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A Duel of Dreams

Linda Backiel is a criminal defense attorney living in San Juan, Puerto Rico.

Naomi Klein, The Battle for Paradise: Puerto Rico Takes on the Disaster Capitalists (Chicago: Haymarket Books, 2018), 96 pages, $9.95, paperback.

Naomi Klein travels the world documenting how capitalism feeds on the carrion of societies devastated by disaster. In January 2018, after two hurricanes destroyed much of Puerto Rico’s infrastructure, she participated in a forum at the University of Puerto Rico on disaster capitalism.1 This phenomenon moves fast, but takes a long-range view, she warns.

But because she was here on the ground, navigating darkened roads blocked by mudslides, she also witnessed the will and creative spirit of the Puerto Rican people. After peering down on an island gone dark from an oasis of solar-generated light at Casa Pueblo in Adjuntas, Klein attended a gathering of dozens of organizations in Humacao—where María struck land with winds of 135 miles an hour. In response, they had created community kitchens, community power grids, community wells, and just plain community. One participant expressed the Puerto Rican response to the recent devastation as “a level of resistance and support that I didn’t imagine was going to be possible.”2

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In fact, much of The Battle for Paradise describes how grassroots organizations—some decades old, some newly sprung from the debris—created the kind of intensely local, deeply rooted resistance that complicates the projections of cryptocurrency investors and their ilk, on whom Klein also spied. Six months after the hurricanes, they gathered in the marble halls of the Condado Vanderbilt Hotel, determined to make Puerto Rico the “Hong Kong of the Caribbean.”3

By this time, most Puerto Ricans were relieved to have found a relatively reliable source of diesel for the generators that still powered our homes and offices. But for the likes of the chair of the Ayn Rand Institute and hedge fund magnates, the devastation spelled an opportunity to cash in on hare-brained investment schemes designed—before María showed the world just how vulnerable we are—to attract big capital to a small island by promising one of the world’s best tax havens.4 The catch? The multimillionaires must spend at least 183 days a year…in Puerto Rico.

The Battle for Paradise describes a duel of dreams for post-María Puerto Rico. On the one hand, networks of resistance and resilience sprang up around the island in the wake of the collapse of not just trees and houses, but infrastructure and government. On the other, a small group of super rich speculators and futurists were poised to cash in on what Puerto Rico’s then-Governor Ricardo Rosselló described as an opportunity to “sort of restart and upgrade” a nation he shamelessly called a “blank canvas.”5 Rosselló was forced out of office on July 24, 2019, by mass protests, in large part thanks to the networks of resistance and resilience that came to life when the government essentially disappeared after the 2017 hurricanes.6

The canvas has never been blank, but the terra nullius fantasy is not new.7 Before the middle of the last century, Puerto Rico’s prophetic Nationalist Party leader Pedro Albizu Campos explained what the United States wanted in Puerto Rico: the cage without the birds.8 In this densely populated land to which its people have been passionately attached since 4,000 B.C.E., getting the birds out of the cage has not been easy. Hurricane María unlatched the door and sent many scattering.

Mayra Santos-Febres is a canary in that cage. As a writer, teacher, and cultural entrepreneur, she sings for her living.9 She sings of the madness and heartbreak caused by both colonialism and hurricanes on an island she, her ancestors, and her children call home. Her poetry book Huracanada (Hurricaned) is a diary of searching for bread, searching for the dead, and searching for community.10 From “Hurricane”:

Where are we going to find the strength to lift all that has fallen?

To gather what has been scattered?

To re-open the highways

of the heart?

From “Debt”:

Now it’s the island that we must escape

At any cost.

Hungerisland.

We mortgage all its assets,

dressed in new clothes,

underneath: skin and bones,

and open sores.

We dress ourselves and mortgage the sores

That come back to bite us;

The damage is collateral.

Only if the debt rips off the clothes

that were never ours

will the debacle come to its end.

“The clothes that were never ours” are the trappings of colonialism. Anyone interested in how Puerto Rico is surviving the impact of hurricanes, bankruptcy, and colonialism should read both books. One sings from within the eye of the storm, the other appraises the view from the belly of the beast.

The Theory

Klein’s general thesis, not explicit in this brief book, is that an economic system that depends on growth but resists regulation is itself a disaster-generating machine. The lack of environmental regulation, for example, predictably creates hurricanes, floods, and other so-called natural disasters. The lack of economic regulation does the same for currencies and markets, (literally) discrediting governments and making privatization a requirement for “reconstruction” and post-disaster aid—a free-for-all for those with capital. Antony Loewenstein writes that the “unavoidable excesses and inequalities of capitalism itself” may create the disaster of “a world ruled by unaccountable markets.”11

And then there is the question of what to do with all that military hardware, technology, and expertise that is rapidly becoming obsolete as cyberwar becomes the norm. Militarize and privatize disaster response, turning disaster into an opportunity for both control and profit. Who better understands destruction than the military?

In the military takeover of Puerto Rico’s airport, sea ports, and traffic intersections in the wake of María, some saw not just a replay of the 1898 invasion, but a new occupation. Most of the seventeen thousand troops deployed to Puerto Rico and the Virgin Islands came here. But the truth is that the uniforms did not need to stay on the ground once they had cleared the way for the Federal Emergency Management Agency and its contractors, many with military experience.

Whitefish, Montana, became emblematic. Just days after María wiped out Puerto Rico’s power grid, two men sitting in an office in a tiny town in Montana acquired a $300 million contract to put it back together. They had no experience with anything remotely similar, and no employees or equipment for the job. Three former Donald Trump cabinet officials were friends of the founder and general partner of HBC Investments, the private equity firm and Republican campaign contributor that financed Whitefish Holdings.12 It was an emergency. While the power was out, maybe the rules did not apply. With communications down, maybe no one was supposed to find out.

The Disaster Before the Disaster

The Whitefish scandal is merely one illustration of the ways capitalism engorges itself on disaster. Such short-term antics distract attention from long-term ones. Hurricanes distract attention from the not-at-all natural disaster Puerto Rico has endured for more than five centuries that is responsible for our current state of collapse: colonialism. First, it robbed Puerto Rico of its natural resources, all but annihilated its native people, deforested its hills, and exhausted arable lands with ever-larger industrial sugar plantations energized by the labor of enslaved Africans. Then it addicted the economy to pharmaceuticals and other U.S.-based industries.

One of the roots of the most recent economic collapses is the decision of the U.S. Congress to eliminate the incentive for U.S.-based corporations to locate manufacturing plants (primarily pharmaceutical, health care electronic equipment, and scientific instruments) in Puerto Rico. So dependent was the economy on this incentive, largely codified as section 936 of the U.S. tax code, that every government agency and corporation in Puerto Rico has 00936 as its five-digit zip code.

The decision to abolish this pillar of Puerto Rico’s economy was strongly supported, if not fomented by, Puerto Rico’s prostatehood New Progressive Party (PNP). The party hated the law, largely because it was part of a Popular Democratic Party (PPD) platform to keep bread in the hands of workers and the middle class, and there was little incentive to drastically change the political status quo as long as they were happy: Puerto Rico as a U.S. territory with a modicum (some would say simulacrum) of home rule. The PPD calls this “the best of both worlds.”

Prostatehood forces also theorized that the elimination of section 936 would not spell economic disaster because someone would find other ways to incentivize economic growth, and any economic growing pains would support their push for statehood by making Puerto Ricans realize that “we need Tío Sam to survive.” The failsafe: that an island supporting what were then 3.7 million U.S. citizens was too big to fail, so if economic collapse were imminent, Tío Sam would be forced to rush to the rescue, putting an end to talk about independence or autonomy. Hunger, and the fear of hunger, has always been the populist bait of the prostatehood PNP.

Section 936 was repealed in 1995; the ten-year phaseout of its benefits culminated in 2006, just a little ahead of the U.S. economic tailspin. The results were hardly surprising. One study reports they included a 16.7 percent decrease in manufacturing wages and a decrease of up to 28 percent in the number of manufacturing establishments.13

At the same time, the government was doing what governments do in times of economic crisis: downsizing. In Puerto Rico, the government is still the largest single employer, employing over a quarter of the workforce in 2016, even after years of early retirement incentives and cutbacks.

Between 2006 and 2016, the number of persons employed in Puerto Rico was reduced by 52 percent. Between 2010 and 2015, Puerto Rico lost 6.6 percent of its population. It has lost another 4 percent since María.14 Twenty-seven of Puerto Rico’s seventy-eight municipalities had unemployment rates of between 15 and 22 percent for the fiscal year of 2016, with workforce participation just under 50 percent.15 The impact on the tax base—government revenue—was profound.

But the factor universally cited as the source of this economic debacle and the focus of government recovery efforts is debt. It is not, as President Trump would have it, the result of poor financial management (and he should know about that), but, in significant part, due to U.S. law once again.16 Between 1996 and 2016, while the 936 benefits were phasing out, Puerto Rico’s government did what everyone running out of money does—it accumulated debt.

It was able to do so at rates no ordinary debtor—not even most municipalities or states—could do, thanks to other U.S. laws that made bonds sold to finance Puerto Rico’s agencies and government exceptionally attractive by being triply tax exempt in every U.S. state.17 Thus, even while deeply in debt, Puerto Rico was able to continue to accumulate unsustainable debt by selling more bonds, meaning, accumulating even more debt. At some point, this whipped cream castle had to collapse.

But not factored into anyone’s calculus was the wobbly tower of subprime mortgages, credit default swaps and other derivatives, and the globalization of production as well as markets, all of which helped turn Tío Sam himself into a panicked miser.

Enter la Junta

By the time Hurricanes Irma and María hit, Puerto Rico was already bankrupt and under the control of a cynically baptized Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA). The macaronic acronym was invented by someone who knew enough Spanish to make control and austerity sound like a PROMISE.18 It created what everyone here calls simply la Junta. Short for la Junta de Supervisión y Administración Financiera para Puerto Rico (the Financial Oversight and Management Board for Puerto Rico). Puerto Rico cannot spend money without its approval. The Junta’s principal focus has been on how to pay off as much of the debt as possible and force Puerto Rico to operate with a balanced budget—something the United States cannot do.

Well before the shock of the hurricanes, the Junta proposed the usual gamut of austerity measures, seeking to replace, at least partially, government services from education to incarceration and transportation with private enterprise. In a culture where the right to strike is guaranteed by the constitution, the federally imposed board has commanded Puerto Rico change its labor laws to enforce at-will employment. Rosselló and the PNP legislature resisted the measures that would surely cost their party the next election.

The most recent in a stream of legal challenges to the Junta involved a clash between two clauses of the U.S. Constitution: the Territorial and the Appointments Clauses.19 It recently took fifty-two lawyers and three judges to set the stage for another trip to the U.S. Supreme Court. That body has confirmed but dared not name Puerto Rico’s colonial status twice in the last three years by affirming its continued subjection to the Territorial Clause.20

Martin Guzman and Joseph Stiglitz agree with those who say that the hurricane was an opportunity to restart Puerto Rico’s economy, but at the end of November last year wrote that the opportunity had already been passed up.21 Instead of scrapping the economic recovery plan developed pre-María calling for more austerity and counting on fewer Puerto Ricans, post-María plans contemplate that emigration plus disaster relief funds would accelerate recovery, permitting a larger pay off to creditors and allowing Puerto Rico to resume borrowing sooner than anticipated.22

Common sense asks: If an economy needed bankruptcy protection to survive a tidal wave of debt, how could the future look rosier after a hurricane wiped out its infrastructure? Especially when most of the profit from the recovery funds will be repatriated by enterprises devoted to reconstruction in the wake of wars, famine, and disaster on a global scale.

The Junta’s plans for Puerto Rico’s future contemplate getting rid of over a million of the troublesome birds currently living in the future golden cage. They will reduce poverty and income disparity by opening the doors of the cage to foster the outmigration of a large number of those needing government services, from health care to education, creating a space more amenable to those who do not like to hear roosters crowing at all hours and feel some discomfort at large crowds praising a flag with a single star and words that rhyme with sovereign.

But PROMESA has also collaborated with María to strip the emperor of his clothes. When Philip Alston, UN Special Rapporteur on Extreme Poverty and Human Rights, was dispatched to the United States, he too visited Puerto Rico. “Political rights and poverty are inextricably linked in Puerto Rico,” he reminded the world. “In light of recent Supreme Court jurisprudence and Congress’s adoption of PROMESA, there would seem to be good reason for the UN Decolonization Committee to conclude that the island is no longer a self-governing territory.” As if it had not already approved thirty-six resolutions essentially to that effect.23

For the two years since Hurricanes Irma and María, we have been asking ourselves whether we can act on the vow inspired by the flamboyant recovery made by nature. In the still dark days, the poet said:

Let it be known,

take note. We can all of us together

pick up what has fallen, give birth to a new Island.

In the last two weeks of July 2019, the people of Puerto Rico picked up the flag of resistance and gave birth to a new sense that we can.

Notes

  1. The term disaster capitalism was coined by Klein and popularized in her book The Shock Doctrine: The Rise of Disaster Capitalism (New York: Picador, 2007). Her excellent article “How Power Profits from Disaster,” Guardian, July 6, 2017, illustrates how Trump cabinet members planned to profit from the Iraq war, migration, and Hurricane Katrina.
  2. Elizabeth Yeampierre, quoted in Naomi Klein, The Battle for Paradise (Chicago: Haymarket, 2018), 77.
  3. Klein attributes this catchy term to Yaron Brook, chair of the Ayn Rand Institute, who has taken advantage of Law 22.
  4. Law to Incentivize the Transfer of Investor Individuals to Puerto Rico, Law 22 of 2012, as amended, is designed to lure those whose income comes from dividends and capital gains to establish residence in Puerto Rico in exchange for exemption on income from those sources. Under Law 20 of January 17, 2012, U.S. corporations that relocate to Puerto Rico in order to export services pay only 4 percent tax, and any dividends paid are tax free.
  5. The Battle for Paradise, 25. Cryptopians called María “the perfect storm.” Although bad for the people of Puerto Rico, its new visibility opened up a world of possibilities for them. Klein is not making this up. “We’re going to make this cryptoland,” announced Bryan Larking of the publicly traded Blockchain Industries, based in Puerto Rico (Nellie Bowles, “Making a Crypto Utopia in Puerto Rico,” New York Times, February 2, 2018). Unfazed about the difficulty of securing power, light, and water, they plan to build their own city.
  6. The spark that incited the two weeks of massive demonstrations that forced Rosselló to resign was the publication of the content of the private chats of the then-governor and his innermost circle, some of whom held no government positions. They were rife with cynicism (“we fool even our own”), misogyny, and homophobia. They were published the same week that two members of his administration and a private contractor were arrested in a bribery scandal.
  7. The term terra nullius (no man’s land) was used in international law to justify colonialism. It purported to describe lands unowned or unoccupied by any so-called recognized nation, and justified conquest and occupation of lands belonging to indigenous peoples by European powers. As a result of persistent struggle by the native peoples of Australia, its High Court rejected the doctrine as part of Australian law in Mabo v. Queensland (No. 2, 1992). See, for example, Irene Watson, “Re-Centering First Nations Knowledge in a Terra Nullius Space,” ALTERNATIVE 10, no. 5 (2014): 508–20.
  8. Pedro Albizu Campos (1891–1965) presided over the Nationalist Party of Puerto Rico Liberation Movement between 1930 and his death in 1965, the result of radiation while in prison. As a student at Harvard University, he was inspired by resistance to colonialism in India and Ireland. He developed the legal argument that the Treaty of Paris, by virtue of which the United States “acquired” Puerto Rico as a condition for ending the Spanish-American war in 1898, violated the Charter of Autonomy then governing Puerto Rico’s relation with Spain. Velázquez v. Puerto Rico, 77 F.2d 431 (1st circa 1935). The Charter provided that once approved, it could only be modified at the request of Puerto Rico’s legislators. Carta Autonómica de Puerto Rico de 1897, Additional Art. 2. The Treaty provided that “the civil rights and political status” of Puerto Rico’s “inhabitants…shall be determined by the Congress.” Art. 9, 30 Stat. 1759. Long relegated to the category of independentista folklore, Albizu’s repudiation of Puerto Rico’s treatment as a mere piece of “unincorporated territory that belongs to, but is not part of” the United States under Art. IV, Cl. 3 of its Constitution as a violation of international law has recently gained respect from unexpected sources. See, for example, Juan R. Torruella, “Why Puerto Rico Does Not Need Further Experimentation with Its Future: A Reply to the Notion of ‘Territorial Federalism,‘” 131 Harvard Law Review Forum 65 (2018); José Trías Monge, Puerto Rico: The Trials of the Oldest Colony in the World (New Haven: Yale University Press, 1997). Torruella, a Puerto Rican, was the Chief Judge of the U.S. Court of Appeals for the First Circuit and Trías Monge was the Chief Judge of the Puerto Rico Supreme Court. Some of the current writers are indignant because Puerto Rico is not “a part of” the United States (that is, a state); others because the United States refuses to acknowledge what they believe was a commitment to grant Puerto Rico greater autonomy. Largely silent in the current clamor are the proindependence voices, grown hoarse repeating this argument over the last eight decades.
  9. Mayra Santos-Febres is one of Puerto Rico’s most prolific and active authors, as well as a literary activist and educator. Huracanada is her meditation on Hurricane María. Her novel Our Lady of the Night is available in English. She is the originator of the Feria Internacional del Libro, which has established Puerto Rico as an important center of literary activity in Latin America and the Caribbean and takes literature to public schools and communities.
  10. Mayra Santos-Febres, Huracanada (San Juan: Trabalis, 2018).
  11. Antony Loewenstein, Disaster Capitalism: Making a Killing Out of Catastrophe (London/Brooklyn: Verso, 2015).
  12. Steven Mufson, Jack Gillum, Aaron C. Davis, and Arelis R. Hernández, “Small Montana Firm Lands Puerto Rico’s Biggest Contract to Get the Power Back On,” Washington Post, October 23, 2017.
  13. Zadia M. Feliciano and Andrew Green, “U.S. Multinationals in Puerto Rico and the Repeal of Section 936 Tax Exemptions for U.S. Corporations,” National Bureau of Economic Research, Working Paper 23681, Cambridge, MA, August 2017.
  14. Associated Press, “Puerto Rico Pierde Casi un 4% de su Población desde María,” El Nuevo Día, April 18, 2019.
  15. Puerto Rico Economic Analysis Report 2015–2016 (San Juan: Commonwealth of Puerto Rico, Department of Labor and Human Resources, Bureau of Labor Statistics, 2017).
  16. See James Gibney, “Puerto Rico’s Debt Crisis Is Kind of Congress’s Fault,” Bloomberg, October 29, 2015.
  17. When Congress established a civil government for Puerto Rico in 1917, it specified that “all bonds issued by the Government of Puerto Rico, or by its authority, shall be exempt from taxation by the Government of the United States…or by any State, Territory, or possession, or by any county, municipality, or other municipal subdivision.”
  18. For the official view from the perspective of a bankruptcy expert, see, David Skeel, “Reflections on Two Years of P.R.O.M.E.S.A.,” Revista Jurídica UPR 87, no. 3 (2018).
  19. The Financial Oversight and Management Board for Puerto Rico, as Representative for the Commonwealth of Puerto Rico, Debtor, Aurelius Capital Manager et al. v. Commonwealth of Puerto Rico, the Financial Oversight and Management Board for Puerto Rico, F.3d (1st Cir. No. 18-1108, March 26, 2019).
  20. In Puerto Rico v. Sánchez Valle, 136 S. Ct. 1863, 1876 (2016), it applied the prohibition of the Double Jeopardy Clause to prosecution in local court after a federal conviction. That does not happen following state convictions because states have separate sovereignty, but under the Territorial Clause, the “ultimate source of prosecutorial power remains the U.S. Congress.” In other words, nothing in the last 120 years altered the legal foundation of colonialism, established in the Treaty of Paris.
  21. Martin Guzman and Joseph E. Stiglitz, “Disaster Capitalism Comes to Puerto Rico,” Project Syndicate, November 15, 2018. Stiglitz is a Nobel Prize-winning economist. Guzman is an associate researcher at the Columbia School of Business and Cochair of the Commission on Debt Restructuring and Sovereign Bankruptcy of Columbia’s Policy Dialogue Initiative. They have written on Puerto Rico’s economy for both popular and academic audiences.
  22. Post-María projections of the Junta predict a net loss of 1.2 million residents—over a third of the population—between now and 2058. See Guzman and Stiglitz, “Disaster Capitalism Comes to Puerto Rico.”
  23. Philip Alston, “Statement on Visit to the USA, by Professor Philip Alston, United Nations Special Rapporteur on Extreme Poverty and Human Rights,” Office of the United Nations High Commissioner for Human Rights, December 15, 2017. In fact, in June 2018, the UN Special Committee on the Situation with Regard to the Implementation of the Declaration on the Granting of Independence to Colonial Countries and Peoples adopted its thirty-seventh resolution since 1972, calling upon the United States to live up to its obligations under that declaration, a statement of peremptory norms of international law. The Resolution, A/AC109/2018L.7, can be found at http://undocs.org. In their dissenting opinion in United States v. Sánchez Valle, Justices Stephen Breyer and Sonia Sotomayor cite the (broken) promise made by the United States when, in order to escape UN oversight of its colony, it “told the world that it would ‘develop self-government’ in its Territories. Art. 73(b), 59 Stat. 1048, June 26, 1945, T.S. No. 993 (UN Charter).”
2019, Volume 71, Issue 05 (October 2019)
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