Intervention – “Beyond Disaster Capitalism: Dismantling the Infrastructure of Extraction in Puerto Rico’s Neo-Plantation Economy”

Joaquín Villanueva (Gustavus Adolphus College; jvillanu@gustavus.edu) and Martín Cobián (City University of New York)

A new colonial administration is shocking the nation. The Financial Oversight and Management Board (FOMB), a Congress-appointed body responsible for managing the Island’s finances, has restructured portions of Puerto Rico’s debt with creditors. Not surprisingly, debt restructuring has thus far favored bondholders and creditors. The Puerto Rico Urgent Interest Fund Corporation (COFINA) was the first debt restructuring deal under the PROMESA Act of 2016. According to economists Martín Guzmán and Joseph Stiglitz, the COFINA deal does “not provide enough relief for Puerto Rico to be able to achieve future growth”. They call it a “debt trap” since almost all future tax revenues will go to the pockets of bondholders at the expense of social investments. The FOMB, in conjunction with the current administration of Governor Ricardo Rosselló, are transforming the colonial state into a regressive neoliberal machine. Its function is the extraction of revenues from the social reproduction of the poor and the middle classes. Debt obligations are met by further taxing consumer goods, public utilities, and pensions. Simultaneously, the colonial state is generously extending tax exemptions and incentives to the 1% on the Island and abroad.

Presently we are witnessing the prepping of the Island’s built environment for a massive process of accumulation by dispossession dressed up as reconstruction after Hurricane Maria. At the heart of it is an influx of federal funds and investment capital through two channels: on the one hand, the Department of Housing and Urban Development (HUD) has authorized close to $20 billion in Community Development Block Grants-Disaster Relief (CDBG-DR) for the Island’s reconstruction; on the other hand, the U.S. Congress has opened the floodgates for speculative capital by designating 95% of Puerto Rico as an Opportunity Zone. Opportunity Zones (OZ), part of Donald Trump’s 2017 tax reform, are areas identified as “economically depressed” with the intention of attracting investments. Investors in an OZ receive a sizable tax break: they pay zero taxes on capital gains if they keep their investments in place for a decade. OZ investments are spurring a new round of asset stripping as properties are being sold to foreign capitalists with very little in return in the form of tax revenues. In addition, the Rosselló administration intends to channel some of the CDBG-DR funds via OZ investments, even though not all Opportunity Zones in Puerto Rico are low-income or economically depressed areas. In other words, reconstruction funds are not helping those most in need.

Many critical commentators in the post-Maria period have embraced the disaster capitalism framework to explain the events described above. As a result, commentators have failed to account for the historical continuities that inform pre- and post-Maria Puerto Rico. For example, in our recent Antipode paper, “San Juan, the Fragile City: Finance Capital, Class, and the Making of Puerto Rico’s Economic Crisis”, we emphasized the historical role of the Criollo bloc in the colonial economy of Puerto Rico. Historically excluded from the manufacturing sector, the local elite has made its mark by stripping, concentrating, and exchanging financial assets in the city. Low-income and racialized communities have been stripped of their individual and collective assets, while local and foreign capitalists reap the benefits from this particular form of structural violence. In the post-Maria period, asset stripping and exchange with foreign capitalists has dramatically accelerated. Disaster capitalism unwittingly obscures the history of these practices by focusing almost exclusively on what has happened since the “disaster” (in this case the powerful Hurricanes Irma and Maria), while obviating continuities inherited from the past. Critical analyses of post-Maria Puerto Rico must necessarily situate the present within historical geographies rooted in plantation capitalism.

Our critique is inspired by the work of Clyde Woods. With the care and urgency that characterized his work, Woods provided a long historical analysis to understand the large-scale stripping of publicly held assets in post-Katrina New Orleans. His posthumous book, Development Drowned and Reborn: The Blues and Bourbon Restorations in Post-Katrina New Orleans (University of Georgia Press, 2017), was partly written in response to the popularity of “disaster capitalism” and the limits of that concept. As editors Jordan Camp and Laura Pulido clarify in the introduction to that volume, Woods was sympathetic to Naomi Klein’s critique but “felt that as a theory it [disaster capitalism] was limited by a neglect of the history of plantation capitalism”. For Woods it was imperative that we understand “there was a disaster before Katrina”. Second, Woods disagreed with the disaster capitalism thesis because it placed “too much emphasis on disasters, rather than the imperatives of regional [power] blocs with deep historical roots”. Finally, Woods powerfully elucidated the forms of resistance that have historically challenged the hegemony of regional blocs. In New Orleans and the Mississippi Delta region, the Blues tradition has been a source of knowledge formation that informs social movements against plantation capitalism. In the rest of this intervention, we briefly extend Woods’ critique to understand pre- and post-Maria Puerto Rico and resistance to plantation capitalism.

Before Hurricane Maria, Puerto Rico was operating as a neo-plantation economy designed by the local capitalist class (the Criollo bloc), the U.S. federal government, and its industrial and financial capitalist class. Puerto Rican sociologist, César Ayala, provides powerful evidence of Puerto Rico’s neo-plantation economy. In an article published on the website of the Committee for the Abolition of Illegitimate Debt (CADTM), Ayala succinctly shows that a third of the income generated in the Island is repatriated mostly to the U.S. Since the 1970s, the gap between GDP (Gross Domestic Product, total income of a given place) and GNP (Gross National Product, total income accrued to individuals and companies associated with a place, even if not residing there) has widened: Puerto Rico ranks 188 of 189 countries in GNP to GDP ratio, just ahead of Iraq. In 2017, only 67% of all income generated on the Island stayed there; the rest went abroad free of taxes. Puerto Rico, in other words, is a source of profit for foreign corporations, which efficiently extract wealth at the expense of social life on the Island.

The shock doctrine is being successfully implemented in post-Maria Puerto Rico precisely because local and foreign capitalists are taking advantage of an infrastructure of extraction that has been firmly in place for decades. Just like the 936 U.S. tax code which allowed capital-intensive manufacturers to extract profits from 1976 to 2006, the legal ambiguity of Puerto Rico, as an “unincorporated territory” of the United States, informs both the triple-tax (federal, state, and local) exemptions that Puerto Rico bonds enjoy and the exclusion of Puerto Rico from federal bankruptcy protections. With full knowledge of these colonial limitations, bondholders and underwriters kept issuing and buying bonds from Puerto Rico since the Island had no protections against unpayable debt. Presently, Puerto Rico, represented by the FOMB in court, is being asked to pay its debt obligations at any social cost. In addition, the infrastructure of extraction is made visible by the flow of reconstruction funds. Due to years of austerity that have severely weakened the public sector, the labor and resources necessary for the restoration of electricity, water, and food distribution must rely on private contractors. As a result, the Center for the New Economy, a nonpartisan think tank, showed that 90% of reconstruction funds received in the first year after Hurricane Maria were granted in contracts to U.S. based companies.

One must wonder, however, why Puerto Ricans are not more fiercely resisting these measures. The shock doctrine, understood as a theory of struggle in the neoliberal era, can be a useful explanatory framework. Klein reminds us that “[c]entral to a shock doctrine strategy is speed – pushing a flurry of radical changes through so quickly it’s virtually impossible to keep up”. The speed and the scale with which policy-makers are introducing new profit-seeking measures, courtroom deals with bondholders, tax cuts for the rich and tax increases for the rest, and the gutting of public assets, is alarming. For protesters already overwhelmed by daily life – by the traumas and hardships that decades of neoliberal assault have occasioned on them and their families – keeping up with these rapid changes is difficult. Moreover, resistance has been met by a police state determined to quash all frictions to capital mobility and accumulation. Yet, we find the shock doctrine and disaster capitalism thesis lacking the long-term historical perspective to fully situate present-day resistance within the larger history of plantation capitalism in the Island.

Despite the shock and speed of extraction, community organizations, social movements and advocacy groups have been pushing back against the FOMB’s regressive policies and the Commonwealth’s reconstruction plans. Spaces of resistance are materializing at the point of accumulation, the wide scale and scope of which is reflected in the diverse locations and sectors of struggles presently challenging disaster capitalism. One form of resistance concerns the politics of social reproduction. The Puerto Rico Teachers’ Federation, the Electrical Industry and Irrigation Workers Union, the student movement, the direct action group Jornada se Acabaron las Promesas (Day the Promises are Over), and Frente Ciudadano por la Auditoria de la Deuda (Citizens’ Front for Auditing the Debt), encompass a core group of advocacy, public sector unions and grassroots movements that have taken the streets (and the courts) to contest the odious debt as well as the highly regressive effects of austerity.

Meanwhile, a second front of resistance is quickly emerging in relation to the planned use of CDBG-DR funds as presented by the government’s reconstruction plan and the allocation of Opportunity Zone Funds as approved through the Commonwealth’s legislature. Recuperación Justa (Just Recovery), a grassroots campaign led by the University of Puerto Rico’s Free Legal Clinic and community-based organizations around the Island, has been actively challenging the government’s plan on a number of grounds. Foremost is the dearth of community involvement in policy design and implementation. A related problem is that many of the capital projects in the plan have little to do with the central aims of CDBG-DR funding, which according to HUD should only be allocated to address the unmet needs of those low-income communities that were most affected by the disaster. Given what transpired post-Katrina in New Orleans, one overarching concern is not only that the needs of low-income and racialized communities will take a back seat, but also that many of these communities could be displaced.

Disaster capitalism is merely the latest rendition of a long legacy of colonial capitalism. The Island’s elite, the Criollo bloc, reproduce themselves as a class by serving as junior partners to the U.S. extractive and plantation economy in Puerto Rico. This insight is important since it allows us to depict the social movements reviewed above not just as struggles against the FOMB, austerity or disaster capitalism, but also as historically oriented struggles against the Criollo bloc and colonial capitalism. In this regard, oppositional movements in the present juncture flow out of and into anti-systemic movements whose existence and evolution well predate the debt crisis and Hurricane Maria. A case in point is the agro-ecological and solar energy movements featured in Naomi Klein’s The Battle for Paradise (Haymarket Books, 2018). In the book, these movements are portrayed as being fundamentally about creating resiliency from below through communal mutual aid. While this is certainly true, it misses the broader point. Movements such as the small farmer’s Organización Boricuá de Agricultura Ecológica (Boricuá Organization of Ecological Agriculture), the community organization, Casa Pueblo, and the groups coalescing around La Marcha del Sol (the Sun’s March) are fundamentally contesting the anchor of colonial capitalism, namely colonial mercantilism, manifest in the Island’s virtual dependence on food and energy imports from the U.S. By promoting food and energy sovereignty, these movements’ political horizon is not simply community resiliency in the face of a post-disaster negligent state, but rather the possibility of an alternative agro-energy future. The struggle is an historical one, for the Island to be freed from the accumulation strategies of the Criollo bloc and plantation capitalism.