Sunday, July 26, 2009

The colonial crisis in Puerto Rico and the Puerto Rican entrepreneurs

In Puerto Rico, the global crisis intensifies our colonial crisis. Following its internal clock, the latter broke out two years before the former. Given the importance of the government for the Puerto Rican economy, the crisis appears as a fiscal crisis. Now that the crisis has become more obvious than ever with thousands of layoffs of public employees (there will be from 30,000 to 45,000 in total), we cannot simply regret the alternatives that were not implemented nor accuse the Fortuño government of being at the unconditional service of capital by taking neo-liberal policies; nor limit ourselves to seek immediate solutions for the unemployed. The insensibility of the Fortuño government cannot be fought with tantrums or partial solutions that remain just as insensible. It is necessary to understand the reasons for the crisis and thus understand the government’s insensibility and also the capacities we have to confront it. In order to achieve this, one of the things we must consider is the origin of that group of local entrepreneurs who have come to conceive themselves, in their most sophisticated versions, as the ultimate representatives of the Puerto Rican people (see “Coalición aboga por la economía.” El Nuevo Día, 4 de julio de 2009, p. 33 ) or, in their most vulgar versions, as the owners of the country (“Pérez Rivera proclama al sector privado dueño de PR.” El Vocero, 19 de junio de 2009. ).

Puerto Rican businesspeople have always been under the shadow of foreign capitalists, especially during the first half of the 20th century. Thanks to the development of the Commonwealth (Estado Libre Asociado), they managed to develop an unusual power, although always remaining subordinated to US capitalists. It was the local professionals (journalists, lawyers, bureaucrats, etc.) who, facing the crisis of the sugar economy coinciding with the Great Depression, came up with the Commonwealth as a solution. Most local entrepreneurs were in no position to seek a transformation because they had a small and weak function in the sugar cane economy that made them dependent on that system. The larger entrepreneurs, like the plantation owners, had no interest in reforming the system.

The professionals, on the other hand, who were formed in the art of colonial administration, did not share the planters’ need for keeping the rural workers in miserable conditions and were sympathetic with the workers. As an attempt to reconcile the interests of the US entrepreneurs, of whom they depended, with those of the workers, the leaders of the Popular Democratic Party sought to raise the workers’ standards of living by developing capitalism. They were also part of the reformist wave after the Great Depression. Initially, during the late 30’s, they bet on a strategy of diversifying the economy, and soon they adopted the strategy of attracting investments from US firms with greater technology than that of the sugar industry. As these industries arrived, they would demand goods and services and directly and indirectly create more employment, which would in turn lead to the creation of more demand for goods and services. Thus the local market would grow and there would be more space for the local businesspeople to develop, along with the possibility of an autonomous national economy. The Commonwealth as a political status, autonomous within the US state but practically without representation, fit well the objectives of the reformist professional elites. They would have the support of the US state, which would care about developing US capital in Puerto Rico, and at the same time they would achieve greater autonomy to develop the local capital that would benefit our country. At the end, this strategy gave a lot of power to the entrepreneurs and left the workers in a weak position.

Although this type of strategy could improve workers’ conditions, it does nothing to remedy thier subordinate position, thus being paternalistic and antidemocratic. But leaving this aside, in order to develop a competitive capitalism with this strategy, emulated by other countries with varying degrees of success, the serious threat posed by established entrepreneurs with massive capitals must be overcome. They will try to prevent emerging entrepreneurs from expanding their capitals and threatening their advantages or competing with them. Following this rationale, plantation owners, as early as the mid 30’s, opposed vigorously the Chardón Plan, for they wanted to prevent wage increases, which would rise because of the pressures that the workers’ needs in a richer society would put on the value of the labor force. In fact, they undermined the autoridades or government owned firms established by the 40’s. Later, as the market grew because of the investments from textile and subsequently from petrochemical and pharmaceutical capitals, many local entrepreneurs where displaced by US firms, which entered the local market with better organized companies and more capacities and resources.

The possibility of developing a local competitive capitalist following the industrialization by invitation strategy also relied on the elites that lead the process being conscious about the objective: the investments must be used for the local development, not just promoted for their own sake. This is how countries that have used this strategy successfully have done it, since they attract industries that can be linked to local firms, that bring useful technologies, etc., instead of attracting any firm just to create jobs and demand. However, in Puerto Rico, the planters’ offensive against the development strategy appears to have put an end to any vision that the elites had. By the end of the 40’s, with Operation Bootstrap, the development strategy became a matter of attracting any non-agrarian industry without coordinating progress of the local firms, merely giving them all kind of subsidies for their development.

Competition is central to capitalism because one way for the capitalist to get more money from his investment is to outdo his fellow capitalists in productivity, so that his workers are able to produce more with the same salary and materials, thus increasing the value that he appropriates when he sells the product. Given that a more productive capitalist can undersell the others and ruin them while still having profits, every capitalist tries to be more productive. The global effect of this process (whenever it is not breaking up into crisis from the excess of all these commodities in the market), as capitalists race to stay in business while ruining the competition, is more social wealth or, in other words, progress, even for the worker, although in relative terms s/he tends to become poorer.

Without a clear strategy for developing a competitive capitalism, and with a stronger foreign capitalist, who is always threatening to take over, the Puerto Rican entrepreneur tends to avoid foreign competition, seeking cracks to supply the local market without committing his capital—if he has enough to invest—in new ventures or even technologies that might increase his productivity, but that remain unable to guarantee his survival as a capitalist. It is better to use the capital he obtains locally to speculate in financial markets or find unoccupied niches. Among the biggest national companies, very few are manufacturers, while many are financial. Most of the relatively few local firms stick to geographically protected industries, such as construction, distribution, press, food, etc. Even though there have been massive foreign investments, very few large firms have been established. The result of this halfway capitalism is a looting of the national wealth and very little investment to expand substantially our available means, even when investment is in the hands of local capitalists, who would therefore be able to control those means. (For an examination of the disparities between local and foreing capitalists, see (in PDF) Ayala, César J. "La formación del capital local en Puerto Rico: 1947 al presente." Revista de Ciencias Sociales, 18 (2008): 104-149.)

Our businessmen, accustomed since the 40’s to a government that provides general conditions, became even more spoiled with the solutions that the administrative elites sought in face of the first slowdowns. These came along because as soon as the portion of foreign investments benefiting the national economy was stabilized, the local breed of entrepreneurs, unwilling to innovate, are incapable of maintaining the local economy expanding. A vicious cycle thus emerges where there are no buyers for the products that would sway the capitalist to invest in production. The solution that the administrative elites came up with, given their failed strategy, was to invest in construction, the expansion of the debt for public expenses, and the attraction of more multinationals. As early as the 60’s the earnings of nationals minus the earnings of foreigners (GNP) started to be less than all the earnings in the country (GDP). The government responded with great infrastructure works and eventually with the attraction of petrochemical and pharmaceutical companies, as the textile companies started to leave by the 70’s for countries with lower wages.

The infrastructure works, which contractors have managed to label as “development” (desarrollo), have sprawled roads, urbanizaciones and buildings wherever there is a good profit. Recently, there have been talks about attracting high technology or knowledge industries. The politicians have also filled the government with public employees to lessen the unemployment problem that the businesses are unable to solve, and at the same time to tie those workers to the vicious projects of their parties. The short term result has been to provide local businessmen with the demand they need for investing. In the long run, these businessmen end up using the government to directly increase their wealth, instead of using it simply for maintaining the conditions where they can capitalize.

As these entrepreneurs grow, subsidized by the governments of the Comonwealth, they gradually take over government. They mobilize waged workers who depend on their capital, and create groups of professionals, who being formed in this style of business that depends on the government, defend and organize the entrepreneurs' interests. They turn the old political elites and their parties to their service, given that politicians end up depending on businessmen for their campaigns. Thus they even issue national debt and raise taxes in order to canalize the national wealth to their companies and their pockets with government contracts and legal changes to get subsidies; or they pass laws to expand the working day. The more they pillage, the stronger they are to keep pillaging.

The problem with these pampered entrepreneurs is that they need economic growth for the government to keep supporting them, but since the government subsidizes them, they are not willing to invest in economic growth. And so they lead us into a crisis, since there is a point where it is not possible for the government to keep issuing debt, and on top of that employing the people who these businesspeople are unable to employ. The government cannot maintain its functions of canalizing wealth to local capitalists, paying its debt to the US capitalists, and at the same time employing almost 1/3 of the labor force.

We cannot limit our understanding of the policies of the Fortuño government to the neo-liberal framework. The measures taken by his government, particularly the Public-Private Alliances Law and the massive layoffs fit perfectly the logic of our pampered entrepreneurs, spoiled already by the golden time of the Comonwealth in the post-war period (for the other measures recently taken see Quiñones Pérez, Argeo T. “La marcha de la insensatez.” Claridad. y “Afloran las verdaderas consecuencias y contradicciones del plan Fortuño” Claridad. ). As usual, they seek to remain subordinated to the US capitalists, while using the government to plunder the country. The government must have the funds and the mechanisms to keep subsidizing them. Asking them to cut government expenses in contracts and subsidies, is the same as asking them to shoot their own foot, while asking them to raise taxes against the multinational companies or to reduce the public debt is to ask them to betray their accomplices, who would in turn hand them in. The only alternative from their point of view is to fire public employees and make more efficient the way in which government redistributes wealth to their pockets.

The Public-Private Aliances are perfect for this because they create or deliver public entities to private companies for the works that the state used to make or contract out. The private companies keep the profit, with the advantage that they can overlook the old agreements with the workers. Even better, they get a secure space from which to invest their chickenhearted capital, which will be guaranteed by the government, who will assume control of the venture if it becomes unprofitable. (For an explanation of the Public-Private Alliances Law, see: Sosa Pascual, Omaya. “Cheque en blanco que puede salir caro.” Centro de Periodismo Investigativo, 1ro de junio de 2009. See the law in Spanish and pdf format here.)

The development of the local entrepreneurs goes hand in hand with the loss of the concessions that workers got with the advent of the Commonwealth. The lack of competitiveness allow our capitalists to tolerate the lack of efficiency (not only in the government), which would be unheard of in places where capitalism follows the logic of competition. It also compels our capitalists to use force in order to strip the workers of what they have and get the economy back on track. So far we have seen the increase in personal taxes while those of the corporations decrease, changes to the work day, the dissolution of labor agreements, and the appropriation of land occupied by communities. (The raise in the prices of consumer goods also appears to be a tactic used by retailers and distributors.)

The idea of changing the politicians or the alleged neo-liberal ideology of the governing group by pressuring government or other powerful groups to force them back to more sensible politics looses sight of the power relations that imbue our lives. The local, pampered entrepreneurs must expand their wealth by using the government. They end up taking away our small piece of the pie under the supervision of US capitalists. The only way to stop them effectively is to mobilize a powerful opposition with an alternative logic of production to the vicious cycle of bringing any type of investments and using government to support local firms.

Using the given tools that we have in the Commonwealth (parties, unions, organizations, etc., as most of them exist right now) in order to achieve a more sympathetic leadership towards the working people would not go very far because sooner or later it would operate within the conditions and with the means that our businessmen control. Even worse, it would entail being led into roads that we have already traveled and that we do not want to keep using. In the best of cases, it would lead us to new agreements and concessions under the newly developed circumstances without challenging the entrepreneurs’ privileged position. Instead of taking the beaten concession path, we should take the avenue that leaves behind the spoiled leadership that we have fostered.


  1. Join the protest this June 17, 2013 at the United Nations (UN) to demand the immediate decolonization of Puerto Rico. For more information:

  2. Greetings,

    We need to work together to decolonize Puerto Rico and free Oscar López Rivera. Join 2 peaceful protests until it is accomplished!

    Un abrazo,

  3. Not true that there are 3 political status options for Puerto Rico

    The United States (US) government has made Puerto Ricans believe that there are 3 political status options for Puerto Rico. That is a lie. The purpose for that is to have Puerto Ricans fight amongst themselves. The plan has been a huge success! Puerto Rico has been a colony of the United States for 116 years, and judging by the 80% voter turnout in the colonial elections, the majority of us has not realized that we have been lied to.

    In reality, there is only one option. The United Nations (UN) in 1960 determined that colonialism is a crime against humanity. Therefore, the only thing that Puerto Rico can do is to become her own nation. That means that the US must give Puerto Rico the sovereignty that the US illegally took away from her by virtue of the July 25, 1898 military invasion.

    Thus far, the US government has ignored the 33 UN resolutions asking it to immediately decolonize Puerto Rico. Instead, it has tried to hide these petitions, and at the same time appear to believe in democracy by pushing for plebiscites so that Puerto Ricans could decide between colonialism, being a US state, or independence (decolonization as required by the UN).

    The problem with the US pushed plebiscites are that they:

    1. don’t comply with international law that prohibits a nation to have a colony.
    2. don’t comply with international law that requires the empire to give the sovereignty it illegally took away to its colony.
    3. don’t comply with international law that requires that to have free elections, that country must be free first.
    4. have 2 options that are not permitted by international law- continuing being a colony and becoming a state of the country that has the colony. For the option of becoming a state of the country that has the colony to be considered, the colony must first become her own nation (decolonized).

    This is why we have to peacefully protest 3 times a year until the US government complies with the UN resolutions for Puerto Rico decolonization.

    José M López Sierra