Trans(actions) : Trans(acciones)

Photo by Tony the Misfit : borrowed from creative commons

Puerto Rico’s economy has been stuck in a recession for 42 months and it seems like it will be long before things get better for the island’s residents. I spent a good part of the summer in my homeland and noticed the impacts of a prolonged period of zero and negative growth: many businesses that had become part of the common landscape had closed their doors, city streets looked a bit more desolated, friends talked about other friends who had lost their jobs, former students were bussing tables to make ends meet, and so on. In the midst of a situation complicated by a decaying quality of life, rising unemployment and a contracting economy, the government has pushed forward a plan that cuts back on government spending and attempts to increase consumption through a combination of local and federally funded stimulus packages. As my colleague, Sergio Marxuach, explains on the CNE Blog:

“…the current administration has engaged in a complicated policy minuet.  On one hand, the government is cutting back on government spending and raising taxes, while on the other it simultaneously seeks to stimulate the economy through (1) a $500 million local stimulus package; (2) a $6 billion federally-financed stimulus package; and (3) promoting private sector investment through public-private partnerships.  In essence, the government is betting that the positive impact from the stimulus spending will outweigh the negative impact of the deficit reduction package.”

This convoluted policy exercise has not yielded many positive results. While it is true that economic transformations take time, we have to think about what happens during the in-between period. In other words, policymakers need to think about the social and political costs of an economic recovery. They need to figure out how to administrate the pain that their actions are causing. This is not a task that the Fortuño administration has been handling well. Part of the measures to cut back on government spending have included: incentivized retirement packages, voluntary reductions of work hours, the suspension of previously negotiated collective bargaining agreements, and the layoff of public employees. Asides from these draconian measures, they have pounced over the poor and destitute by displacing residents from informal settlements, curtailing the advancement of progressive grassroots efforts, and deploying police riot squads to deal with minor manifestations of civilian unrest. In sum, the middle and lower classes are the ones being punished. Another colleague and scholar, Harold Toro, has published an excellent analysis [spa] of how the government cutbacks have the potential of crippling the island’s middle class. As he states:

“As of yet it is unclear what will be the profile of terminated public-sector workers.  However, it is clear that the risk of affecting permanently the middle class is not small and neither are the consequences from an adverse shock to the middle class for Puerto Rico’s economic stability.”

This week, more bad news were handed out: over 16,000 public employees were given their walking papers (totaling over 23,000 in less than a year). As the old saying goes, there’s only so much pain a person can take. Thus, different segments of the populace have responded with demonstrations, lockouts [spa], takings of buildings and offices and throwing eggs at the governor. This last form of protest, that reminded me of the Iraqi man who threw his slipper at George W. Bush, has evoked a lot of chatter and laughter from an otherwise depressed country. Here’s a video of what transpired

For now, it’s hard to imagine how this chapter of the story will end. My impression is that a good number of people are fed up what’s happening in their country. Some feel the pain more than others, but as anyone who has been injured knows, after a while, and if things don’t improve, those around you start feeling your pain. I don’t think the current administration has a good grasp of what is at stake here. Public unrest can lead to many different negative outcomes and even if the economy starts  bouncing back, certain damages (and images) are not so easy to remedy (or erase).