19 March 2008

Simple Economic Remedy

This is simple: Change Puerto Rico's tax structure to favor job creation over profit-based credits.

In any system, what you reward and what you punish determine the actual outputs. It doesn't matter why you created the system or what goals the system may have explicitly: The gain/pain ratios will ultimately--and unfailingly--create the end results.

For over 50 years, Puerto Rico's "new" economic structure was based on tax credits that sheltered profits. At first, there was this "idea" that the profits would be reinvested in the Island itself, but in practice, profits became the golden pea in an elaborate shell game wherein Our economy ended up with the same sucking sound of money whooshing away as it had back in the early 1900s.

The problem has been ascribed to "capitalism" or "globalization," and that argument has some merit. But pointing fingers and placing blame has all the appeal of blogging in the dark, so how about We try another method?

Because the U.S. is so business-oriented and so gung-ho on making the rich richer (witness the current sub-prime mortgage market scandal and international reaction to it), why not turn Puerto Rico into an economic laboratory once again and rewrite the current incentives so that companies that operate in Puerto Rico and create more jobs receive a bonanza of incentives?

Too simple? Here's the counter-argument:

---Incentives that shelter profits have not demonstrated any real capacity for creating jobs, for the impetus favors capital over employees. Money will simply chase another tax haven instead of investing deeper.

---Puerto Rico enjoys a privileged position vis á vis the U.S. and its growing number of "free trade" agreements. Although capital is more interested in making money, if making money means creating more jobs to further penetrate the largest consumer market in the world, then that's what capital will do.

---Multinationals may continue to pursue the cheapest nation, but the larger pool of smaller companies, cash-rich and personnel poor, can then find a true win-win situation with Us: They need people, We need jobs.

---The suggested strategy recognizes openly that Puerto Rico simply cannot compete with dirt-level wages and thus, with practicality and dignity, takes matters in hand and decides to walk its own path. The "tax credits for jobs" strategy will not openly upset the mainland, for in fact, it can be easily adopted by any State brave and bold enough to buck the enormous yet fatally-flawed business interests currently manning the helm.

Rewriting the rules is part and parcel of state and national business development. The problem lies in playing the game of "I am cheaper!" to no one's benefit...except for the ones with capital. Puerto Rico can lobby to change its current stick-in-the-mud blindness for a proactive stance.

But that won't happen until 2009, at least. For now, the search for viable solutions and true progress, so long buried beneath larceny, lunacy and laziness, will remain but a hope.

The Jenius Has Spoken.

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