By Luis Valldejuli
The average consumer knows clearly that sale prices of goods and services sold in voluntary market transactions, reflect the true value of the goods and services produced, because they reflect what consumers are willing to pay for them, and so reflect the benefit that consumers see in them. Things cost however much consumers are willing to pay for them; not what sellers believe their value should be.
The payment of the gargantuan debt owed by the government of Puerto Rico to bondholders and the growing cost of reconstructing the infrastructure of the island after the passing of Hurricane María, do not constitute goods and services that consumers are willing to pay for, because these do not reflect a benefit that consumers seek in them. The value for consumers is nonexistent, except as a duty inherent of and created by the government and therefore, owed directly by the government alone. The cost of financial reconstruction is assigned to the local government, while the cost of physical reconstruction is assigned to the federal government.
For now, the economic deprivation and reduced standards of living, continue and are perceived as natural because consumers are slowly coming out of a human crisis. But as the pace to normalcy steadies and Christmas (the season most awaited by local sellers and consumers) comes closer, consumers will begin to realize that increased taxes to finance government spending involve counterproductive incentives that reduce production and growth, and therefore prolong the hellish conditions brought by irresponsible fiscal spending (which remains constant as proven by the controvertible contract extended and later rescinded by the government to the Whitefish corporation) and a mishandled natural crisis.
Increased government spending does nothing to create economic recovery, growth and prosperity. That is because that money is drained from the private sector through increased taxes. Consumers view increased government spending as draining investment capital from productive activities in the private sector and reallocating it to non-productive government consumption.
Standing in the middle of the financial debt issue is the junta created by PROMESA. These men and women must tread carefully through negotiations between the island’s government (the debtor) and the bondholders and their insurers. Add to these FEMA, responsible for reconstruction and functionality of the island’s physical rebirth. Some may refer to the situation as a perfect storm. Only, it is not clear just who is steering the ship through the storm.
If, at any point, the government of the island, recognizes that to move forward and continue holding any power whatever opposite a complete federal takeover, it needs to become BFF with the consumer class and stop assaulting their pockets. These are the people who once sustained the economy and the only ones who can bring it back to life. Just as the small leaves are spouting out of the fallen trees throughout the storm-beaten island, so can the economy begin to flourish. Hurricane Maria swept through the land causing a rebirth in nature. The government, bondholders and the junta ravished the economy causing a rebirth of prosperity. The trick is to never forget past mistakes but learn from them.
Luis Valldejuli is executive director of COMSOLE and proofreader at Holistic Communications & Marketing. On his spare time, he enjoys writing, painting and binge-watching Netflix series.