Puerto Rican Public Corporations are corrupt and inefficient. They have run up massive debt and inflicted huge costs on the domestic economy through their monopolistic and inefficient methods. Shut them down. Sack their managers. At least stop letting them run up further debts.

Stiglitz thinks genuine lenders are queuing up to lend to these white elephants on condition that new loans are granted seniority. This is foolish. By the time the repayment comes due, yet newer loans will have seniority. Genuine lenders and long term f.d.i have been scared away. However, there is a corrupt sort of lender, eager to chalk up all sorts of front loaded fees and happy to indulge in any amount of accounting chicanery, who will gladly step in to help out the current gang of thieves further impoverish the people.

Puerto Rico doesn't have a recession so much as an inward shifting aggregate supply curve because the very wealth effects which will continue to lower demand also affect supply. Why? Because the assets of the State continue to be horribly mismanaged.

Promesa has kicked the can down the road- ludicrously, it requires Puerto Rico to come up with some sort of vision statement for the decade- but the fundamental problem is that of prying resources out of the greedy, corrupt and incompetent hands of Public Corporations.



Stiglitz makes some remarkable admissions in this article. For example

1) Increased migration from Puerto Rico imposes costs on the US tax payer.

What makes Puerto Rico different from Mexico, Professor Stiglitz? If more migrants from the former hurts the US tax payer why shouldn't Trump keep out migrants from the latter?

2) Puerto Rico's plight has to do with lost jobs not debt. Even if we lend each unemployed Puerto Rican enough money to pay for a butler, on condition that another unemployed Puerto Rican is hired, and thus restore full employment- Puerto Rico's problems will not have been solved. Debt has to rise exponentially till the bubble bursts. It achieves nothing.

Bringing back jobs by Protectionist measures may help Puerto Rico, it may not. Everything depends on how the thing is managed.

3) Puerto Rico itself triggered the creation of PROMESA because it knew its own law would be struck down and this was a superior alternative. Why? Because the involvement of non Puerto Ricans, appointed by the President, increases not decreases credibility w.r.t creditors. Ricky Rossello & Rothschild &Co can play harder ball now.

Stiglitz paints a picture of poor and ignorant natives being terrorised and exploited by cruel Yankee masters. Why? Perhaps he pictures himself as Che Guevara or Django Unchained or something of the sort.

Sorry Stiglitz, Padilla was the only Governor educated entirely in Puerto Rico- people like Rossello are Ivy League technocrats not illiterate peasants.

4) Puerto Rico needs to borrow to prevent even more devastating cuts to entitlements. That's why it triggered the creation of PROMESA. Pretending that the latter has some magical power or political remit to just create money out of thin air is silly gesture politics.

5) If Stiglitz is right- Puerto Rico can't pay debts incurred when it was better off and thus won't be able to borrow since it is clearly becoming worse off and nothing can halt this continual decline. It is a basket case. Stiglitz wants this to be made clear immediately so that it can be treated on a par with Haiti- whose per capita Income can't go down without mass starvation- as a Charity case. That's bound to be good for the long term prospects of its people. By contrast, a country which lowers its standard of living, and thus per unit labour cost, for a period, can rise rapidly thereafter thanks to better resource allocation. The alternative is to go the Venezuelan route. Borrow in good times and starve ever thereafter.



Fortunately, however bad Puerto Rico's political class has been, it is no Venezuela. Stiglitz, with his typical maladroitness, has raised that spectre to no purpose other than to expose his own going from bad to worse as a sophist.

It seems Rothbard's Law- economists increasingly specialise in what they are worst at- has struck again.

