[Column] Puerto Rico’s Doomsday Clock
On January 25, 2018, the Doomsday Clock was moved to two minutes to midnight.
A group of scientists that includes 15 Nobel Laureates made the dramatic announcement that they had moved the clock forward 30 seconds closer to what they say is the possibility of the global catastrophe of nuclear war.
Formed in 1947 by scientists who had worked on the atomic bomb, the idea of the Doomsday Clock is to alert humanity of the danger – a danger they now see made worse by North Korea and President Trump’s reaction.
There is also a Doomsday Clock in Puerto Rico.
On January 19, 2018, some of the best economic minds in the U.S. wrote a letter to President Trump and Congress on Puerto Rico. The impressive list of 21 U.S. and three Puerto Rican economists titled the letter: “A Fiscal Plan for Puerto Rican Recovery.”
It begins: “a new, far reaching plan must be set to restore economic growth.”
The letter, in fact, can also be seen as a clock ticking towards doomsday.
Puerto Rico, it states, is faced with “one of the longest depressions in this hemisphere for at least the past century, before the hurricane damage.”
To avoid this, the President and Congress must do three things.
One, approve a “massive injection of funds for recovery.” The Governor of Puerto Rico and Moody’s estimate that $94 billion is needed. This, of course, would provide desperately needed economic stimulus.
Second, recognize that Puerto Rico’s $70 billion plus debt is “unpayable.” “Most or all of it” should be written down, “suspending any payments until the economy recovers.”
Third, give Puerto Rico “the same level of support for Medicaid and Medicare as U.S. states.” This would add billions to the island economy.
The list of economists who sent the letter is indeed impressive. There is a Nobel Prize-winning economist, four economics professors from Harvard, two from MIT, the chief economists in the Clinton and Obama administrations, and Jeffrey Sachs, generally considered the world’s top expert on “sustainable economic growth,” author of several best-selling books, described by the New York Times as “probably the most important economist in the world.”
But there is something missing in the letter.
Economic “recovery” is not “economic growth.” Of course, the latter cannot occur without the former. But to avoid doomsday is not an economic growth strategy.
On January 21, 2018, Governor Ricardo Rosselló submitted to the PROMESA Fiscal Board a new, post-Hurricane Maria, fiscal plan. It also can be read as the ticking of the Doomsday Clock.
The economy of Puerto Rico, it says, will decline this fiscal year by 11.2 percent.
Then it will begin to recover: he GNP will grow by 7.6 percent in 2019, 2.4 percent by 2020, 1.5 percent by 2021. And this recovery will be driven by federal funds, $57 billion in disaster aid, and $21.9 billion in private insurance payments.
In other words, it will take three more years to recover what we will lose in 2018. In three years, there will be no net economic growth.
This is what is missing in both documents: an economic growth strategy.
It is obvious that Puerto Rico needs to create hundreds of thousands of jobs. That while government spending, federal funds, insurance payments are vital for recovery, they are not an economic growth strategy. Only private investment will create the jobs, and provide the government with the revenue to keep and create government jobs.
Since the late 1940s, Puerto Rico had an economic growth strategy. It was to create private sector jobs through manufacturing. With all the blows it has received in recent decades, manufacturing is still today what drives the island economy, generating 49 percent of the economy.
On January 11, 2018, the head of Economic Development and Commerce, what was once called Fomento, predicted that in three to five years manufacturing, mostly from the U.S., will no longer be the engine that drives the economy.
Meanwhile, Moody’s issued a report warning that of all the economic threats facing Puerto Rico, there is the possibility that U.S. industries will decide to leave the island. There is the new Federal Tax reform that imposes a new tax on the goods these industries ship to the mainland. There is the migration of thousands of talented Puerto Ricans.
And there are now the experiences of the devastation of the hurricanes and the painfully slow recovery. And the reality that every year Puerto Rico has a six-month hurricane season.
So the essential question is: If not manufacturing, what? If you don’t have a credible, realistic answer to what will replace the engine that drives 49 percent of the economy, you don’t have an economic development strategy.
Of course, the scientists that created the Doomsday Clock created a metaphor, using a scare word to shake public opinion.
But the fact that Puerto Rico does not have an economic development strategy to create hundreds of thousands of jobs is not a metaphor, is not a scare tactic.
It’s the ticking of Puerto Rico’s Doomsday Clock.
–A.W. Maldonado was a reporter and columnist for the San Juan Star, executive editor of El Mundo, and publisher and editor of El Reportero.
–The views expressed in the Opinion section are the columnists’ own and not necessarily the views of Caribbean Business.