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Colonialism, Exploitation, and the Betrayal of Puerto Rico
By Ed Morales
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Since its acquisition by the US in 1898, Puerto Rico has served as a testing ground for the most aggressive and exploitative US economic, political, and social policies. The devastation that ensued finally grew impossible to ignore in 2017, in the wake of Hurricane María, as the physical destruction compounded the infrastructure collapse and trauma inflicted by the debt crisis. In Fantasy Island, Ed Morales traces how, over the years, Puerto Rico has served as a colonial satellite, a Cold War Caribbean showcase, a dumping ground for US manufactured goods, and a corporate tax shelter. He also shows how it has become a blank canvas for mercenary experiments in disaster capitalism on the frontlines of climate change, hamstrung by internal political corruption and the US federal government’s prioritization of outside financial interests.
Taking readers from San Juan to New York City and back to his family’s home in the Luquillo Mountains, Morales shows us the machinations of financial and political interests in both the US and Puerto Rico, and the resistance efforts of Puerto Rican artists and activists. Through it all, he emphasizes that the only way to stop Puerto Rico from being bled is to let Puerto Ricans take control of their own destiny, going beyond the statehood-commonwealth-independence debate to complete decolonization.
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When Hurricane María unleashed its devastating Category 4 hurricane winds and rains on the already-vulnerable island of Puerto Rico, I understood almost immediately that it was the inevitable disaster that I’d dreaded for years. The colonial government had been accumulating accelerated amounts of debt for ten years and had defaulted on it, prompting a bipartisan Congress to impose a fiscal oversight and management board. The island’s electrical infrastructure had begun to collapse, and I’d already been caught in traffic snarls with no stoplights and driven up the winding, dark roads into the island’s mountainous interior feeling the encroachment of a dystopian future for myself, my family, and all Puerto Ricans.
I was born in New York and consider myself a die-hard city kid, having grown up in the East Bronx, lived through the downtown years of art explosion and gentrification of the East Village, resettled in brownstone Brooklyn, and returned like a prodigal son to the Bronx’s southern tip in Mott Haven. But like most “Nuyoricans,” I consider Puerto Rico my mecca, the repository of my spiritual self and the endless story of my extended family, who came from two adjacent areas of the island’s mountainous central region. During my childhood visits I immersed myself in those hillside fincas, or subsistence farms; watched as my grandfather milked his cows and chased his roosters; and picked up mangos ripe enough to eat that had fallen from the trees. When I go for a swim at the Balneario de Luqillo, our local beach, I feel myself embraced by the Yoruban spirit of Yemayá and ask to be healed from all the times I missed subway trains pulling out of stations and editors who spiked my stories from publication.
For Puerto Ricans living on the island and in the United States, the twin crises of debt and hurricane recovery present a fundamental reassessment of how they view themselves. After more than a hundred years since the United States granted Puerto Ricans US citizenship, that identity’s value is being questioned and the fantasy of its promise is being exposed. Puerto Rico is now revealed to be what it always was: a colonial satellite, a dumping ground for US manufactured goods, and a tax shelter/investment casino in a land of temptation for tourists: white-sand beaches, exotic cocktails, and polyrhythmic hedonism. It had already been threatened with decades of economic contraction, an emptying of its population, and the transformation into something wasting away but undying, a hollowed-out shell of itself, a site for speculative profit—an island no longer resembling the nationalist dreams of a proud people.1 Post–Hurricane María, all of these factors will be exacerbated, and the challenges facing Puerto Rico’s reinvention are staggering.
The time-stopping, hope-shattering moment of María, which can be extended into the weeks and months immediately following the storm, was the final straw that exposed the illusion of US citizenship that islanders had been granted in 1917. This is how our wannabe American fantasy balloon burst: despite being denied the right to vote in presidential elections and lacking voting representation in Congress, many Puerto Ricans had long felt that their citizenship, which was realized more fully when they migrated to the United States, included equal protection under the law. The cries of dismay heard over and over again in the weeks after María—“We’re US citizens, aren’t we?”—revealed the poignant nature of our delusion.
Despite these fantasies, the US response to Hurricane María proved beyond the shadow of a doubt that residents of Puerto Rico have never really been first-class citizens. The Trump administration’s sluggish and neglectful deployment of FEMA and military assistance, coupled with its brazen willingness to privatize any and all relief efforts, laid bare the racist colonialism with which the United States has often administered Puerto Rico, the largest of its five major inhabited “unincorporated territories.” A Politico investigation published in March 2018 made this stunningly clear: of the individual assistance aid approved in the nine days after each hurricane, $141.8 million went to Houston, whereas Puerto Rico received only $6.2 million.2 The amount of personnel and food and water distribution as well as the number of temporary roof tarps were at least two or three times higher for Texas than for Puerto Rico. Although these numbers came out months after the storm, Puerto Ricans could sense the ugly truth that they were being deprioritized, and it was having fatal results.
The callous indifference of the Trump administration and several officials from FEMA and the military was demonstrated in so many ways—from employing the talking point that there is “a really big ocean” separating Puerto Rico from Washington and that the electrical grid was “dead before the storms ever hit” to tossing paper towels to a handpicked throng of evangelicals in a church in a well-off suburb, believing that constituted compassion. Trump’s oblivious condescension stood as stark proof that the citizenship granted to Puerto Ricans in 1917 has always been second class.
Puerto Ricans have been excluded from first-class citizenship through a legal process that demonstrates the inseparable tie between colonialism and racism. This process goes back as far as the 1901 case Downes v. Bidwell, decided by some of the judges who ruled on Plessy v. Ferguson, when a new colonial turn of phrase entered the American vocabulary. According to Downes, Puerto Rico should not be considered fit for becoming a state in the Union but would be instead an “unincorporated territory” “belonging to, but not part of” the United States. Belonging to, but not part of. Separate, but also not equal. Sort of.
Although most Puerto Ricans grow up not knowing much about this tawdry history, the 1900 debate in Congress about the possibility of Puerto Rico becoming a state was littered with epithets about Puerto Ricans being “mongrels” and an “alien race” unfit to govern themselves.3 We were bodies, then, that should not mix with the body of white America, for we were already stained with mixture, through both our fraught tropical sweatbox of consensual and nonconsensual unions as well as the legacy of our Iberian antecedents, who had already been festooned in Moorish veils of uncertain North African origin. Unwashed bodies, unworthy bodies, and—like the body of Homer Plessy, the Louisiana Creole passenger booted from the whites-only section of the train—bodies marked for exclusion/destruction, the objects of violence, both literally and figuratively.
María came just weeks after Charlottesville and the many other spectacles of implied and literal racial conflict that had marked the first year of the Trump reign, with the mainstream media apoplectically ping-ponging between the Colin Kaepernick–inspired national anthem–kneeling protests and the tragedy of tens of thousands of Puerto Ricans. They were traumatized, root-shocked, and desesperados by a landscape of twigs where Ceiba trees grew, zinc roofs shattered into shards, and a simmering, rising tide of noxious, contaminated water flowing through what were once quaint Caribbean towns. African American athletes’ kneeling protests were a silent rejection of internal colonialism, while the shock doctrine military-P3 complex that was about to overtake Puerto Rico was the endgame of a century or so of external colonialism.
Even well-meaning, proud Puerto Ricans who had served in the US military complained about Trump’s slow-motion doddering on María, insisting that their sacrifice deserved respect. But they seemed to forget that when African American and Mexican soldiers returned home to Jim Crow segregation and dehumanization after fighting the “Good War” of Tom Brokaw’s “Greatest Generation,” their angry disappointment significantly motivated the Civil Rights Movement. The language of “belonging to, but not a part of” and “separate but equal” has never been formally written out of America’s narrative.
So here we were, vulnerable in our beautiful brown bodies, at the intersection of mainland and island, of diaspora and isleñidad, and of what is perhaps the ruling dialectic of the late-capitalist world system, debt and crisis. The debt, all $72 or so billion of it plus $49 billion in unfunded pension obligations, is a kind of fiction, but the crisis is all too real. The privatization frenzy promised by PROMESA, the congressional debt collection agency, has already begun to accelerate as the spin of Trump’s casino-government roulette wheel picks out the winning bids. Planeloads of desperate Boricuas will evacuate to Central Florida, Texas, and beyond, while billionaires like John Paulson gobble up prime beach real estate as they seek the latest in chic tax havens.
In the ancient world, Middle Ages, and early Modern Europe, there were debt jubilees, where the slate of obligations was wiped clean and the collective citizenry could start over again. But aside from some progressive proposals by Bernie Sanders and Elizabeth Warren, most Democrats have focused on investigating the Trump administration’s unacceptable handling of María while virtually ignoring the machinations of the Fiscal Oversight and Management Board (FOMB)—known in Puerto Rico as “La Junta”—as it imposes austerity policies. With its local government officials rendered powerless by the FOMB, Puerto Rico remains stuck in the powerlessness of its colonial status and can’t find a path to economic self-determination.
Although it is the only possible humanitarian solution, rescinding the debt—or even a vast reduction of the debt—seems highly unlikely, and the US government seems poised to use the debt’s nagging accumulated weight to institute a permanent state of crisis. The indebting of Puerto Rico was accomplished through a systematic policy intertwined with colonialism. After the end of the slave economies in the nineteenth century, the United States and European countries have intervened in Caribbean economies by overwhelming local currencies and leveraging control of agricultural production, creating the conditions for debt accumulation. In the second half of the twentieth century the US financial sector offered indebtedness as a solution to Puerto Rico’s inability to weather the 1970s recession, creating the conditions for speculation on its rising obligations.
The debt crisis represents a normalized scenario for a colony—or “unincorporated territory”—to be able to operate when its economy is no longer creating jobs or retaining profits made by outside investors. A major motif of this crisis is the infrastructure that—like our bodies, subjected to violence—was exposed and poorly maintained. Electrical cables running along haphazardly installed posts crisscrossing the island, constantly failing for years before the storm, now lay fallen like the mass casualties of war. Collapsed like the stick-figure balloons that advertise car washes, Puerto Rico’s infrastructure is in a grand mal seizure.
The state of the electrical infrastructure is directly related to the way the island territory got caught in a web of borrowing in the form of municipal bonds just to pay government expenditures. As payroll and pension payouts for its hundreds of thousands of workers as well as minimum operating costs swallowed up most of the liquid funds available, maintaining the infrastructure—including roads, public buildings, and so on—was neglected. Hurricane María merely made visible what had already been apparent to Puerto Ricans: the island as a whole was deteriorating, and the merciless path of destruction created by the endgame of Puerto Rico’s debt crisis could no longer be covered up.
So how did we get here? For me it all started when I went to visit my mother in the house she and my late father built in the 1980s for their retirement. It was the end of June in 2015, and I found myself watching, along with millions of television viewers, Governor Alejandro García Padilla declare that the island territory’s $72 billion debt to a staggering array of bondholders was unpayable. The warning sirens of the debt crisis had been sounding for a year, but now we were all facing a watershed moment in our—and America’s—history: the life we had lived as the people of Puerto Rico, the Caribbean’s Great Democratic Experiment, was a fantasy, and now it was over.
For many Puerto Ricans on the island, hoping to live a sustainable life with a steady job in a viable profession or to start and grow a small business and raise some children, the looming debt crisis and the hurricane’s aftermath had created a tremendous amount of doubt. An exodus of both skilled professionals and unskilled workers had already been underway since the island had gone into a recession in 2006, and the seeming inevitability of prolonged economic contraction was creating a sustained feeling of anxiety about the future. Talk show hosts who once focused on political gossip with manic intensity began to lapse into a kind of somber monotone, a fully realized voice of ay bendito resignation, recalling the lament of songwriter Rafael Hernández’s suddenly impoverished mountain peasant jíbaro.4
Yet all those folks whose hopes were dashed by the default had never fully acknowledged that they were based on a fantasy that the island was a “commonwealth” with a position in the US orbit that almost made it one of the “states.” Over the last four years—since Alejandro García Padilla’s 2015 announcement through the September 2017 nightmare of María—I saw over a hundred years of America’s failed colonial experiment flash before my eyes. The 1898 landing of American troops in the southern port of Guánica, the imposition of the English language in schools and in the courts, the massacre of nationalists in Ponce, the false hope of the 1952 Constitution and commonwealth status, the Great Migration of the 1950s and 1960s, West Side Story, Freddie Prinze, the Young Lords, the Nuyorican Poets, Rita Moreno, the South Bronx’s Fort Apache, Roberto Clemente, Raúl Julia, Rosie Pérez, Ricky Martin, Jennifer Lopez, Marc Anthony, and Daddy Yankee. All of it spinning before us, evading our grasp like the snow globe that slips from the hands of a flagging Citizen Kane.
Clearly this was the beginning of an end, yet the whole story, from its very prologue, had never been adequately explained. Few Puerto Ricans—let alone mainland US citizens—had really come to grips with the reality that Puerto Rico is the world’s longest-held colony, tracing back to its seizure by the Spanish in 1493, and that its history is emblematic of how a dark side of colonizer behavior has always tainted America’s founding story—its noble declaration of independence from a colonial power. At various points in its history Puerto Rico has served as a military outpost, laboratory for birth control experiments, and dry run for free-trade policies like the North American Free Trade Agreement (NAFTA). Now it would become a testing ground for how far a fiscal control board could go to impose austerity on a subservient government to extract as much as possible from the Puerto Rican people and its public institutions to pay debts generated by Wall Street speculation.
It’s also crucial to understand how Puerto Rico’s cycle of debt is part of a long-established set of economic relationships between Europe and the Americas. The common knowledge about this part of world history focuses on the origin story of industrial capitalism in Europe and how that dynamic played out in the United States. However, the expansion of trade and finance capital, coupled with the massive exploitation of slavery, is key to understanding the underdevelopment of the Caribbean and Latin America. The late-nineteenth- and early twentieth-century period was not just playing out the final stages of Manifest Destiny; it was when the United States took control of Latin American economic activity to its advantage.
This takeover entailed not only penetrating and controlling the productive sectors of those newly acquired possessions and economies but also enforcing a new debt-collection regime on the Caribbean, including the islands of Dominican Republic and Cuba. In the early twentieth century Wall Street investment banks like the City Bank, J.P. Morgan, Speyer, and Kuhn, Loeb & Co. began lending money to Caribbean nations and the colony of Puerto Rico, epitomizing what economist Peter James Hudson calls the confluence of “finance capitalism with racial capitalism.”5 Almost a century earlier, in 1825, France demanded a 150-million-franc payment from Haiti to compensate for its loss of slaves and land after their late-eighteenth-century revolution. This helped set up a model that other European powers quickly emulated: indenturing Latin American countries through debt. The United States merely decided to assume the debt collector role as a way to eliminate European influence.
After it came under US control in 1898, Puerto Rico evolved from being a site of domination by US-based sugar manufacturers to a midcentury showcase for the success of US industrial capitalism in the Caribbean. The latter phase came about as a reaction to pressures from the postwar UN for world decolonization, the threat of a militant Puerto Rican nationalist movement that called for independence, and a Western desire to blunt any optimism about Cuba’s socialist experiment. But as the optimism generated by the industrialization of the island in the 1950s faded with the 1970s recession, the turn to globalization and free trade became the key to Puerto Rico’s modern demise.
As part of the industrialization effort, euphemistically called “Operation Bootstrap,” the United States allowed corporations to set up tax-free on the island, employ workers for below minimum wage, and corner the market on selling to Puerto Rican consumers. But when the NAFTA era began in 1994, American businesses flocked to Mexico, Central America, and beyond, where the wages and operating costs were a fraction of those in Puerto Rico, which no longer held a competitive advantage. When a provision of the IRS tax code giving tax breaks to American corporations operating in Puerto Rico was phased out between 1996 and 2006, the exodus of US corporations accelerated, and a deep recession set in. The island’s government, which had been already borrowing to cover essential services, engaged in a shadowy partnership with Wall Street municipal bond market speculators, exacerbating the accumulation of the debt, which eventually grew into the current $72 billion debt crisis.
The crisis was highly abstract, and at first almost no one seemed to understand or care much about it. Its intricacies were couched in the exotic language of finance: interest rate swaps, complex financial instruments, triple-tax exemptions. The island’s political discourse was wrapped up in its never-ending status debate and a continual back and forth between its two main political parties, which favored either a continuance of the commonwealth status or petitioning for US statehood. Media coverage was limited to local San Juan newspapers and business press outlets like the Wall Street Journal and Bloomberg Business, emphasizing at first the plight of the mom-and-pop investor and, as the crisis worsened, the threat to the municipal bond market itself. The accumulation of debt had an ambivalent morality to it—bond selling was irresponsible and reckless, but from the Puerto Rico government’s perspective, it could at least be justified with keeping public services afloat and saving the jobs of tens of thousands of Puerto Ricans. As the private sector began to struggle, the government became one of the most reliable employers on the island, propping up its tenuous middle class.
The slow erosion of the island’s quality of life, infrastructure, and essential services was a constant theme after the US corporate tax breaks were phased out from 1996 to 2006. Private-sector jobs were evaporating at a record pace, and the government implemented job cuts by the tens of thousands. Hundreds of thousands of Puerto Ricans were migrating to the mainland, as US citizenship allowed them to do so without restriction. When Governor García Padilla determined that the debt was unpayable, Congress rushed to pass a bill called PROMESA—the Spanish word for “promise”—which President Barack Obama signed into law in June 2016. It imposed an unelected fiscal oversight and management board with the power to control all aspects of public policy on the island. PROMESA was ostensibly installed as a federal mechanism to restore fiscal responsibility, with a moral mission to cut back on expenses and impose on the US territory a sense of shared sacrifice. But islanders saw it as a very expensive debt collection agency, one whose $1.5 billion cost over its initial five-year term would even have to be covered by the island’s government coffers.
Appointed by former president Barack Obama from nominations made by both Republicans and Democrats, the original PROMESA board had seven members, only two of whom were residents of Puerto Rico, and all were from the financial sector. The use of fiscal oversight boards goes back to New York’s financial crisis of the 1970s and such boards were more recently used for public budget crises in Detroit and Washington, DC. But this oversight board—which includes a former executive of Santander Bank and a member of the island’s Government Development Bank, both institutions that were players in the formation of the crisis—is widely perceived as a group of self-interested outsiders, an obvious imposition of colonial authority. What’s more, as Puerto Ricans increasingly suspect their elected officials of corruption, many are not willing to accept guilt for the accumulation of the island’s debt.
Beyond the national trauma that Puerto Ricans are experiencing, the present cataclysms may also provoke a pernicious blowback into the United States’ municipal bond market. While one of the narratives about Puerto Rico’s accumulation of debt places blame on the Puerto Rico government for excessive borrowing, seeking to instill a sense of guilt on the island as a whole, the financial crisis may inevitably send market headwinds crashing beyond the island’s borders. The fiscal oversight and management board is partially meant to forestall any rippling effects from Puerto Rico’s crisis that could unmoor looming debt crises for some US states—like California, New Jersey, and Illinois—that, like Puerto Rico, don’t have access to bankruptcy protection. Many economists predict that the slow recovery from the 2008 crash most likely means there is another financial crisis in the future, brought on by failing states and their foundational positions in the bond market.
The debtor relationship between the United States and Puerto Rico, though always present, has exploded as a product of the neoliberal free-trade era. Straddling the border between being treated as a US state and an international territorial entity, the island became sucked into a rapidly expanding municipal bond market, an arena that could quickly shift from “safe,” low-risk investment to the distressed debt favored by vulture investors. All of this activity was cloaked in the mysterious language and practices of high finance, with the average Puerto Rican only able to measure their standing through their status as consumers of US products or their ability to escape the island to live as fully entitled citizens in one of the fifty states.
Although Puerto Rico’s debt crisis situation, as a result of its use as a laboratory for bond speculation and offshore banking for tax avoidance, seems remote in its far-off Caribbean location, it could serve as a preview for the trouble brewing in the United States. In 2018, as Congress rolled back the Dodd-Frank measures designed to regulate banking institutions after the 2008 financial crisis, it became increasingly clear that Puerto Rico–like municipal debt crises may become more common in the US. The debt that Puerto Rico had accumulated by borrowing for decades just to cover governmental expenses has been portrayed as irresponsible, but it was the same public-sector spending strategy that New York City used in the 1970s, that had caused bankruptcy-like procedures in Detroit and Washington, DC, and currently threatens Illinois and other troubled states.
In many ways imposing austerity on Puerto Rico is a way for the United States to externalize its own shaky financing and create its own “exceptionalism” by asking its colony to pay for its own sins. With the Trump administration driving up the national debt to $22 trillion, it’s hard to argue that the United States is a paragon of financial responsibility. Puerto Ricans increasingly use slogans like “esa deuda es inmoral” (that debt is immoral) that absolve them from a debt created by a government and elite banking sector unchecked by Washington and Wall Street, reflecting that all this trouble may yet come home to roost in the United States.
Ringing out faintly over the howling of natural disasters, alarm bells have sounded in Puerto Rico. Its government is reeling from being perceived as corrupt and powerless, plunging its civil society into uncertainty, with many islanders girding for active resistance in the form of street protests and general strikes. Puerto Ricans’ collective spirit may soon shift from passive guilt over their government’s ineffectiveness to hardened regret that they weren’t quicker to identify and counter the true authors of their home’s decay. The battle lines have already been drawn in the fight to save the island’s university and public-school system, the surface road infrastructure is rapidly crumbling, and the electrical grid, particularly after Hurricane María, has been shown vulnerable to complete collapse. There is an imminent healthcare crisis as hundreds of doctors flee daily from a system struggling to serve an aging population. This societal precarity, in addition to vulnerability to new ecological disasters, will make any recovery long, tortuous, and prone to setbacks.
But across the water how soon will it be before mainland Americans realize that Puerto Rico’s fall may greatly erode the American Dream from within? How long will it take before it becomes obvious that the original dream of American emancipation from European colonial control is inevitably connected to the US subjugation of a multiracial, “foreign” people? The more the bad news about this unincorporated tropical paradise is exposed under the media microscope, the more it threatens to subvert the best-laid plans of a nation that sees itself as the light of the world. The imposition of PROMESA—its program of austerity and the tension this will create between the Puerto Rican people and vulture- and hedge-fund bondholders—may further fracture US global financial primacy if the municipal bond market, a linchpin of finance capital worldwide, is called into question.
Even before María the drama stirred by the imposition of the FOMB, which took power in January 2017, had been building in intensity. Tensions between La Junta and the government, headed by pro-statehood governor Ricardo Rosselló, were already being felt in the process of creating a budget and fiscal plan. To complicate matters further, when the government and La Junta filed for a modified bankruptcy procedure facilitated by PROMESA in May 2017, a circuit court judge from Brooklyn, Laura Taylor Swain, became a third major player controlling the island’s destiny.
- "The hurricanes, the debt, the depopulation. Ed Morales has written an urgent, fascinating, and impassioned portrait of Puerto Rico, the world's oldest colony."—Daniel Immerwahr, author of How to Hide an Empire: A History of the Greater United States
- "Ed Morales has put together a compelling indictment of U.S. colonialism in Puerto Rico, based on journalistic and academic sources as well as his personal experiences as a New York-born Puerto Rican who cares deeply about his ancestral homeland. His work is an engaging, compassionate, well-documented, and crisply written analysis of the political, economic, and demographic downturn of the Island, after more than a decade of economic recession and almost two years since hurricane Maria."—Jorge Duany, author of Puerto Rico: What Everyone Needs to Know
- "Ambitious, intimidating, and beautiful...This book will be particularly important to readers with a connection to Puerto Rico and useful and thought-provoking to anyone else seeking to understand capitalism's past, present, and future."—Library Journal
- "[An] eye-opening economic and political history... [Morales's] technical yet impassioned polemic will persuade those with a keen interest in the subject."—Publishers Weekly
- On Sale
- Sep 10, 2019
- Page Count
- 352 pages
- Bold Type Books