You can read the entire article in the New York Times Tuesday business section reporting on Puerto Rico’s default on a payment on its staggering $72 billion debt without once learning that the little Caribbean island, home to 3.5 million US citizens, is a territory of the United States, or more properly, a colony, insofar as its residents have no representation in Washington, cannot vote for national candidates for office, and furthermore, are subject to US federal courts, whose judges are all appointed by the federal government.
At least USA Today made the story its page one lead, instead of just a business story, but it too just notes that the island is a “commonwealth” and that as such it cannot be bailed out as Greece hopes to be, by such international bodies as the International Monetary Fund (IMF) or the European Union. The meaning of the term “commonwealth” is not defined.
The Wall Street Journal ran its report on the bankruptcy on the front of its Money & Investing section, making it clear that the only significance of this story was to the many institutional and individual investors who hold Puerto Rican tax-free bonds in the municipal bond allocation of their investment portfolios. It too failed to explain what it meant to call Puerto Rico a “commonwealth.”
US citizens outside of Puerto Rico, most of whom don’t even know Puerto Ricans are fellow citizens, and not potential “illegal immigrants” to their shores like the Haitians, Dominicans, Cubans and other residents of neighboring islands, are no doubt understandably confused about Puerto Rico’s status, given that Kentucky, Virginia, Massachusetts and Pennsylvania all refer to themselves as “commonwealths” and not as states.
But Puerto Rico is no “commonwealth,” a term which the Oxford dictionary defines as “an independent state or community, especially a democratic republic,” and which Websters dictionary defines as a nation or state or alternatively — in a special category for Puerto Rico and the Northern Mariana Islands, presented without any sense of irony — as “a political unit having local autonomy but voluntarily united with the United States.”
I’m not sure how that last definition got past the editors, though. Puerto Rico is can never, with a straight face, be said to have been “voluntarily united” with the United States. The island was a spoil of war when the US defeated Spain in the Spanish-American War of 1898, and it instantly became a colony under brutal military rule, its indigenous independence movement crushed, and even its native Spanish language barred from public education from 1898 until 1948.
When Puerto Rico’s purely symbolic but powerless elected delegates assembly voted in 1914 to call unanimously for the island’s independence, the US Congress responded in 1917 with the Jones Act, which declared all residents of Puerto Rico to be US citizens, whether they liked it or not (people were given a one-time chance within the next 30 days to renounce that citizenship forever, but nobody since then has had that right).
The Jones Act allowed islanders some local autonomy (all laws are subject to Congressional veto) but it also imposed crippling colonial policies, many of which continue to this day, and they have contributed mightily to the island’s current debt crisis. Puerto Rico’s local farming was destroyed in favor of a deliberate US policy of monoculture. Its women were involuntarily sterilized without their knowledge. And while Puerto Ricans have had no vote on matters of war and peace, its young men were ordered to serve in America’s wars, beginning with WWI and continuing until draft call-ups ended. (Actually, at the time of Puerto Rico’s “liberation” from Spain by US forces in the 1898, islanders had more political power and autonomy than they ever have gotten subsequently under US domination. Under pressure from a powerful and growing independista movement, Spain had already granted Puerto Rico 18 voting delegates in the Spanish parliament. Yet even today, as a US colony, Puerto Rico only has one non-voting “observer” in the US House of Representatives.)
On the economic front, under the Jones Act, while ships from all over the world pour into US stateside ports disgourging cheap goods from abroad, Puerto Rico can only ship its own goods and produce to the mainland on US-flagged vessels — about the most expensive way to ship goods known to man. US goods shipped to Puerto Rico must likewise travel on US vessels. This one act restriction has been a principle reason that the island’s Maquiladora-style manufacturing system has collapsed, causing unemployment to soar.
Puerto Rico has no control over its own borders, is forced to use the dollar, making devaluation — the classic way to get out from under crushing debt — impossible, and yet it is also barred by US law from doing what municipalities and other public entities can do when they can’t repay their debts: seek bankruptcy protection from creditors.
In some ways the crisis in Puerto Rico is like that facing Greece: both places are seeing their economies collapse as government services are cut and public assets are sold off to private investors at fire-sale prices. Both places are at the mercy of a larger polity which is seeking ever greater austerity measures — in Greece’s case, the European Union and the European Central Banks, and in Puerto Rico’s case, the US Congress, the US Federal Court, the US Treasury Department and the Federal Reserve Bank. But the similarity ends there.
While its political leaders have thus far shied away from the step, Greece has the option of quitting the Eurozone and re-establishing its own currency, the drachma, and of renouncing its foreign debt. Puerto Rico, as a colony of the US, cannot short of a bloody rebellion leave the clutches of the US and the US dollar.
And as unlikely as a “bailout” of Greece by the IMF may be, as USA Today notes, even that option is closed to Puerto Rico, since the only agency that could bail it out is the US Treasury, and US Treasury Secretary Jack Lew has already said such an option is not under consideration. Even a bill that would grant Puerto Rico the right to file for bankruptcy protection is stalled in a Congress that is wholly owned by the US banking industry.
Given all this, most Americans I’ve talked with immediately assume Puerto Rico has dug its own debt hole. But the truth is different. The island was battered by the fiscal crisis far worse than the rest of the country, though that crisis was not of its own making. To add to the problem, a tax break — technically a tax credit on profits earned by Puerto Rican operations of US companies — long granted to US businesses that set up manufacturing facilities on the island (where there is no US income or business tax in a small bow to the old “no taxation without representation” legacy of the US revolution) was ended in 2006. This was just the final blow following a shift already underway by companies away from the island to cheaper-labor countries in Latin America following the passage of the North American Free Trade Agreement (NAFTA).
It’s not surprising that over one-third of Puerto Ricans living on the island depend upon Food Stamps to get by (that compares to 15 percent of the US population). So ubiquitous is the use of Food Stamps that it is effectively a second currency in Puerto Rico, used for all manner of commercial transactions between people and with various shops and businesses.
Unable to pay its bills or to raise more local tax revenue, or to devalue its currency, Puerto Rico’s island and local governments have been forced to make drastic cuts in public services, from education to health care to road maintenance. And worse is in store, with word that the governor has hired the “expert,” Stephen Rhodes, who as a bankruptcy judge in Michigan, crafted Detroit’s notorious bankruptcy plan — the one that has the city reneging on and stealing the pensions of its public workers. There are also calls for getting the island exempted from the US federal minimum wage law.
While there surely is plenty of corruption in San Juan just as there is in Washington, this was not, by and large, a matter of profligacy, but of survival. Puerto Rico’s borrowing binge was how the government had to pay for needed services while the island’s economy and tax collections has tanked over the past decade.
It is often pointed out that Congress has allowed the people of Puerto Rico to vote on four occasions — 1967, 1993, 1998 and 2012 — in non-binding plebiscites on their choice of status for the island. The available choices have always been: independence, continued commonwealth status, statehood or “none of the above.” Independence has always received only a token vote, as independence activists have boycotted these meaningless ballots, while commonwealth status has always beaten the pro-statehood vote. Election turnout for local contests is usually quite high on the island, but with these plebiscites, between a quarter and a third of the electorate has always stayed home — probably a reasonably good measure of pro-independence sentiment. (Lest one think that there is no real support for independence on the island — and among the Puerto Rican diaspora on the US mainland — recall that in 1976, when President Jimmy Carter issued a clemency to Puerto Rican revolutionary nationalist Lolita Lebron, releasing her after she had served 21 years in federal prison for her participation in the shooting of five US Representatives in Congress in 1954, she was welcomed back to the island like a conquering hero.)
But there is in any event a reason for at least some of the reluctance to support independence too: the poor of the island, after over a century of destructive colonial rule, are deeply dependent economically upon the US. Puerto Ricans fear that with independence they would lose their critical Food Stamp assistance, and perhaps even their Social Security benefits as well as other transfer payments. That is a life-and-death matter that for many poor people trumps politics, nationalism and cultural identity.
This is why the UN General Assembly has consistently denounced the US for failing to properly grant genuine self-determination to Puerto Rico and its people. The many former colonies that fought for their freedom and are now member nations of the UN know that Puerto Rico’s non-binding plebiscites have been a sham, especially without any prior promises of compensation and economic transition by the US following over a century of colonial domination and repression.
Viewed in this light, it is clear that while there may be some similarities between the Puerto Rican and the Greek debt crises, the situation faced by Puerto Rico is far, far worse. The ultimate decision on Greece’s fate is still in the hands of the Greek people. If they want to break away from the imperial grip of Germany and the northern European countries, they have the means to do it: just vote in a government with the political spine to pull the country out of the Eurozone.
In Puerto Rico’s case, the ultimate decision on the island’s fate lies in the hands of the politicians in Washington, DC and the banksters in New York.