* Puerto Rican economy








Puerto Rico: Economy


Figure 1.-- Here we see three children carrying water home during the 1950s. Most rural homes still did not have running water. The need to carry water home is common in many places, southern Spain, southern Italy, Arab countries, subsahrian Africa, and much of Latin America. It was also the case throughout but many asiand have reported phenomenal economic progress in recent years.

Puerto Rico was like most of the Catibbean islands inhabied by the Taino, an Arawak people. The economy was a mix of hunting and gathering along with agriculture. The island enviroment more or less forced the islanders to move away frim nomadic hunter-gatering and adopt at least primitive agriculture. The Taínos both hunted and fished to supplement gatering and agriculture. They made canoes for both fishing and trading. Basic marine technology was necessary for their ancestors to get to the islands. It involved making dug-out canoes. Their main crops were corn, cassava, garlic, potatoes, yautías, mamey, guava, and anón. Cirn anf pototatoes were an engineered crop develop in Peru and Mexico, showing how agricultural technology had spread throughout the Americas before the arrival of the Spanish. The economy was transformed with the arrival of the Spanish (1493). Strangely, the Spanish did not adopt sugar as their main crop like the Dutch, English, and French on their island (Cuba, Hispaniola, and Puerto Rico). After the early years of the Spanish Main, the Spanish focus was more on the mainland. The economies of the Spanish islands became moee oriented on supply and prorecting Spanish shipping moving from the mainland colonies and Spain. Spanish colonial policy was to exlue foreigners and trade with foreign countries and colonies. Only after the Napoleonic Wars in the 19th century did sugar become an important crop on the Spanish islands, especially Cuba. nother major change occurred in Puerto Rico when the U.S. Army liberated the island from Spain (1898). This introduced American economic patterns and a much more robust economic partner. Puerto Rico became an American Commnwealth. Special laws were past to promote economic development on the Island, primarily by offering tax breaks. The result has made Puerto Rico the most wealthy island in the Caribbean other than small islands like the Caymans with tax have banking industries. Income levels, however, remained far below those prevailing in the mainland United States. Cutbacks in the subsidies in recent years have afversly affected the Island economy which is currently experiencing a Greek-style fiscal crisis.

Taino Economy ( -1493)

Puerto Rico was like most of the Caribbean islands inhabited by the Taino, an Arawak people. The economy was a mix of hunting and gathering along with agriculture. The island enviroment more or less forced the islanders to move away from nomadic hunter-gatering and adopt at least primitive agriculture. The Taínos both hunted and fished to supplement gatering and agriculture. They made canoes for both fishing and trading. Basic marine technology was necessary for their abcestors to get to the islands. It involved making dug-out canoes. Their main crops were corn, cassava, garlic, potatoes, yautías, mamey, guava, and anón. Corn and pototatos were an engineered crop developed by more avanced people in Peru and Mexico, showing how agricultural technology had spread throughout the Americas before the arrival of the Spanish.

Spanish Empire (1493-1898)

The economy was transformed with the arrival of the Spanish (1493). he Spanish attempted to enslave the Taino. When the Taino popultion collpsed, they began to bring in captive Africns to do the work. Strangely, the Spanish did not adopt sugar as their main crop like the Dutch, English, and French on their island (Cuba, Hispaniola, and Puerto Rico). After the early years of the Spanish Main, the Spanish focus was more on the mainland. The economies of the Spanish islands became more oriented on supply and prorecting Spanish shipping moving from the mainland colonies and Spain. Spanish colonial policy was to exlude foreigners and trade with foreign countries and colonies. Regulations prohibited the development of a manufacturing sector. Manufacturung was reserved to Spain. The colonies were to produce raw material and agricultural products. Only after the Napoleonic Wars in the 19th century did sugar become an important crop on the Spanish islands, especially Cuba. Spanish officials issued the Royal Decree of Grace (1815). Rhis permitted foreigners for the first time to enter Puerto Rico and opened San Juan and other ports to trade with nations other than Spain. This was the beginning of a degree of economic expansion based on exports, at least for the agricultural sector. The major export commodoties were sugar, tobacco, and coffee. Spain at first refused to cooperate in British effort to end the slave trade and was one of the last ciuntries to abolish slavery.

American Commonwealth (1898)

Another major change occurred in Puerto Rico when the U.S. Army during the Spanish American War liberated the island from Spain (1898). This introduced American economic patterns and a much more robust economic partner. Puerto Rico became an American Commnwealth. American invetments helped to expand agricultural production, especially sugar production. Producion as a result increased dramtically. Sugar came to account for about 40 percent of the Island's cultivated land, 50 percent of agricultural labor, and more than 30 percent of the economic activity. Increases in sugar price brought a degree of prosperity to the Island. Puerto Rico became an important sugar producer. The Island was adversly affected by the Stock Market Crash leading to the Great Depression (1929). Commodity prices including sugar collapsed. Puerto Rico experienced devestating nfrastructural and public health as a result of not only the the Depression, but the devastating San Felipe and San Ciprian hurricanes (1928 and 1932). The local political structure was uable to deal with it. Puerto Rico benefitted from the initial relief phase of the New Deal. A unique approach to Puerto Rico's problems was fashioned by the Puerto Rico Reconstruction Administration--PRRA (1935). The PRRA replaced all other New Deal activity on the island. It was a locally-run Federal agency. One assessment reports, "By building the island's first truly public works and establishing its first public authorities to administer them, the PRRA constructed a new public infrastructure capable of addressing three interrelated goals: increasing life expectancy through concrete interventions in public health; providing more egalitarian public access to a safer and more permanent built environment; and limiting the private corporate control of Puerto Rico's natural resources. Designed by Puerto Rican engineers and built by Puerto Rican workers, PRRA public works projects made concrete contributions to the physical security of millions of Puerto Ricans through the construction of hurricane-proof houses, schools, hospitals, roads, sewers, waterworks, and rural electrification networks." Special laws were passed after World War II to promote economic development on the Island. Political leaders in the Third World were convinced that prosperity required industrialization. Puerto Rican leaders were no exceotion. The goal was to develop a manufacturing sector. The Puerto Rican program to promote industry was Operation Bootstrap. The plan was to industrialized by using local labor, draw foreign capital (mostly American), import raw materials, and export finished product (mostly to the United States). A major part of Operation Boostrap was to attract American corporations by offering tax breaks. The econony began to shift from agriculture to manufacturing. Tourism also became important. The result was to make Puerto Rico the most wealthy island in the Caribbean other than small islands like the Caymans with tax haven banking industries. Income levels, however, remained far below those in the mainland United States.

Economic Assessment

Puero Rico along with the Bahamas (benefitting from nordering Florida) have the highest living standards in the Caribbea. with rhe excwption of the Cayman Islands with its tiny population. Even so, it is also the case that incomes in the Island are below all the 50 sttaes and that gap is not closing. It is not clear to us why Puerto Rico has done so much worst ecomomically than the 50 states. The island operates unnder the same Fedral laws as the states and actually has some advantages. Most Island residents do not pay Federal income taxes despite receiving most Federal benefits. This of course is a hige advantage. Why the economy had not been as successful as the economies in the Atates is nor clear. The Puerto Rican ecomomy seemed to making progress with Opertion Bootstrap, but by the 1970s, economic trends began to go terribly wrong. Federal policies adversely affected Puerto Rico, but the major problems appear to have come from policies pursued by the Puero Rican Government. Most Puerto Ricans gravitated toward the Democrtic Prty creating a basically one-party state. Here are the economic natters we have found in assessing the Puerto Rican economy. Cutbacks in the Federal subsidies in recent years and a range of other problems have adversly affected the Island economy which is currently experiencing a Greek-style fiscal crisis, but so not explain why the usland cannot generate economic growth. The problem may well be the Caribbaen itself. There are no Carinnbean countries, exceot for the tiny Cayman Islands that have achieved a high level of national income. The most prosperous Cribban countries have only raeched th level of th poorest Ruropean vcountrued and most are substantially below.

Sources

Burrows, Geoff G. The New Deal in Puerto Rico: Public Works, Public Health, and the Puerto Rico Reconstruction Administration, 1935-1955 (Burrows, Graduate Center, City University of New York).

MacEwanand, Arthur and J. Tomas Hexner. "Puerto Rico: Quantifying Federal Expenditures." Data to calculate net federal expendituresper capita for the states, Puerto Rico, and D.C. have been available in the annual Consolidated Federal Funds Reportfrom the U.S. Department of Commerce and Internal Revenue Service Data Book from the Department of the Treasury. However,and unfortunately, the former of thesesourceshas not beenpublished since 2010, and the data it contained are not available for later years.

Setser, Brad. A senior fellow at the Council on Foreign Relations, an independent, non-partisan think tank. Interviewd for a NBC News report.

U.S. Census Bureau. "Consolidated Federal Funds Report compiled by the U.S. Census Bureau."









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Crerated: 10:13 AM 5/26/2017
Last updated: 11:45 PM 4/27/2020