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| Puerto Rican anti-austerity protesters rally in Manhattan, July 13 |
The crisis has been likened to that of Greece as creditors call for — you guessed it — austerity, austerity and more austerity to settle the debt. For an island already suffering more than 12 percent unemployment (higher than any state), budget cuts would promise more pain.
With three thousand of our brothers and sisters belonging to Teamsters Local 901 in San Juan, Puerto Rico's debt crisis hits close to home. And the sources of the problem are all too familiar.
An exodus of workers caused by corporate-backed trade deals are among the culprits, as Think Progress explains:
Depending who you ask in Puerto Rico, the debt crisis was caused by neo-colonial and imperialist policies from the U.S., the Puerto Rican government’s wasteful overspending and corruption, or the cadre of hedge funds that are currently profiting from the island’s woes. Add to that toxic mix a series of free-trade agreements that triggered mass outsourcing, and a population in rapid decline due to out-migration, and you arrive where we are today, with the government on the hook for tens of billions of dollars.
Beyond anti-worker trade policies, the corporate greed behind Puerto Rico's problems has another ugly face: hedge funds. Circling the island like vultures over the carcass they helped kill, hedge funds with fingerprints all over the debt disaster want extreme austerity imposed on the U.S. territory.
According to the organization Hedge Clippers, it's companies with names like BlueMountain Capital Management and Stone Lion Capital Partners that are at the heart of the crisis:
According to the organization Hedge Clippers, it's companies with names like BlueMountain Capital Management and Stone Lion Capital Partners that are at the heart of the crisis:
Several groups of hedge funds have bought up large chunks of Puerto Rican debt at discounts and have also pushed the island to borrow at extremely favorable terms for creditors. At the same time, they are also using the island as a tax haven. Known as “vulture funds,” these investors have followed a similar game plan in other debt crises, in countries such as Greece and Argentina. The spoils they ultimately seek are not just bond payments, but structural reforms and privatization schemes that give them extraordinary wealth and power.
A report commissioned by these funds recommends cutting the minimum wage, laying off teachers, selling off public assets and slashing workers' retirement benefits.
What makes Puerto Rico more vulnerable is that, unlike Detroit, it's not protected by Chapter 9 bankruptcy laws. Bills recently introduced in Congress — where Puerto Rico has no voting representation — would give the island Chapter 9 bankruptcy protection and disarm creditors. That legislation doesn't appear likely to pass and the White House has already said no to a bailout like the one so quickly given to the Wall Street vultures in 2008.
But Puerto Rico is not Greece. Yes, the austerity being pushed by creditors would almost certainly mean a vicious cycle of economic despair in Greek fashion, and Puerto Rico cannot turn to the IMF for help. But as economist Paul Krugman points out, the human impact of the crisis has been far less severe because Puerto Rico has so far been shielded from austerity. Even as its economy sank, the U.S. government continued to uphold the commonwealth's safety net in the form of Social Security, Medicare and other programs. Cutting welfare won't solve the crisis, however. Because, as Krugman explains, out-migration brought on by outsourced jobs (caused by bad trade deals) is central to the economic problems on the island.
Many activists in Puerto Rico are calling for debt forgiveness. Others are more visceral, saying the hedge fund millionaires who caused so much of the mess can shove it.
Martha Quiñones Dominguez, an economics professor at the University of Puerto Rico, says what's needed is an independent audit to see which creditors' claims are valid and which aren't. The island needs to raise taxes on corporations and the rich, she said, as well as invest in sustainable development to cut down on dependency and imports.
While corporate powers are pursuing another mammoth trade deal in the Pacific, similar trade regimes have bankrupted another economy in the Caribbean.
As for the hedge funds plotting against Puerto Rican workers and families, these are the same forces pushing austerity and privatization on the U.S. mainland. If they succeed in Puerto Rico, they will be more powerful than they already are — and more dangerous.
What makes Puerto Rico more vulnerable is that, unlike Detroit, it's not protected by Chapter 9 bankruptcy laws. Bills recently introduced in Congress — where Puerto Rico has no voting representation — would give the island Chapter 9 bankruptcy protection and disarm creditors. That legislation doesn't appear likely to pass and the White House has already said no to a bailout like the one so quickly given to the Wall Street vultures in 2008.
But Puerto Rico is not Greece. Yes, the austerity being pushed by creditors would almost certainly mean a vicious cycle of economic despair in Greek fashion, and Puerto Rico cannot turn to the IMF for help. But as economist Paul Krugman points out, the human impact of the crisis has been far less severe because Puerto Rico has so far been shielded from austerity. Even as its economy sank, the U.S. government continued to uphold the commonwealth's safety net in the form of Social Security, Medicare and other programs. Cutting welfare won't solve the crisis, however. Because, as Krugman explains, out-migration brought on by outsourced jobs (caused by bad trade deals) is central to the economic problems on the island.
Many activists in Puerto Rico are calling for debt forgiveness. Others are more visceral, saying the hedge fund millionaires who caused so much of the mess can shove it.
Martha Quiñones Dominguez, an economics professor at the University of Puerto Rico, says what's needed is an independent audit to see which creditors' claims are valid and which aren't. The island needs to raise taxes on corporations and the rich, she said, as well as invest in sustainable development to cut down on dependency and imports.
While corporate powers are pursuing another mammoth trade deal in the Pacific, similar trade regimes have bankrupted another economy in the Caribbean.
As for the hedge funds plotting against Puerto Rican workers and families, these are the same forces pushing austerity and privatization on the U.S. mainland. If they succeed in Puerto Rico, they will be more powerful than they already are — and more dangerous.
