Colonial Capitalism in Puerto Rico: Crisis and Response

Since 1901, when the first duties between puerto Rico and the United States were abolished, the island’s economy has served as a kind of experiment in what we today call neoliberalism. Puerto Rico has long been notable for its deep integration into the North American system, the maximal fluidity of labor and capital flows between it and the U.S. mainland, and its dependence on U.S. imports. This century-old brand of colonial capitalism has been adjusted and readjusted over the years, often in response to system-wide shocks—most recently and dramatically in 2006, when the insular government ran out of money and temporarily laid off about 80,000 public employees.

Pablo Morales

Since 1901, when the first duties between puerto Rico and the United States were abolished, the island’s economy has served as a kind of experiment in what we today call neoliberalism. Puerto Rico has long been notable for its deep integration into the North American system, the maximal fluidity of labor and capital flows between it and the U.S. mainland, and its dependence on U.S. imports. This century-old brand of colonial capitalism has been adjusted and readjusted over the years, often in response to system-wide shocks—most recently and dramatically in 2006, when the insular government ran out of money and temporarily laid off about 80,000 public employees.

As Rafael Bernabe argues in this Report, last year’s fiscal crisis represented the end of an era, one beginning in 1950 with the industrialization program known as Operation Bootstrap. The program’s centerpiece was its tax and other incentives, offering U.S. capital all the benefits of a third world country but within the U.S. system. Like today’s maquiladoras, most of the factories built during Operation Bootstrap were enclave assembly operations, importing raw materials and exporting their output. Its first major crisis was during the world recession of 1974–75.

The adjustments that followed between 1976 and the mid-1990s merely propped up a faltering economy, only deepening the tax breaks, until Congress reversed course and began phasing them out in 1995 in an effort to get companies operating on the island to pay their due. It is thus tragically fitting, then, that the fiscal crisis occurred the same year that the phaseout was completed. The experiment in crisis management through tax exemptions, Bernabe argues, is now itself in crisis.

Now that most incentives for U.S. corporations in Puerto Rico are gone, interest in resolving the perennial “status question” has increased in Washington, especially since 2005, after a presidential task force recommended a new round of voting to determine if Puerto Ricans want to do away with the commonwealth. A mainstream position seems to have crystallized, one that interprets Puerto Rico’s technical status as an “unincorporated territory,” which makes Puerto Ricans U.S. citizens but bars them from voting in federal elections (and paying federal taxes), as unconstitutional. A pair of competing congressional bills, both submitted by Puerto Rican representatives from New York, reflect a struggle over this. As Angelo Falcón notes, each bill has been accused of being biased toward statehood or the commonwealth, showing that discord over the status issue is as prevalent among the stateside Puerto Ricans just as it is on the island.

Meanwhile, the pro-independence movement has worked tenaciously since the 1970s within the United Nations, securing a number of nonbinding resolutions defining Puerto Rico as a colony and calling for its national liberation (a framework the U.S. legislation avoids altogether). This position has long, however, been a minority view; after all, since 1950, Puerto Rico’s per capita GDP has hovered near the halfway point between that of the United States and those of its impoverished neighbors. Still, almost half the island lives below the poverty line. Michael González-Cruz, a member of the Nueva Escuela collective, argues herein that the best bet for building an anti-colonial consensus in Puerto Rico lies precisely in poor, marginalized communities, where popular education may play a crucial role in linking national liberation with local struggles for sovereignty, like the one described by Cándida Cotto on one community’s successful fight against a massive casino development.

Finally, Frances Negrón-Muntaner and Raquel Z. Rivera describe Puerto Rico’s flexible cultural nationalism through the story of reggaeton music—initially disparaged and even criminalized as obscene, now embraced as “the island’s most important cultural export since Ricky Martin.” The reggaeton nation, even as it faces grave economic and political uncertainty, makes its mark in the global economy, “playing the national game,” the authors write, “better than ever.”


Pablo Morales is editor of the NACLA Report on the Americas. See the entire November/December issue: "Colonial Capitalism: Crisis and Response."
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