Travel Update: I’m Going To Puerto Rico

[Originally published by Market Urbanism]

 

Miami, FL

1. My three Forbes articles this week are about a proposed 1,200-foot skyscraper for Brooklyn; about the murder spike that has inflicted post-riot Baltimore; and about a new Houston-based think tank founded by Joel Kotkin called the Center for Opportunity Urbanism.

2. But the real fun begins next week, when I conclude my Miami stay with a 4-day trip to San Juan, Puerto Rico. It’s ironic that while in Miami, there were two Caribbean territories just a short flight away that were in the center of the news, and that I will get to see during their major national transition periods.

One of them, of course, was Cuba, which recently normalized its relations with the United States, highlighted by the reopening of the U.S. embassy. This doesn’t mean that Cuba’s government should now be viewed as reasonable—far from it— but the normalization, if conducted properly, should benefit the people themselves. Opening up trade and travel between nations has always been a path to economic liberalization, which, in hand, enriches citizens and diminishes dictators’ power. Hopefully this will happen in Cuba, with the extreme poverty that I witnessed (documented here and here) reaching its peak before globalization kicks in–although many in South Florida remain skeptical…

The story in Puerto Rico, meanwhile, isn’t so positive. Ever since President Alejandro Garcia Padilla announced in June that the island’s $72 billion debt was unpayable, bond prices tumbled and there were talks of default. On Monday this finally happened, when it could pay only $628,000 of a $58 million bill. The default resulted from decades of poor management both internally, and from Puerto Rico’s status as a U.S. commonwealth, which ties it to certain backwards federal policies. First for the internal struggles:

  • The Wall Street Journal blamed it on “excessive borrowing, anti-growth policies…and the refusal of local politicians to address the failure of entitlement state politics,” highlighted by three pension funds that account for nearly half of the debt.
  • Another factor is the culture of corruption—which trails only New Jersey—including by the police.
  • Puerto Rico’s tax policies, while sometimes more lenient, still charge similar rates as the U.S. mainland, without creating equal service value. This is partly the federal government’s fault—in 2006, it ended the island’s special tax breaks, which caused many corporations to leave. Puerto Rico has been in recession ever since.
  • This decline, marked by 13.7% unemployment, has caused people to rapidly leave, furthering the economic troubles.

Among the problems imposed upon Puerto Rico by our federal government include:

  • The federal minimum wage law, which is impractical, says the Washington Post, given the island’s far lower labor productivity and economic development levels.
  • The Jones Act, which “mandates that ships must be built, owned, registered, and crewed by American citizens or permanent residents in order to ship goods between U.S. ports.”According to the Manhattan Institute, this raises prices throughout America, but especially Puerto Rico, given its reliance on shipping.
  • Federal entitlements have provided a disincentive to work, offering $600 more monthly than a minimum-wage job for a household of three.

What none of these articles provide, though, is the human face behind the government failures—which is why I’m visiting. I want to see how Puerto Ricans themselves have been effected by a decade of recession and ultimate default. What is their standard of living? What are the streets like during the daytime when only 40% of the labor force works? And what do the people themselves think of it all? Thus my San Juan trip, like the Havana one, will be a study of the working-class barrios. Stay tuned!