Economic Update with Richard D. Wolff

Episode Title: "Puerto Rico as US's Greece"

Date: October 30, 2015

Host: Richard D. Wolff

Guest: Prof. Ian Seda Irizarry

Overview

In this episode, Richard D. Wolff explores the deep economic crises facing several American cities, with a special focus on Puerto Rico's mounting fiscal disaster. Through updates on Detroit, Chicago, social issues like homelessness and rising healthcare costs, Wolff draws connections to the broader structural issues within the capitalist system. The highlight of the episode is an in-depth interview with Prof. Ian Seda Irizarry on the historical and current facets of Puerto Rico’s economic turmoil, likened to the crisis in Greece, including the legacy of failed development policies, dependence on US capital, austerity, and emerging political resistance.

Key Discussion Points & Insights

1. Economic Crisis in US Cities: Detroit and Chicago

Detroit:

• Detroit's population fell from 2 million (1960) to 700,000 due to economic collapse.
• Quote [03:25]: "You could not have had a President of the United States more utterly and completely wrong about the major industrial city in his country." — Richard Wolff, critiquing Lyndon Johnson’s optimism about Detroit.

Chicago:

• Mayor Rahm Emanuel raises property taxes by $500 million, primarily impacting middle-class homeowners.
• Efforts to cut public sector pensions blocked, resulting in “austerity” measures.
• Quote [10:43]: "Mayor Emanuel is imposing austerity as best he can, shifting the burden of an economic crisis onto the people who can least afford to pay for it and who had least to do with bringing it about." — Richard Wolff

2. Social Fallout: Homelessness and Healthcare

Homeless Children:

• Number of homeless children in US public schools doubled from 2007-2014 (now 1.36 million). Federal aid per child is about $40 annually.
• Quote [15:40]: "There is no recovery for the mass of people, and there is a collapse for those at the bottom." — Richard Wolff

Medical Care Deductibles:

• 80% of Americans with private insurance had a deductible in 2015, compared to 55% in 2006. Average deductible doubled from $600 to $1,300.
• Impact: Lower real income, more people forgo medical care.
• Quote [18:56]: "That's why people feel when they hear the word recovery that you must be talking about somebody else, because I'm not recovering." — Richard Wolff

3. VW Scandal and Capitalist Competition

• Recap of the Volkswagen emissions fraud; over half a million employees affected.
• VW follows a pattern of deception similar to other auto giants (Ford, Toyota, Honda).
• Root cause is capitalist competition and profit-maximization at the public’s expense.
• Quote [23:11]: "Capitalist competition leads businesses to do what Ford did, what Toyota did... Number one is to make money and to make profits. And if that means fooling around with the equipment, making a defeat device, violating the law — so be it." — Richard Wolff

4. Pope Francis on Economic Justice

• Pope’s condemnation of "the empire of money" and call for prioritizing community, fighting poverty, and supporting workers’ rights.
• Notable Quotes from the Pope (via Wolff):
  • [28:12]: “It means thinking and acting in terms of community, of prioritizing the life of all over and above the appropriation of goods by the few. It also means fighting the structural causes of poverty, inequality, unemployment, lack of land and housing, and the denial of social and and labor rights.”
  • [28:51]: “It is strange, but if I talk about this, there are those who think that the Pope is communist.”
  • [29:05]: “Every worker... has the right to fair remuneration, Social Security and a pension.”
  • [29:28]: “I am against people being excluded from employment rights, who are denied the possibility of forming trades unions who do not have an adequate or stable income. Today, I wish to unite my voice to theirs and to accompany them in their struggles.”

Main Segment: Puerto Rico’s Crisis as “America’s Greece”

Introduction to Prof. Ian Seda Irizarry [30:55]

• Assistant Professor at John Jay College, CUNY
• Member of Puerto Rico’s Working People’s Party

The Nature and History of Puerto Rico’s Crisis

Double Whip: Financial and Fiscal Crisis

• Crisis began in 2006, preceding the US/global recession.
• Attempts to fix fiscal crisis worsen recession, and vice versa—“the double whip.”
• Quote [31:31]:
  "As you try to fix the fiscal crisis, you exacerbate the economic recession. And as you try to diminish the negative effects of the recession, you augment the fiscal crisis itself.” — Prof. Seda

Structural Roots: The “Model by Invitation”

• Since 1940s, Puerto Rico incentivized foreign (mainly US) capital through tax breaks/subsidies.

• Initial focus: apparel industry, later shifted to heavy industries (petrochemicals).

• Quote [34:47]:
  "We see a model where again, the gains are privatized and the costs are socialized for the sake of facilitating the activities of those firms in Puerto Rico.” — Prof. Seda

• Tobin Report (1976) found the model ineffective in addressing poverty and unemployment, advised less reliance on US capital—recommendations ignored.

Tax Incentives Proliferate

• From 50 tax exemption laws (2004) to 80+ (2015).
• Example: Law 20 (2012) granted 4% flat tax to new service firms; average result—only 4 jobs per company.

Fiscal Recklessness and Debt Accumulation [41:42]

• Successive administrations avoided reviewing existing incentives and kept extending them.
• Shrinking tax base, expanding informal (untaxed) economy.
  • Quote [43:23]:
    "As you go up the income ladder, there's more income evasion or tax evasion.” — Prof. Seda
• Heavy borrowing filled government revenue gaps, leading to large debts sold to hedge/vulture funds at high rates.

Puerto Rico and Greece: Parallels [44:19]

• Both forced to borrow at higher rates as traditional funding dries up.
• Conservative narratives blame “living beyond means,” ignoring structural flaws.

Current Crisis Status [46:32]

• Per capita income lower than poorest US state.

• 45% poverty rate, 43% labor participation, enduring double-digit unemployment.

• Expert commissions (e.g., Ann Krueger/IMF) recommend restructuring debt + “heavy dose of austerity.”

• Quote [47:53]:
  "What both have in common? Again, the heavy dose of austerity. Absolutely.” — Prof. Seda

The Cost of Austerity [48:08]

• Severe public spending/budget cuts; universities face 10% cuts.
• Exemptions and low taxes for corporations remain; enormous outflow of profits ($35B/year), about half Puerto Rico’s GDP.
  • Quote [50:21]:
    "Puerto Rico is basically a tax haven in terms of the profits produced.” — Prof. Seda
• Minimum wage exemptions for the young to entice employment, while many young people just emigrate to mainland USA.

Resistance and Alternatives [52:58]

• Working People’s Party and others call for a debt audit and moratorium to identify which debts are illegitimate.

• International legal precedent for rejecting "odious" debt contracted under corrupt or exploitative circumstances.

• Efforts face political resistance; the status quo political class retains power, often enabled by fluctuating election blame games.

  • Quote [54:33]:
    "When I speak to people who actually have to deal with the brunt of the problems, things don't look that positive… lots of people are organizing outside the traditional political parties, in movements, organizations, alternative parties…” — Prof. Seda

Political Shifts and Diaspora Involvement

• Puerto Ricans in the diaspora (e.g., NY, FL) mobilize for federal intervention and legislative changes.

• Grassroots political parties gain traction; possible parallel drawn to Syriza's rise in Greece.

  • Quote [57:10]:
    "I think that's a positive side to all that's happening." — Prof. Seda

Memorable Quotes & Timestamps

• "There is no problem too tough or too challenging for Detroit to solve. You could not have had a President of the United States more utterly and completely wrong..." — Wolff quoting and critiquing President Lyndon Johnson [02:54]
• "That's why people feel when they hear the word 'recovery' that you must be talking about somebody else, because I'm not recovering." — Wolff [18:56]
• “Every major car company has betrayed the public trust in the last three years. … If public employees, if public enterprises had a record of deception, illegality, murder of people, etc. … there would be screams to high heaven to privatize… But there's silence now that the private enterprises, having betrayed the public trust, deceived us, killed some of us, worsened the air, lied.” — Wolff [25:11]
• Pope Francis (relayed): “It means thinking and acting in terms of community, of prioritizing the life of all over and above the appropriation of goods by the few…” [28:12]
• "What both [government and creditors’ solutions] have in common? Again, the heavy dose of austerity. Absolutely." — Prof. Seda [48:08]
• "Puerto Rico is basically a tax haven in terms of the profits produced..." — Prof. Seda [50:21]

Conclusion

Richard D. Wolff, with Prof. Ian Seda Irizarry, provides a sweeping and critical examination of Puerto Rico’s economic predicament—highlighting deeply entrenched structural dependencies, failed policy repetition, the social cost of austerity, and popular resistance through new political movements. The analogies to Greece and other crisis-hit regions reinforce a systemic critique of austerity and exploitation under capitalism, pressing listeners to reconsider accepted economic narratives and policies. For Puerto Rico, the crisis remains unresolved, but change may yet come from within, as citizens organize for alternative solutions and real accountability.