colonialism. 
Nowadays, talk about the colonial status of Puerto Rico is commonplace. 
But in some ways, the word “colony” has been deprived of its meaning.

The commonplace definition of the term defines a colony as a territory 
that does not hold sovereign power over itself — instead, it is 
accountable to decisions made elsewhere, generally in imperial centers. 
But this definition of the term puts a heavy emphasis on the legal and 
formal aspects of the colonial relationship.

Based on this definition, statehood 
<http://www.theatlantic.com/notes/2016/03/the-state-of-puerto-rican-statehood/472599/> 
can be interpreted as a solution to the colonial problem. As members of 
the fifty-first state, Puerto Ricans would participate in the selection 
of the president, enjoy congressional representation, and participate 
fully in the political charade of Washington DC.

But while the lack of sovereignty is one aspect of colonialism, it is 
not the only one. Although many on the island want to achieve statehood, 
becoming a state might only entrench and tighten the colonial 
relationship even further.

Colonialism in Puerto Rico has always had a concrete economic meaning 
<https://www.jacobinmag.com/2015/08/puerto-rico-debt-crisis-imf/> — 
enormous amounts of wealth have been produced in the colony over the 
last 118 years, but that wealth has vacated the island as quickly as it 
has been produced. That pattern continues today.


        Where’s the Money?

Net capital investments in fixed assets in Puerto Rico averaged $11 
billion per year between 2000 and 2014, amounting to a total of $176 
trillion. That investment returned well over $1.1 trillion during the 
same time period — but less than $410 billion went toward employee 
compensation. The rest was profit.

The profit rate in the manufacturing sector is even more revealing: out 
of the $538 billion generated by manufacturing in those fourteen years, 
only $40 billion were paid to employees.

In other words, workers earned less than 8 percent of the wealth 
generated. While the manufacturing sector has increased its profits by a 
huge percentage since the 1990s, worker salaries have invariably fallen 
or remained the same.

To make matters worse, corporations paid under $30 billion dollars in 
taxes to the so-called “commonwealth” during that 2000-2014 time span. 
But taxes collected from individuals during that time period sum $38 
billion, not including an additional $28 billion in excise taxes and 
another $5 billion since 2007 as sales tax.

These taxes all tend to hit the poor the hardest by increasing the cost 
of goods and therefore reducing the purchasing power of the labor force. 
At the same time, Sila Maria Calderón 
<https://www.britannica.com/biography/Sila-Maria-Calderon>, the first 
female governor of the island, actually /reduced/ the corporate tax 
burden in the early 2000s by lowering tax rates on profit returned to 
the mainland United States.

In effect, working people pay to maintain the state, while foreign 
corporations profit from Puerto Rico’s human and natural resources.

Puerto Rico’s dismal employment record 
<http://247wallst.com/economy/2015/06/30/puerto-rico-unemployment-at-12-6-poverty-at-41/> 
paints an even bleaker picture of economic prospects on the island. In 
2000, less than one million people had jobs, out of a working-age 
population of 2.8 million.

Employment peaked in 2007 — 1.2 million employed out of a working-age 
population of 2.9 million. Since then, the population of eligible 
workers has been estimated to be decreasing at a rate of six thousand 
persons per year. And unemployment has increased in recent years as the 
economic depression has worsened.

In 2014 only 995,000 Puerto Rican workers were employed 
<http://www.bls.gov/eag/eag.pr.htm>. That’s a net loss of 269,000 jobs 
in seven years — and if we take into account that low-wage workers often 
hold multiple jobs (and so may be counted twice, or even three times) 
the situation could be even worse. Circumstances are especially dire for 
women workers — the only population group with a majority employed are 
middle-aged male workers.

Work in manufacturing has especially taken a major hit. Manufacturing 
jobs peaked at 172,000 jobs in 1995 — when Section 936, a tax credit for 
American businesses with operations in Puerto Rico, was being dismantled 
by Congress.

That number fell to 86,000 in 2014, a net loss of half the total 
manufacturing jobs. The trend continues — in March of this year, there 
were only 72,000 manufacturing jobs in Puerto Rico.


        An Exploiter’s Paradise

But even during extreme recessions, some still accumulate wealth. The 
question is — who?

In Puerto Rico, personal financial assets 
<http://www.wsj.com/articles/puerto-ricos-pensions-2-billion-in-assets-45-billion-in-liabilities-1472156434> 
more than doubled between 2000 and 2014. But personal debt has also 
increased from $17 billion to $23 billion in those fourteen years, and 
bankruptcy filings doubled between 2006 and 2014.

The banking sector has consolidated at an extreme rate. In 1996 there 
were twenty banking institutions in Puerto Rico, but today all capital 
is concentrated in just six banks.

So although total assets in banks fell from $96 billion in 2005 to $55 
billion ten years later, we shouldn’t fall for the crocodile tears 
flooding /la milla de oro/ — Puerto Rico’s financial district. In that 
same ten-year time-span, Banco Popular 
<http://www.thecerbatgem.com/2016/08/22/popular-inc-bpop-plans-quarterly-dividend-of-0-15.html> 
went from $13 billion in assets to $22 billion, and became the island’s 
leading financial institution.

And in the past year, Citibank surpassed Popular as the leading 
institution when its assets increased from $11 billion to $26 billion — 
likely thanks to the tax-haven laws the current governor enacted for the 
benefit of billionaires.

Combined with massive job loss, declining wages, and the debt crisis of 
the state, all this suggests that Puerto Rico is suffering the 
consequences of an international crisis of capitalism.

The state has an important function 
<https://www.jacobinmag.com/2015/12/bill-gates-ted-talk-renewable-energy-research-development-government/> 
within contemporary capitalist society — to guarantee the necessary 
conditions for the reproduction of capital. The state accomplishes this 
by building and maintaining the physical infrastructure companies need 
to operate. The state also provides the resources to maintain the 
workforce by working to ensure health care, education, and housing.

The current situation is like a never-ending slide — the economy keeps 
sinking with no end in sight. A smaller, less productive workforce makes 
for a smaller base of tax revenue for the state, while the increases in 
the cost of living put high stress on the government to fulfill its 
obligations.

A state — particularly a colonial state — has to maintain social order 
and political stability to provide a welcoming environment to foreign 
corporations. Food stamps, public health insurance, and even forced 
emigration become pressure release mechanisms that — when combined with 
police repression and property protection — turn the island into an 
exploiter’s paradise.

This is not the first time Puerto Rico has seen a situation like this. 
In the past, only massive capital investments from the US government and 
multinational corporations could save the day — but of course these 
investments also drove new tides of colonial exploitation.

Faced with the current conditions, Puerto Rico had to mortgage itself. 
Now, public debt 
<http://www.nytimes.com/interactive/2016/business/dealbook/puerto-rico-debt-crisis-explained.html> 
has reached over $72 billion dollars — and if the government’s internal 
debt is added to the balance sheet, this figure could triple.


        Forty Years of Austerity

Austerity and the neoliberal agenda have been present in Puerto Rican 
politics since the late 1970s, when Carlos Romero Barceló 
<https://www.loc.gov/rr/hispanic/congress/romerobarcelo.html> of the New 
Progressive Party <http://www.puertoricousa.com/english/pnp.htm> (PNP) 
privatized the first set of public hospitals and enacted tuition hikes 
in the University of Puerto Rico (UPR). Since then, Puerto Rico’s 
working class has experienced a sustained attack on its rights and 
working conditions.

After the worst years of Romero’s so-called “spider government” during 
the 1980s, Rafael Hernández Colón 
<https://www.britannica.com/biography/Rafael-Hernandez-Colon> was 
elected. He continued the assault on public services by privatizing the 
Puerto Rico Merchant Marine Authority (Navieras) and the international 
calls branch of the Puerto Rico Telephone Company.

Next, Governor Pedro Roselló González upped the ante by attempting to 
enact the neoliberal agenda in full — after his push to privatize public 
schools was defeated by the teachers union, he privatized all the public 
hospitals 
<http://articles.chicagotribune.com/1998-07-17/news/9807170111_1_privatization-pedro-rosello-public-hospital> 
on the island.

Nevertheless, a one-day teachers’ strike in 1993 marked a significant 
victory for the anti-austerity movement, managing to force significant 
amendments to the “community schools law” which attempted to create the 
basis for charter schools. The amended law — which grants community 
control over public schools — has been under constant attack since its 
passage, and its most progressive aspects have never been fully implemented.

The twentieth century closed with the last great stand against 
privatization in Puerto Rico — the strike against the sale 
<https://www.washingtonpost.com/archive/politics/1998/07/08/puerto-rico-paralyzed-by-strike-over-phone-company-sale/f8dee1a1-84cb-46d7-87ba-8658b4a325ce/> 
of the Puerto Rico Telephone Company. This “people’s strike” reached 
beyond the immediately affected phone workers to unite many Puerto 
Ricans behind common political demands. But in the end, the strike was 
defeated. The Puerto Rico Telephone Company was privatized.

Soon after, state retaliation intensified. In 1999, Law 45 
<http://www.lexjuris.com/lexlex/Leyes2013/lexl2013045.htm> granted 
public sector workers the right to organize and bargain collectively, 
but prohibited strikes. Far from strengthening Puerto Rican unions, the 
law was used to tame union militancy.

Under the terms of the new law, almost any type of worker resistance 
could be said to have an adverse effect on public services — which made 
unions vulnerable to decertification by the state. Even picket lines 
during lunch time were forbidden by some unions.

To make matters worse, in 2002 the government launched an attack on the 
independent teachers’ union — the Puerto Rico Teachers Federation 
<http://labornotes.org/2008/01/seiu-raid-union-representing-40000-teachers-puerto-rico> 
(FMPR) — with the support of its longtime rival, the American Federation 
of Teachers (AFT). The government dismantled the FMPR’s health plan, 
citing an overdrawn balance sheet, lack of liquidity, and bad 
administrative practices.

The next year, rank-and-file teachers responded by electing new, more 
radical union leadership. But even with this new leadership, the FMPR 
was unable to successfully resist the attacks from the AFT and the 
colonial justice system.

Workers at the Puerto Rico Energy and Power Authority (PREPA) were the 
next to come under fire, as the government began purchasing energy from 
two private power-generating enterprises that had recently entered the 
market.

Privatization had wide-ranging effects at PREPA 
<http://blogs.wsj.com/bankruptcy/2014/10/07/the-examiners-prepa-restructuring-requires-time-liquidity/> 
— full-time repair and construction workers were replaced by 
subcontractors; administrative and commercial duties were assigned to 
Banco Popular; and corrupt officials drove the authority even deeper 
into debt.

Today, the Electrical Industry and Irrigation Workers Union (UTIER) — 
once one of Puerto Rico’s most powerful and respected unions — suffers 
from a diminished workforce and a demobilized rank and file. Years of 
repeating “the best strike is the one that never comes” have destroyed 
the union’s will to fight, and, in the absence of political 
organization, class consciousness is almost nonexistent.

This assault on the working class intensified in 2004 with the election 
of Governor Anibal Acevedo Vilá 
<http://www.nytimes.com/2008/03/27/us/27cnd-puerto.html>, who attacked 
unions and dismantled social protections in an attempt to protect those 
who financed his campaign from the now-foreseeable collapse of 
commonwealth finances.

Within days of his taking office, Acevedo hiked tuition at the public 
university, a move that was met with resistance from the small but 
highly politicized student movement. But Acevedo’s Popular Democratic 
Party <http://ppdpr.net/> (PDP) was able to successfully forge an 
alliance with ruling-class nationalists and independence advocates, 
putting the party on good footing to absorb or defeat any groundswell of 
working-class struggle that might emerge.


        One-Sided Class War

Increases in the cost of water, power, and basic consumer goods were 
followed by the establishment of a sales tax in 2007, in order to create 
the Puerto Rico Urgent Interest Fund Corporation 
<http://www.gdb-pur.com/investors_resources/cofina.html> (COFINA) — a 
new fund set up to issue investment bonds as a way to refinance the 
public debt.

Many were opposed to the new tax, which would hit poor Puerto Ricans the 
hardest. Still, a popular movement in favor of the Sales and Services 
Tax emerged. But the movement — known as “el pueblo grita 
<http://noticias.terra.com/noticias/marcha_puerto_rico_grita_convoca_a_decenas_de_miles_de_boricuas/act394150>,” 
or “the people shout” — was really organized by the media and a few of 
the AFL-CIO unions — or, as we like to call them in Puerto Rico, 
“chupacuotas” (“quota-suckers”).

So the governor — facing a hostile Congress but determined to pass the 
new tax — used public workers as the cue ball in a game of political 
pool. He closed the Department of Education for two weeks, citing 
concern about the public debt.

The FMPR didn’t have the strength to respond — unable to protest, many 
teachers ran to the unemployment offices and began collecting food 
stamps. Still, a small group of teachers and students fought back by 
organizing civil disobedience and street resistance. In the end, schools 
reopened and teachers were paid, but the governor was able to 
successfully push the unpopular sales tax through congress.

That process laid the groundwork for the 2008 teachers’ strike 
<http://labornotes.org/2008/03/teachers-strike-stops-classes-puerto-rico>. 
The FMPR had begun negotiating their new collective bargaining agreement 
in 2005. But the negotiations stalled when the union ran up against the 
government agenda — to privatize schools and reduce the size of the 
Department of Education.

In response, The FMPR began preparing to strike, working to build 
widespread support for the union among ordinary Puerto Ricans. Support 
for the teachers grew with each passing moment. But then the union was 
decertified in January 2008, two months before the strike was scheduled 
to begin.

Today the FMPR is fighting for survival — once the largest working-class 
force <https://www.solidarity-us.org/node/2104> in Puerto Rico, after 
years of attrition it now represents only two thousand of Puerto Rico’s 
thirty thousand teachers. Although the FMPR strike was defeated, the 
example set by the teachers continues to inspire resistance as students 
and workers find new ways to push back against the neoliberal assault on 
their living standards.


        Anti-Austerity, Anticolonial

Everyday life in Puerto Rico has become increasingly political. The 
day-to-day discussion in the media is about the economy, bonds, 
unemployment, and the distribution of wealth. And although the media is 
highly biased towards colonial capitalist ideology, there remain some 
dissident voices to be heard.

The Puerto Rican Independence Party <http://www.independencia.net/> 
(PIP) and the Working People Party <http://www.pueblotrabajador.com/> 
(PPT) will each go into November’s gubernatorial election with an 
anti-austerity agenda. But neither can offer a perfect solution to 
Puerto Rico’s ongoing crisis. And since PROMESA established a federal 
oversight board to supervise the actions of the elected government, 
neither party can even guarantee that they’ll actually be able to 
fulfill their platform promises.

Of the two, the PIP presents the situation a bit better — their position 
holds that colonialism is the root cause of Puerto Rico’s crisis, and 
only in independence can we seek to solve the problems that haunt us. 
The PPT, on the other hand, aims to rebuild the benefactor state with 
neo-Keynesian economic reforms, but evades the so-called “commonwealth 
question” by advocating a popular referendum on independence, but 
declining to take a firm position.

The PPT’s view is full of contradictions, since opposing colonialism 
without presenting an alternative other than a referendum or a 
constituent assembly fails to answer the question of how to solve the 
crisis definitively.

Still, independence is not enough. A radical democratic state — 
committed to finding collective solutions and placing real power in the 
hands of the working -class majority — is the best way to solve not only 
the colonial crisis, but all the problems afflicting Puerto Rico.

Nonetheless, principled anticolonialism is extremely relevant to the 
anti-austerity struggle, and mounting a meaningful challenge to 
austerity often means also confronting Washington’s colonial influence 
over San Juan.

For example, even in a situation as specific as public school 
administration 
<http://www.progressive.org/news/2015/11/188428/puerto-ricos-school-crisis>, 
the outsized influence of United States policy — and the inability of 
local authorities to influence or circumvent it — poses severe problems 
for reformers. It is no secret that Puerto Rican public schools have 
lost the little prestige they had during the last sixteen years. 
Teachers are demoralized, students don’t believe in their schools, and 
parents have lost their faith.

In large part, this a legacy of the No Child Left Behind Act 
<http://www.ed.gov/news/press-releases/obama-administration-approves-nclb-flexibility-request-puerto-rico>. 
Since Washington imposed this destructive legislation on Puerto Rico, 
corruption has increased while education has deteriorated and more and 
more school services are privatized — and the island has no way of 
amending or repealing the law.


        Which Way From Here?

I don’t claim great powers of foresight. But some things are as 
predictable as /telenovelas/.

Public-sector workers in Puerto Rico have been expecting a lockout for 
some time, but so far the government has managed to delay taking that 
step. Still, the government will run out of money at some point, and a 
government lockout of public workers could become the basis for 
intensifying social unrest.

The economic effects of such a lockout will be catastrophic. Emigration 
<http://www.pewresearch.org/fact-tank/2015/10/14/puerto-ricans-leave-in-record-numbers-for-mainland-u-s/> 
will increase even further, as will crimes against property — and that 
will have an effect on investments, as a larger fraction of the island’s 
scarce capital resources will be diverted to private security.

Organized labor has to recognize the political situation it is in: there 
are no technical solutions that could separately guarantee the security 
of each sector of the workforce. Only by developing a political 
working-class movement with class demands can we stop — or at least slow 
down — the attacks on our standard of living.

Frankly, people don’t care if it’s a foreign control board or a local 
law that implements austerity — they care about the negative effects 
austerity measures will have on their lives. Those negative effects are 
what we should be fighting against.

What we need in Puerto Rico is a mass movement that goes beyond 
organized labor. If the situation right now has shown itself clearly to 
be a political one, the answer has to be political also. Technical 
solutions only suggest imposing austerity on one or other branch of the 
working class.

Unions and political organizations have to recognize the structural 
changes in the working class and adapt to them. We need another peoples’ 
strike or mass movement — such as the struggle to remove the US Navy 
base in Vieques 
<http://nvdatabase.swarthmore.edu/content/puerto-ricans-protest-united-states-navy-presence-vieques-island-1977-1983>, 
the 2010 student strike 
<http://www.nytimes.com/2010/05/21/us/21students.html?_r=0>, or the 1999 
Telephone Company strike 
<http://www.nytimes.com/1998/06/19/us/plan-to-sell-puerto-rico-phone-company-leads-to-strike.html>. 
We have to recognize those events for what they were: small, local 
struggles that became the igniting sparks of much larger movements.

Today, there are at least two social groups with the potential to become 
sparks that ignite larger movements in Puerto Rico. First, university 
students have often been among the most militant participants in Puerto 
Rican protest movements. And in the current moment — during which 
college-educated young people must face the choice to either leave the 
island or to accept precarity and underpayment at home — they are 
natural opponents of austerity.

Second, teachers, though weakened by the defeats they’ve suffered, still 
have a lot of political strength. And they haven’t received a single 
salary increase in over eight years.

Of course, organizing a movement with its own specific demands that is 
also conscious of the larger issues is not an easy task. Anti-austerity 
forces in Puerto Rico must maintain a double focus. It’s not enough to 
answer only the immediate questions — we must also think in the long 
term, asking, what could solve the problems that persist in Puerto Rico?

As one first priority, we must fight to implement a minimal program that 
can at least help us rebuild a politicized working-class movement.

Left political organizations have formed a small but relevant alliance 
against the oversight board, choosing civil disobedience and direct 
action as their means of struggle. Besides the obvious opposition to the 
oversight board they have come up with some general demands against 
austerity and colonialism — including steps towards effective 
decolonization and radical democracy; a constitutional referendum to 
vote on whether to pay the debt or default; a full audit of the debt; 
and a tax on the rich, particularly on the corporate and banking sectors.

The Workers’ Socialist Movement 
<http://frentesocialistapr.tripod.com/organizaciones/mst.htm> (MST) has 
proposed a few other demands that may go even deeper into solving the 
problem — an end to ongoing privatizations; the reversal of as many 
privatizations as possible; an economic recovery program that emphasizes 
diverse and technologically advanced agriculture; a universal health 
care system and universal pension fund;  income-adjusted tuition rates 
at public universities; a moratorium on foreclosures; the seizure of any 
excess housing inventory held by banks; and the protection of basic 
goods produced on the island.

Many — if not all — of these demands may call into question the colonial 
status of Puerto Rico. But that is precisely the point. Without a 
fighting anti-austerity movement, Puerto Rico will continue to fall 
victim to the one-sided class war waged by its creditors and the United 
States government. And in Puerto Rico, especially since the passage of 
PROMESA, an effective anti-austerity movement must also confront the 
colonial roots of the debt crisis.


-- 
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