Puerto Rico was such a blessed island that for many years there was no talk about the economy because the factories that took advantage of the 936 law ensured a consistent flow of money to the government. The loss of 936 was a fatal blow to our economy, so fatal that it cost us bankruptcy and a debt that will keep us making payments to bondholders for at least 20 years. Needless to say, this will be a costly process for Puerto Rico. But that is not the worst news.
The administrations that have reigned over our island's finances since Puerto Rico's economic bonanza ended have been abysmal. Even knowing that the money was no longer coming in, the government continued to spend as if nothing had happened. To top it off, instead of making adjustments, they continued to issue bonds as if they did not have to repay them after their maturity date.
Although the bond repayment date was imminently approaching, more government agencies and positions continued to be created. So many agencies and so many employees and so little efficiency were created, that the Fiscal Oversight Board wrote an essay on how to reshape government. At the same time our legislators were creating more restrictions on our local businesses making it more difficult than any state in America for our own residents to open their own business. These same restrictions created barriers to local businesses to such a degree that it prevented them from growing into multinationals that could provide much more in contributions to the government and create an enormous amount of jobs.
All of this has contributed to the impoverishment of our Island and has inevitably kept us in a state of economic dysfunction. The straw that broke the camel's back was the devastation of Hurricane Maria in 2017. This caused a massive exodus of Boricuas leaving Puerto Rico to find better opportunities, causing thousands to vote “with their feet”, thus deciding that Puerto Rico was a hostile place and unsuitable for personal and professional economic success.
The Pillage of Government Funds
According to economist Thomas Sowell: “No one really understands politics until they understand that politicians are not trying to solve our problems. They're trying to solve their problems, of which getting elected and re-elected are number one and number two. Whatever number three is is way behind.”
This profound truth is important to understand that within the norm and with only a few exceptions most politicians are in their positions for their own aspirations, not to serve the people. The lack of economic opportunity has meant that people who in other economic circumstances would have created a business to obtain their success, have found that in Puerto Rico it is less risky to be a political candidate. The level of difficulty and knowledge to enter politics is not considered a major barrier in PR. The biggest difficulty is getting money for the campaign and not being introverted (a major sin in local politics).
When you create significant barriers to business, people will look for other ways to succeed. The knock-on effect of all this is that the corruption that has plagued us has cost us close to $7 billion in total, not counting the immense amount of funds that are used to maintain political “batatas” and defeated politicians as trusted employees. All those funds that could have been used for infrastructure that is so badly needed in Puerto Rico, are used in a completely legal way to continue maintaining the political system that maintains loyalty to the party in power, not because of loyalty to an ideology, but because of loyalty to self-interest, there is no greater incentive than that.
In short, looking from the outside it looks like a simple democratic system, to anyone who dabbles in politics. Some will tell me that the system is not designed with that intention. But the purpose of a system is what the system does, not what they say it does. Our result has been inefficiency, the perpetuation of poverty, clientelism and rampant corruption.
What It Means For Candidates
Since we have determined that the system works in a way that discourages entrepreneurship and rewards political dabbling, the only way out of the current system is with candidates who are committed to changing it. For obvious reasons this immediately eliminates the two traditional parties. Only the two opposing parties would be left. The first would be those representing the left. These have ideas of expanding the current system and creating an even bigger government than it is today. They want to eliminate all vestiges of privatization, one of the few good things the current government has created, and put limits on what ordinary citizens can do with their wealth and property. This is not a winning formula for a country that has not created a considerable amount of wealth yet and will result in an economic failure similar to what it was for Argentina and other LATAM countries that have used the social democracy model without having a native source of wealth that generates consistent benefits for the country.
We finally arrived at the only option that includes freedom and that the majority wants. The party that wants to shrink the government, eliminate bureaucracy and remove restrictions so that Puerto Ricans are no longer slaves to the system, that we are free to open new businesses, expand operations, use our ingenuity to fend for ourselves without fear of being fined, without using a manager for everything, without having to pay government employees “under the table” to “make things happen”, can be the winner of the race. This economic vision would be one in which all Boricuas can feel that we are free to dream, achieve and grow. If this system is implemented, it would soon put a stop to the Boricua exodus to the U.S. because there would be abundant economic opportunity for all, the incentive would quickly change from politics to business. This does not mean that there would be no environmental rules and regulations, law and order must be followed to ensure that the incentives do not distort their purpose. The difference is that under this system the funds used would not be largely public, the damage to the country is minimized and the losses to the government decimated.
Countries that have adopted economic freedom policies are among the richest in the world and Puerto Rico would have the opportunity to belong to that select group of countries. This is not a far-fetched or isolated idea, in a study done earlier this year by Gaither International for CRECE it was determined that 71% of those surveyed think they are better equipped to make decisions on how to use their money than the government, 67% think it is very difficult to start a business in Puerto Rico. There is more data that points to the average Puerto Rican being displeased with the current system.
In the Atlas Intel survey for Noticel, 75% of the respondents rated the current government's performance with economic development as neutral or negative and in the same survey, 66% of the respondents described Puerto Rico's economy as “bad”. As you can see, most people want economic freedom but those who have administered us have always thought they know better than the people. This elitist mentality, which has always been identified more with the left, also dominates the traditional parties.
My opinion is that the party that takes on the task of offering economic freedom to the people will be attractive because it will create the right incentives: to allow human flourishing and encourage the creation of wealth that our Island needs so much. The candidate who makes this his or her main platform has every chance of winning the elections because it is not an issue that divides us, it is one that unites us.
We all want to “hechar pa'lante”, and the politician who makes this his political campaign slogan can win votes from other parties that only have in their favor their devotion to a preferred status formula. Many people are realizing that status has very little chance of being resolved in the near future. What can make all the difference is what we do right now with our economy. Waiting until we become a state or an independent republic to change something that is in our power to change right now makes no sense at all..
The call is clear: We need a leader who is willing to take on the government apparatus and let the voters know that we will no longer play politics with government jobs, that we will dismantle the current system to create a truly free economy for all Boricuas, one that will create generational wealth like never before seen in Puerto Rico. Whoever pushes that forward can win the election.
This article was originally published in Spanish in Buenas Nuevas.
