A few days ago, a local newspaper quoted NPP Senator Roberto Arango as saying that a new economic model was being implemented for future generations and that it gave him great satisfaction to be part of it. The Senator added that the Government is committed to ending the current economic model that served Puerto Rico so well for over 60 years, as it does not work, and the island is no longer competitive. Senator Arango noted that the New Economic Model is smaller, more agile, where the government serves as a facilitator.
His remarks necessitate clarification. Will there be a phase-in period between the current and the proposed economic models? Is an effort being made to retain our pharmaceutical manufacturing base? How can we improve our competitiveness and our educational system? What are the expected inputs and outputs of this new model, and when can we see some results of its implementation? A historical overview of our economic models can be helpful in visualizing where we’ve been, and where we should be headed.
The twentieth century in Puerto Rico can be divided into two distinct historical stages separated by World War II. The old colonialism of the first period, spanning over four decades from 1898 to 1940, was marked by the absence of self government, as Puerto Rico was ruled by presidentially appointed colonial and military governors. The island was dominated by a monocultural sugar plantation economy largely owned by absentee capital from the United States and had limited migration to the United States.
The second period, from 1940-1953, began with the U.S. entrance into World War II. It was followed by newly formed institutions and sweeping transformations in Puerto Rico that were established, and became entrenched, following the war. Many of the changes introduced in the island were highly influenced or produced by federal initiatives that would have a long-term impact on Puerto Rico’s subsequent historical development. There has been no comparable period of transformation and institutional innovation since then.
This period was marked by a progression of governors ranging from the liberal New Dealer Rex Tugwell (1941 to 1946), to the first presidentially appointed Puerto Rican governor Jesús Piñero (1946 to 1949), to the first locally elected governor Luís Muñoz Marín (1949 to 1965).
Puerto Rico experienced massive federal expenditure on military bases and road construction, agrarian reform marked by the dismantlement of the plantation economy, the development of an industrial economy oriented toward export markets, attempted first through government owned industries and then through the initiation of an “industrialization by invitation” program aimed at attracting U.S. capitalists to the Island, and subsequently largely owned by absentee capital from the United States.
Important government institutions that were designed to assist economic development included the Puerto Rico Planning Board, the Government Development Bank of Puerto Rico, the Puerto Rico Agricultural Company (PRACO) and the Puerto Rico Industrial Company (PRICO) were developed. The government-owned power generating authority established provide electrification to the island was created during this period, as were pension benefits and federal financing for returning veterans that, in turn, boosted residential housing construction and promoted the emergence of a modern construction industry in Puerto Rico.
The 1950s brought self-government in the invention of the Commonwealth of Puerto Rico, and massive migration from Puerto Rico to the continental United States. The industrial period began to collapse with the end of the federal tax exemption program, which coincided with the aggressive manufacturing policies implemented in many developing countries, particularly China and India.
The Twenty-First century brings new challenges to the island. During the period of booming manufacturing, few local entrepreneurs created exportable products or services, the educational system (both public and private) was not developed to compete with the rest of the world, and innovative and research oriented structures were not implemented. As we let go of our past economic model, we find that we have not invested in an alternative. This is not to say that we can not achieve what other states have done. Didn’t North Carolina turn its tobacco based economic model into a research based one? It is not surprising to find that quite a few of their researchers are Puerto Rican. Can we not offer these expatriates the opportunity to work these wonders here?
A new economic model requires, among other things, a long term plan, patience, perseverance, resources, and consistency. The hundreds of thousands of Puerto Ricans working in key leadership positions in the United States and elsewhere demonstrate that as individuals, we have the capability to succeed. To do it collectively requires consistent and committed public policies. Hopefully, Puerto Rico will see the implementation of these policies.