The already distressed economy of Puerto Rico risks falling into a full-blown depression “of a magnitude seldom seen around the world” if current proposals for restructuring the island commonwealth’s massive public debt are adopted. That warning was delivered in a letter from Nobel Prize–winning economist Joseph Stiglitz published Monday in the New York Times.
“The plan, which puts the creditors’ interests above those of the island’s economy and people, will create a debt spiral,” Stiglitz writes, referring to the proposed repayment of banking and hedge fund debts ahead of government pension checks—to retired teachers, cops, firefighters, for example—and other public commitments.
The board appointed to oversee Puerto Rico’s debt restructuring is demanding these policies, Stiglitz writes, even as it predicts “a decline of 16.2 percent of gross national product in the next fiscal year, comparable to the experience of countries in civil wars, and Venezuela in economic crisis in 2016. Unemployment, already at 12.4 percent, would soar.” He adds, “American taxpayers will lose, too, as they will pay for the costs of increased migration to the mainland.”
Stiglitz is a former chief economist of the World Bank, in Washington, D.C., which he left in 1999 after dissenting from some of its policies. He now teaches at Columbia University in New York. During the Clinton administration, from 1995–97, Stiglitz served as chairman of the President’s Council of Economic Advisers. An outspoken critic of economic policies that have intensified global wealth inequality, he has also been in the forefront of environmental issues, serving as lead author of the U.N.’s Intergovernmental Panel on Climate Change, which was awarded the Nobel Peace Prize in 2007.
Puerto Rico’s painful economic crunch, his Times letter concludes, should not be obscured by America’s current political convulsions. “One of the untold costs of the Trump era,” he writes, “is that vital issues such as this are getting no attention.”