Statehood Is Better than a “Marshall Plan” for Puerto Rico

Can Congress Make Political Cliches About “Marshall Plan” More Than Just Media Sound Bites?

U.S. Senator Bernie Sanders and his colleague Elizabeth Warren propose a $146 billion “Marshall Plan” for Puerto Rico. The Sanders-Warren proposal is supported by San Juan Mayor Carmen Cruz, who is also a harsh critic of federal and local government recovery support.

The funding proposed by Sanders, Warren and Yulin Cruz is comparable to the $180 billion in 2017 dollars that the U.S. contributed for the entire Marshall Plan for 16 nations in Europe after WWII. That means spending for Puerto Rico’s “ Marshall Plan” would exceed the per capita cost of the Marshall Plan in Europe siginificantly.

But the amount of public funds is not as important as how and why U.S. financial aid is provided. What are the goals and intended outcomes? What sustainable social and economic progress will be achieved for Puerto Rico? Since the commonwealth regime of territorial government was bankrupt before the hurricanes of 2017, can a better economic order be established?

Sanders, Warren and San Juan Mayor Yulin Cruz point out that U.S. citizens in Puerto Rico with one non-voting delegate in Congress are not represented in Washington democratically or equally compared to citizens in the states. Yulin Cruz agrees with and supports Sanders and Warren as Puerto Rico’s best shot at better representation in Washington.

Yet none of these supporters — Mayor Yulin Cruz, Sanders nor Warren — has indicated whether the funding under their “Marshall Plan” will be used on measures and programs consistent with continued territory status, statehood or independence. Leaving the future political status of Puerto Rico undefined make it unlikely that the success of the original Marshall Plan in Europe after WWII will be replicated in Puerto Rico.

Can the Sanders-Warren plan work in a territory?

The fiscally responsible use of funds to put Puerto Rico on a path to sustained recovery will be different if its future status is statehood than if it becomes an independent nation.

If Puerto Rico continues as a territory, it will repeat the cycle of economic upturns and downturns every territory in U.S. history has endured until it became a state.

The original Marshall Plan applied in foreign countries. It helped people who were not U.S. citizens. Unless plans to help Puerto Rico include statehood, the U.S. will continue to treat Puerto Rico as a territory.

That will continue the failed political status model under which Congress has incoherently and often in a contradictory manner treated Puerto Rico as a foreign place for some purposes, a territory without equal democratic rights for some purposes, or like a state of the union. Inevitably as long as Puerto Rico is a territory inconstant federal policy leaving the island in political and economic limbo will be decided by a Congress more responsive to special interests in states with voting delegations than a territory with none.

What was the Marshall Plan?

In contrast to a “Marshall Plan” that redistributes wealth to Puerto Rico as a failed U.S. colony, the real world Marshall Plan was about production of wealth. As announced by George C. Marshall at Yale in 1947, the Marshall Plan recognized that government spending couldn’t create recovery for Europe’s devastated post-WWII national economies.

The Marshall Plan was a limited four year program to modernize Europe as a cooperative multinational regional economic trade and development alliance. It called on 16 countries to promote development through pro-business policies mobilizing mutually beneficial cross border capital investment.

Marshall Plan programs included projects to promote reforms that limited the national government role in internal domestic and international commerce, and restrain regulation that made cross border business in Europe and internationally subject to higher political risk. By eliminating anti-competative government regulation, harnessing market economics to serve reconstruction goals, and unleashing free enterprise combined with democracy, the Marshall Plan opened Europe for business.

The actual Marshall Plan was mostly grants and loans to governments that funded foreign government economic policy reforms and market stabilization policies to jump start private sector led recovery and reconstruction. For example, it included loans to governments that were subject to repayment and conditional grants funneled through revolving funds to capitalize business ventures starved for investment due to political risk.

Scholars of economic history have confirmed the success of the Marshall Plan in achieving its well-defined goals. The result was a new Europe, more politically stable and economically prosperous than before WWII. This also opened Europe to American businesses that were able to export goods and services to Europe without tariffs or regulation creating unpredictable cross-border political risks.

The Marshall Plan was politically neutral, but served broad U.S. interests. It was approved with bipartisan support by a Republican controlled Congress, and signed into law by a President who was a member of the Democratic Party.

Statehood, Not a Marshall Plan, Is Puerto Rico’s American Solution

The federal government does not have, cannot afford, and will not provide enough “government money” to bring Puerto Rico back to the level of development it attained before the fiscal collapse of the territorial government and two apocalyptic hurricanes. The only way Puerto Rico will see economic success is when Congress provides the conditions for private sector led recovery and development.

These conditions must include more than disaster support. Here are some of the programs that can make a difference for Puerto Rico:

• A proportional federal public works program to install hardened infrastructure neglected by the U.S. due to the territorial limbo status of the island
• Economic development programs that foster free enterprise in the private sector instead of dependency on public sector employment and transfers of wealth from the private to public economies
• Financing for creditworthy private enterprise
• Revolving funds that will use repaid loans to make additional loans, without tax shelters or anti-competitive incentives that are inconsistent with future statehood or nationhood

Statehood is only proven domestic federal program to jump start the economic engine of recovery for 3.5 million U.S citizens in America’s last large territory. For centuries, statehood has produced far better social, political and economic outcomes in the U.S. than the Marshall Plan ever did in Europe.

Thirty-two territories that became states have experienced sustainable political and economic stability over multiple generations. Statehood is the solution for Puerto Rico.