Boom and Bust in Puerto Rico
How Politics Destroyed an Economic Miracle
Who is to blame for the economic and political crisis in Puerto Rico—the United States or Puerto Rico? This book provides a fascinating historical perspective on the problem and an unequivocal answer on who is to blame.
In this engaging and approachable book, journalist A. W. Maldonado charts the rise and fall of the Puerto Rican economy and explains how a litany of bad political and fiscal policy decisions in Washington and Puerto Rico destroyed an economic miracle.
Under Operation Bootstrap in the 1950s and '60s, the rapid transformation and industrialization of the Puerto Rican economy was considered a “wonder of human history,” a far cry from the economic “death spiral” the island’s governor described in 2015. Boom and Bust in Puerto Rico is the story of how the demise of an obscure tax policy that encouraged investment and economic growth led to escalating budget deficits and the government’s shocking default of its $70 billion debt. Maldonado also discusses the extent of the devastation from Hurricane Maria in 2017, the massive street protests during 2019, and the catastrophic earthquakes in January 2020.
After illuminating the century of misunderstanding between Puerto Rico and the United States—the root cause of the economic crisis and the island’s gridlocked debates about its political status—Maldonado concludes with projections about the future of the relationship. He argues that, in the end, the economic, fiscal, and political crises are the result of the breakdown and failure of Puerto Rican self-government. Boom and Bust in Puerto Rico is written for a wide audience, including students, economists, politicians, and general readers, all of whom will find it interesting and thought provoking.
1. The Rise and Fall of Operation Bootstrap
2. Bootstrap and the Statehood Surge
3. The Demise of Section 936
4. The Turning Point
5. The Breakdown of the Public Corporations
6. The Demise of the Government Development Bank: The Descent into the $70 Billion Debt
7. “That is Nuts” Puerto Rico’s Labor Policy
8. Will Puerto Rico Become a State?
9. The Future of Puerto Rico
10. A “Troubled” Relation
11. A Century of Miscommunication and Misunderstanding
“Boom and Bust in Puerto Rico offers a fascinating account of how a misunderstanding of the meaning of self-determination is at the core of Puerto Rico’s economic and political history.” —Heidie Calero, president of H. Calero Consulting Group, Inc.
“Boom and Bust in Puerto Rico is an extremely important and comprehensive addition to the history, politics, and economics of the unique relationship between the governments of the United States and the island Commonwealth of Puerto Rico.” —Peter Holmes, former managing director of the Puerto Rico–USA Foundation
"A. W. Maldonado makes a keen and engaging assessment of the political and economic trials Puerto Rico has faced in its twelve-decade-long relationship with the United States, paying distinct attention to the ways in which the political culture within the commonwealth has affected the outcomes. This book should fare high in the agenda of those interested in the future of Puerto Rico, as well as those interested in the future of the many non-sovereign nations that today struggle with larger political entities to accommodate their national identity, fiscal autonomy, and development objectives through mutually convenient, democratic non-traditional frameworks." —Antonio Garcia Padilla, dean emeritus, University of Puerto Rico Law School
“For anyone wanting an insightful account of how Puerto Rico has ended up where it is . . . , Maldonado’s Boom and Bust in Puerto Rico is a must-read.” —Global Americans
"Written in a clear and comprehensive manner, this book explores a fundamental problem in the relationship, of over a century, of Puerto Rico and the United States: how to synchronize the world's most advanced economy to one of the smallest and most depressed?" —El Nuevo Día
"Maldonado observes a broad consensus pointing squarely at Puerto Rico’s colonial status as the culprit for its ongoing financial woes. . . . [He] argues it is precisely this ongoing struggle over the island’s political status that is to blame for its economic death spiral. A provocative reexamination of Puerto Rico's economic history and future." —Choice
"Maldonado convincingly demonstrates that, while the Bootstrap tragedy was in many ways self-inflicted, a 120-year history of ‘miscommunications and misunderstandings’ between the US and Puerto Rico compounded the island’s pain." —Survival: Global Politics and Strategy
How to explain such a remarkable run of misfortune? Was Puerto Rico “cursed?” In 1899, a prominent Catholic prelate believed it was. Hurricanes were then seen as “acts of God” and were named after saints. After the devastation of San Ciriaco on August 7, 1899, which killed 3,369 Puerto Ricans, the prelate explained in a long letter why God had “punished” Puerto Rico. Like most Catholic priests on the island, the native Spaniard was hurt and offended that the Puerto Ricans had welcomed the Americans with open arms, turning their backs on Mother Spain. San Ciriaco, the prelate wrote, was “God’s punishment.”
The threat of a hurricane every year between June and November, from the many storms and hurricanes that form off the African coast crossing the Atlantic towards the Caribbean has always been part of the island’s reality. Every year there are the official storm and hurricane alerts and warning, the frantic rush to prepare for the worse. They are, of course, terrifying, in the past causing deaths mostly by drowning in the floods and mudslides, wiping out the island’s rural, agricultural economy. The terrifying danger is real, but yet most, in fact, miss the island; there is a direct hit an average of every seven and half years.
Now in 2018 there was no evident explanation for Puerto Rico’s extraordinary bad luck. Not one, but two hurricanes struck one after the other after twelve years of economic recession. After the humiliation of being told that it no longer could borrow money, of admitting that it could no longer pay its debt, that it was bankrupt, and of being imposed a fiscal board capable of overriding its self-government.
It was not bad luck. As much damage as they inflicted, the hurricanes nor the earthquakes were the causes of the crisis.
So who is to blame for the economic and fiscal crisis?
The response of most of the political leadership in all the parties, especially after the creation of the PROMESA Fiscal Board, is the island’s political status. It is “colonialism.” As Governor Ricardo Rosselló invariably pointed out, if Puerto Rico were not a “colony,” if Puerto Ricans had the political power of citizens living in the states, voting representation in Congress and the presidential vote, none of this would have happened.
On May 9, 2019, pro-statehood Senate President Tomás Rivera Shatz wrote: “The colonial crime against Puerto Rico has been provoked principally by the U.S. Congress…(the U.S.) has always discriminated economically as it has politically, because we are a colony... that is why the problem of Puerto Rico is colonialism and those that promote it.”
Puerto Rican political leaders supporting statehood or independence are of one voice: to blame are “the Americans.”
Puerto Ricans are Latin Americans. The Venezuelan intellectual and journalist, Carlos Rangel, in his influential and controversial 1977 book, The Latin Americans: Their Love-hate Relationship with the United States, asks what has been a terrible question for Latin Americans: how to explain the economic and political success of North America and the relative political and economic failure of Latin America.
Rangel is far from being an apologist for the Americans, recognizing “Washington’s misuse of power, its clumsiness and exactions.” But he calls on Latin Americans to stop “blaming American imperialism” for Latin American failure. Stop wallowing in self-pity, in resentment and humiliation, Rangel pleaded, stop seeking comfort, emotional refuge in anti-Americanism, and face the reality that Latin Americans are themselves to blame, that its failure is due to defects in its culture and politics.
Rangel dedicated less than two pages to “the case of Puerto Rico.” Like most Latin American intellectuals, he is confused by Puerto Ricans. He writes “it is in Puerto Rico that we find the most extreme form of the bitterness and resentment that Latin Americans in general feel towards their northern neighbors.” Yet Puerto Rico has benefited from the Americans as no other Latin Americans: “its economic development has been quite extraordinary.” At the time, Puerto Rico’s per capita income of $2,000 was five times that of Central American countries.
But in fact the theme of Rangel’s book—“the love-hate relationship with the United States”— is precisely the foundation of Puerto Rico’s status politics. When he writes that Puerto Rico “suffers from an acute case of the Latin American complex” he is effectively describing Puerto Rico obsession with the political status issue.
This is the key to answering the question of how did the Puerto Rico of the Camelot event, of Operation Bootstrap, of the economic miracle that turned the “poorhouse of the Caribbean” into the “showcase of democracy,” descend into the seemingly endless nightmare?