Puerto Rico’s American dream is dead

Tyler Cowen writes: President Donald Trump has finally started tweeting about the disaster in Puerto Rico, and his messages show that he — and we as a nation — still haven’t digested the full implications of the post-Hurricane Maria situation. The underlying reality is that the political and economic model for the island just isn’t working any more, and the dream of Puerto Rican economic convergence has been laid to rest once and for all. That in turn says something bad about the rest of this country, namely how quickly we will give up on the possibility of transformational change.

The traditional American dream is that the poorer parts of this country would, sooner or later, start catching up to the richer parts. The American South, after an extreme divergence, gained on the North after World War II. But Puerto Rico never made the same leap, and in relative terms has held roughly steady since 1970.

Worse yet, the island has about $123 billion in debt and pension obligations, compared with a gross domestic product of slightly more than $100 billion, a number that is sure to fall. In the last decade, the island has lost about 9 percent of its population, including many ambitious and talented individuals. In the past 20 years, Puerto Rico’s labor force shrank by about 20 percent, with the health-care sector being especially hard hit. The population of children under 5 has fallen 37 percent since 2000, and Puerto Rico has more of its population over 60 than any U.S. state.

Hurricane Maria has produced conditions unprecedented in recent American experience. Much of the island has no fresh water and no phone service, and the status of the food supply and its accessibility is uncertain. Restoring electricity will take months, the health-care system isn’t functioning, and a major dam may yet break, causing further dangerous flooding.

Those developments will worsen the already dire long-term prospects for Puerto Rico. Tourism no longer exists after the storm, and presumably outside investment will decline in both the short and longer run, due to damaged infrastructure and the possibility that major storms are now more likely as the climate changes. [Continue reading…]

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