Why the Black Puerto Rican Flag?

Puerto Rico Black Flag

Its a symbol of resistance and opposition against the islands colonial status. There are people that argue that the problem that caused the entire debt crisis in Puerto Rico was excessive spending by the government. This is wrong and a very, very superficial take on a very complex situation. It is drenched in ideology and ultimately misses the point. In a nutshell, Puerto Rico's debt crisis is a consequence of Puerto Rico's structural position in relation to the US over the years.

So in a nutshell, Puerto Rico's crisis was caused by the way its relationship to the US oriented its economy to US businesses and investors. For a long time, it looks like Puerto Rico's development was defined by a series of tax breaks that the island received from the US to allow it to develop and industrialize. It was given triple tax exempt status in 1917 thanks to the Jones-Shafroth Act which made investing in PR very attractive. In 1976, it also received a tax break (thanks to section 936 of the US tax code) which drew US companies to the island; the Puerto Rican tax code itself also attracted subsidiaries of US companies to the island. This benefited the economy for a while and it allowed it to develop much quicker and more intensively than other islands in the Caribbean. Initially, this development came through the manufacturing sector but after the 1980s the pharmaceutical industry as well as other multinationals came to dominate the PR economy. However, although PR might have benefited at the time, simultaneously it made the Puerto Rican economy dependent on US tax breaks and incentives. Rather than developing its tourism industry or agriculture, Puerto Rico's economy actually became artificially skewed towards US investments and businesses.

However, as soon as the US decided to phase out these tax breaks in 1996, US subsidiaries in Puerto Rico started to pull out, unemployment rose and the economy dove into a recession, unable to attract capital from the US. In order to fund its budget deficit, the government started borrowing excessively. Of course, the debts became unsustainable because the economy continued to shrink, unemployment continued to rise and Puerto Ricans emigrated en masse to the US. At the same time, Wall Street played a huge role in making a bad situation even worse. PR became highly dependent on Wall Street to restructure its debt, which Wall Street used to push Puerto Rico into a lot of predatory loans and toxic interest rate swaps. This made the island acquire a bunch of variable interest rate loans which raked in a lot of money for Wall Street but put Puerto Rico in an increasingly precarious situation (over half of the $70 billion debt is interest). Over the years, the debt increased while the economy stayed stagnant, forcing it into a perverse relationship with Wall Street in order to continue to borrow its way out of its existing debt. This relationship was enabled by the completely unregulated Wall Street banks as well as the ensuing financial crisis. At some point, due to this whole situation, Puerto Rico stopped being able to borrow enough to pay off its debt, the debt became too big, and here we are.

As far as the solution goes, what some people are saying is that the problem can only be saved by making PR citizens pay for their irresponsible spending -- basically: decreasing wages, cutting in social programs, further rounds of privatization which of course lead to a higher cost of living overall, etc. This approach misses the point though -- it's not that Puerto Ricans do not want to pay their debt, it's that they are not able to. And they aren't able to because their economy has been skewed due to a decades-long relationship with the US which (although beneficial at certain moments in history) can overall be characterized as unfavorable for PR. Anyone who says that Puerto Ricans are lazy or that they spend too much misses the whole story and the fact that this problem is the product of a 100-year long neo-colonial relationship with the US rather than a character flaw of the Puerto Rican people. And anyone who wants to solve the debt problem has to solve the structurally inferior position of the Puerto Rican economy in relation to the US.

And those who say that Puerto Rico needs to be disciplined by subjecting its population to torturous austerity measures (i.e. PROMESA) actually doesn't understand that austerity measures have never worked to help countries out of debt crisis. This is why PROMESA will fail -- and is already actually failing, as demonstrated by the fact that the Financial Control Board has done nothing since they came into power.