Puerto Rico Business Magazine: Restore Crony-Capitalism!

The Executive Editor of Caribbean Business magazine, Philipe Schoene Roura, (“Lee Kuan, Quien?” CB April 20) weaves a defeatist narrative of Puerto Rican cultural masochism.  Daring to believe there is a viable solution to Puerto Rico’s current failed client state syndrome is self-inflicted punishment for people doomed to political futility.

Schoene’s socio-economic fatalism advances a revisionist defense of market distorting New Deal economics that brought short term gain and long term pain.  This includes his fond reminiscences of when “officials from around the globe descended on Puerto Rico to observe and replicate a model of industrialization.”

In reality, junkets by foreign bureaucrats did not result in replication of Puerto Rico’s model for national government control of a dependent client state, enduring corporate exploitation in exchange for federal subsidization of an undemocratic regime.  Oblivious to real word outcomes, Schoene longs for the “good old days” of rampant crony-capitalism.

Schoene exalts the partnership between local elected leaders in the colonial regime and federal overseers who were New Deal social engineers, including Rex Tugwell, exiled to the colonies by FDR for being too far left.  A “line of 160 factories” extolled as proof the U.S. Tax Code Section 936 corporate tax shelter was a success does not mitigate the imperialist legacy of a lopsided scheme to plunder huge profits grossly disproportionate to real local economic benefits.

That corrupting tax evasion scam also served political and business elites to make an undemocratic status appear more tolerable.  Instead it robbed local entrepreneurs of confidence Puerto Rico could compete in a diversified, vibrant and resilient market driven economy without tax gimmicks .

Elimination of Section 936 was by bipartisan agreement between Clinton and Gingrich.  Prophetically, U.S.  Senator Patrick Moynihan told Clinton over dinner ending 936 would make statehood necessary to prevent Puerto Rico’s economic failure.

Schoene bemoans as proof of the damage done by loss of Section 936 roughly $315 billion in corporate profits repatriated to mainland corporate coffers since it ended in 2006.  Yet, he’s not bothered by roughly $400 billion in Section 936 profits repatriated to mainland corporations before it was phased out.  Tens of billions that could have been invested in sustainable local development instead became “corporate welfare” for companies in the states.

The unilateral termination of Section 936 (a so-called “pillar of commonwealth”) without local consent, along with unsustainability of business sectors dependent on that tax shelter scam,  explains why it was not “replicated globally.”  Schoene’s nostalgia for “Operation Bootstraps” and Section 936 is not grounded in current reality.

It is the U.S. model of constitutional federalism with equality of citizenship rights and economic opportunity the whole world seeks to replicate.  Statehood is within reach, closer for Puerto Rico than 32 territories that became states by 1959, and so is sovereign nationhood.

Political parties and fake news don’t control what the people do in voting booths.  Secret ballot voting is a sacred right, a confession at the altar of freedom known only to God.  Instead of enslaved obedience to media bias and party junta boycotts, the people need to take control of Puerto Rico’s destiny.  Even though the democratic process is never perfect, the time to secure true dignity and freedom has arrived.

500 years of colonialism, the 65 years of self-inflicted submission under “commonwealth,” is too long for the great and good people of Puerto Rico.

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Howard Hills is former territorial status advisor under Presidents Carter and Reagan, and author of the book “Citizens Without A State” (foreword by former U.S. Attorney General Dick Thornburgh)

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