Puerto Rico’s One-Sided Class War

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.

The passage of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) in June — which established a seven-member federal oversight board 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 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 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 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 — 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, 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 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. 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 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 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 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 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 of the New Progressive Party (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 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 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 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 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 (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 — 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, 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 (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 (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,” 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. 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 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, Anti-Colonial

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 (PIP) and the Working People Party (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, 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. 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 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, the 2010 student strike, or the 1999 Telephone Company strike. 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 (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.