Trouble on Welfare Island May 25th 2006 | AGUADILLA AND SAN JUAN >From The Economist print edition Abridged by Gruss
Puerto Rico has been a United States territory for more than a century, and its people have been citizens since 1917. The island is distinguished by its poverty and joblessness, which are far worse than in any of the 50 states. The territory's economy, moreover, has fallen further behind the national one over the past three decades. Bad governmentnot just locally, but also federallyis largely to blame. Half the working-age men in Puerto Rico do not work. Puerto Rico's annual income per person was around $12,000 in 2004, less than half that of Mississippi, the poorest state. More than 48% of the island's people live below the federally defined poverty line. That poverty rate is nearly four times the national average, and more than twice as high as in poor states such as Kentucky, Louisiana, Mississippi and West Virginia. Puerto Rico ought to be doing much better, because being part of the United States gives it many advantages over other low-income economies. Most important may be America's legal system. These guarantees tend to attract outside capital, spur local investment and let commerce and innovation flourish The island can also trade freely with the giant mainland economy. And its workers can migrate to and from the 50 states at will, gaining skills, creating business connections and making money. In some ways, generous United States taxpayers have also been useful. To help the territory catch up, they have paid for infrastructure and a huge leap in education levels. The average length of schooling in Puerto Rico rose from 3.7 years in 1950 to 11 years in 2000. With these advantages, Puerto Rico grew impressively in the decades after the second world war, even outperforming Asian "tigers" such as South Korea, Taiwan and Singapore (which has roughly Puerto Rico's population). Since the 1970s, however, Puerto Rico has been outpaced badly by the Asian tigers and Ireland, another place to which it is often compared. It has also diverged from the United States, losing ground even to lowly Mississippi. Many things have gone wrong. Most important, however, is that the United States government assumed too big a role in the Puerto Rican economy, and its largesse enabled the commonwealth's government to do the same. Two federal intrusions stand out: an oversized welfare state, and misguided rules on business investment. Federal transfer payments to Puerto Rico rose sharply in the 1970s. Some programmes have been modified since then, but transfers still make up more than 20% of the island's personal income. These federal handouts reflect the sensibilities of a wealthy country. So by Puerto Rican economic standards, they are huge. And the more a man or woman earns through paid work, the more they decrease. Puerto Ricans are eligible for federal disability payments, for example, through Social Security and federal disability allowances are much higher than the United States average as a share of wages and pension income. Unsurprisingly, therefore, one in six working-age men in Puerto Rico are claiming disability benefits. Many families do not view the federal handouts as temporary. Neither does Raúl Vega, who owns a consumer-finance outfit in Aguadilla. His firm treats the benefits as income when deciding whether to lend people money for new televisions. As Aguadilla's Mayor walked through town hall recently, he boasted about each employee's university or graduate-school credentials as he introduced them. The trouble, he says, is that "All they want to do is find security only. They have no ambition...Everybody wants to work for the government." Manuel Reyes, of the Puerto Rico Manufacturers Association, also sees little hope that the government's role will shrink. "There is no light at the end of the tunnel," he says, "because we are still in denial." ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~| Message: http://www.houseoffusion.com/lists.cfm/link=i:5:208397 Archives: http://www.houseoffusion.com/cf_lists/threads.cfm/5 Subscription: http://www.houseoffusion.com/lists.cfm/link=s:5 Unsubscribe: http://www.houseoffusion.com/cf_lists/unsubscribe.cfm?user=89.70.5 Donations & Support: http://www.houseoffusion.com/tiny.cfm/54
