Can Putin Survive?
The Lessons of the Soviet Collapse
PUERTO RICO'S valiant struggle to industrialize throws significant light on the relation of population to social change. Thirteen years ago the situation there looked hopeless. With nearly 2,000,000 inhabitants and a density of 520 persons per square mile, the island was increasing its numbers at a rate that would double the population in 35 years. Puerto Rico was poverty ridden and economically stagnant. The annual per capita income was only $119, and no increase in manufacturing had occurred for a decade. As H. S. Perloff says, "Of all the important indices, only the index of population growth showed a sustained and uninterrupted rise." The ever increasing numbers of people of working age were swelling the ranks of the unemployed and underemployed. Relief from the United States was flowing into the island at a rate of about $23,000,000 per year, with every prospect that the burden would expand.
Anyone acquainted with the island in 1938 felt the existing situation intolerable, and although certain solutions could be imagined, the odds seemed heavily against their being achieved. If, for example, the birth rate could be quickly reduced to equal the death rate, the population pressure at least would get no worse. But there was no sign that the birth rate would decline; no sign that the population would be less than 2,225,000 by 1950 or the density less than 650 per square mile. Perhaps migration would help; but after a period when as many Puerto Ricans came back as left, it was hard to visualize a regular exodus of some 40,000 per year. Obviously, agricultural improvement and land redistribution had only limited value; for no matter how well tilled or how equitably divided, each square mile of cultivated land could not support adequately the 1,300 people per square mile estimated for 1950. Possibly industrialization would help, but how could Puerto Rico industrialize? The island was too small and its people too poor to provide a local market. Located inside the United States tariff wall, the island had only one big market, the mainland; and how could its manufactures compete against the assembly-line products of American plants? Furthermore, Puerto Rico had no industrial resources--no exploitable mineral deposits other than small amounts of manganese ore. Coal, iron, and oil--bases of modern industry--were lacking. The main resource was the soil, though that was not first-class and not abundant in this mountainous country.
Thus, in 1938, there were strong doubts that a solution could be found. There was endless discussion, but the choice of a remedy was largely a matter of individual predilections and personal faith. The old arguments are instructive, because at that time Puerto Rico presented a classic example of the densely settled, underdeveloped tropical area. Rural and poor, without resources but with a large and fast-growing population, it had all the earmarks of the hopelessness we still ascribe to such areas. Had there been a Point Four at that time, Puerto Rico would not have seemed a propitious place to apply it. Few foresaw what was actually to happen.
In retrospect there appear to have been several errors in forecasting probable developments. First, nearly everyone was overly impressed by the grimness of the current situation. Second, most views of the future failed to distinguish between the short-term and long-term prospects. Third, there was a tendency, doubtless as a result of partisanship, to view the possible kinds of change as mutually exclusive, thus overlooking the interdependence of various remedies. And finally, there was a failure to appreciate the dynamic quality of the existing situation.
Something had to happen. The people, importing half their food from abroad, could not get much poorer and hope to keep on living. Either there would be a decline in the birth rate, a heavy emigration, rapid industrialization, a rise in the death rate--or a combination of several of these eventualities. Since birth rates have never been known to drop precipitately in backward areas, and since no government has ever wholeheartedly pursued a policy of birth-limitation, the improbability of the first possibility, in the short run, should have been clear. It is, however, absolutely necessary over the long run. On the other hand, emigration can rise and fall with remarkable rapidity; changes in this respect were possible though they did not by themselves offer a permanent solution. Since economic change has been known to move ahead faster than any recorded rate of natural increase, it should have been apparent (and was apparent to some) that a combination of rapid industrialization and heavy emigration was the only immediate means, other than grants of funds from the United States, of avoiding a drop in the standard of living (already dangerously low) and a consequent rise in the death rate. But quick industrialization could hardly come automatically. It had to be guided and stimulated. The Puerto Rican Government was therefore forced by the logic of the situation to undertake to supply the necessary stimulus.
Evidently a review of the previous outlook in Puerto Rico and of subsequent developments furnishes a lesson with respect to underdeveloped areas in general. It is, however, not a clear lesson because, as always in a particular case, there were circumstances that would not recur in other instances. Beginning about 1938 Puerto Rico had several pieces of good luck. For one thing, the long crisis finally produced a new leader who had an extraordinary combination of popular appeal, social and economic wisdom, and sincerity. It is not without significance that he was reared in New York City, attended Georgetown University, first married a non-Puerto Rican, and contributed to The Baltimore Sun, The Nation and other publications before returning to the island in 1931. This man, Muñoz Marin, founded the Popular Democratic Party in 1938 with a program of economic reform--Pan, Tierra y Libertad. Whereas insular parties had previously centered their attention on the island's political status, Muñoz Marin turned to the problem of reshaping the domestic economy. His "Populares" won bare control of the legislature in 1940, won all but three of the 58 seats in 1944, and repeated with a sweeping victory in 1948. The breadth and duration of his political ascendancy have made it possible for him to carry through development policies of a fundamental character.
At the same time the New Deal on the mainland was sympathetic to change in Puerto Rico. Rexford G. Tugwell, appointed Governor in 1941, was disposed by outlook and experience to plan boldly with the Populares. In addition, World War II came along. Puerto Rico, strategically located at the gateway to the Caribbean and the Panama Canal, became a military bastion. The feverish construction of bases brought jobs, money, trade--and attention. The control of sugar prices kept the island from realizing a huge profit on this item, but the scarcity of whiskey on the mainland provided a bonanza market for Puerto Rican rum, not so much because mainlanders liked rum as because they had to take it if they wanted to have anything. (The low price and tie-in sales were strong inducements.) As a consequence, the net income from the rum industry increased ninefold during 1941-44, a greater increase than for any other type of economic activity on the island. Since the Federal authorities must turn back to the insular treasury all excise taxes, this increase in rum sales contingent on the war meant a huge, quick rise in government revenue, available for development purposes.
The military draft removed men from the insular labor force, and the mainland labor shortage provided opportunities for Puerto Rican migrants, checked only by the shortage of transport. During six years from 1944 to 1949, a net emigration of over 150,000 occurred. Thus military service and migration helped to reduce the ranks of the unemployed, and, through social benefits for service men and remittances from migrants, brought additional funds to the island.
In short, the Populares Party found conditions unexpectedly ripe for major economic developments. If ever the island was to break the vicious circle of poverty and population growth, now was the time. It is a tribute to the Party that it proved equal to the task. Muñoz Marin had the good sense to call to his aid the able young men available on the island, products of the education which the United States had fostered, to collaborate with the sympathetic régime on the mainland. A farsighted program was laid out, within the democratic framework, which would bring quick industrialization to what had been primarily an agricultural country.
To convert a liability into an asset is shrewd strategy. If Puerto Rico's liability was too many people, her asset was a large pool of low-cost labor. The trick was to use this labor, accustomed to poverty and eager for employment, as a means of attracting industry. In playing its trump card, however, the Government could not simply say to American businessmen, "Come over and use our labor." Industrialization is more complicated than that, for it requires capital, skills, stability, transport and markets. The insular Government therefore set out to use its own capital, acquired largely through the wartime demand for rum and from Federal benefits, to prepare the way for private industry. It undertook to furnish risk capital as a decoy for private capital, to supply technical and vocational training for both agriculture and industry, to improve the roads and the power system, to provide the basis for a lucrative tourist trade, and to give tax exemptions, building sites, technical assistance and access to local capital.
To do these things, the insular government created in 1942 an Industrial Development Company and a Government Development Bank. The company started off by building four factories to manufacture bottles, cardboard, pottery and shoes, and by taking over one already built by the Reconstruction Administration for the production of cement. These plants were intended to provide a practical demonstration that industry could thrive on the island; most of them were later sold to private interests. In 1946 the company began to construct buildings for private manufacturers. It built 18 plants and one hotel at a cost of $15,000,000, subsequently selling or leasing them to private firms. It discontinued these efforts only when its funds ran out and it had to borrow from the Development Bank to complete some of the structures.
In its most recent phase the Company has concentrated on propaganda and general assistance. It has given wide distribution to pamphlets and to articles in magazines read by businessmen; has written personal letters to nearly every manufacturer on the mainland who seemed likely to succeed in Puerto Rico; and has given detailed and free guidance about the insular laws, the tax-exemption procedures, the potential sites, the sources of local capital. Through its industrial relations officers, the Company has assisted in finding suitable labor for new plants by providing long lists of potential recruits whose aptitudes had been tested and work-records analyzed. It has helped the manufacturer solve his training problems, negotiate his labor contracts, set his standards of work performance and determine his welfare policies. The British economist, W. A. Lewis, writes, "Manufacturers who have been through this process testify that the Development Company is 'better than a father' to them, and that they have had no problems, however large or small, with which the Company has not been willing to help to the utmost limit of its power."
In June 1950, the work of the Industrial Company was transferred to a broader governmental agency established to coördinate all developmental work. The new entity, the Economic Development Administration, embraces also the Transportation Authority, the Tourist Office, the Department of Research and the Industrial Promotion Division. The effort to attract industry will thus continue on a broad front. As the Company's president, Teodoro Moscoso, Jr., says, "The best industry for Puerto Rico is any industry."
On the whole, the strategy of the Muñoz Government has been bold and vigorous, particularly impressive in view of the doldrums that preceded its program. But the program is not unique. Government assistance to new industry is standard policy in all ambitious, underdeveloped areas. Puerto Rico has not utilized the familiar device of direct subsidy, and it has not supplied capital as lavishly as some governments have done. The Development Bank, like the insular branch of the R.F.C., has pursued a conservative lending policy. The tax-exemption program has had certain limitations, notably that a resident of the mainland must pay a Federal income tax (not collected from island residents) on income from Puerto Rico. As W. A. Lewis points out, "Exemption from income tax in this case is merely a gift from the Puerto Rico Treasury to the Federal Treasury, and provides no real incentive to the American capitalist." The percentage of the island's income going into developmental activities has been extremely modest, a fact which has led Daniel Creamer to remark that "characterization of the Puerto Rican economy as one of State Socialism constitutes an extravagant example of poetic license."
In view of the modesty of the financial commitment, the success of the program is remarkable. Since 1942 approximately 100 new industries have been established, most of them after 1946 and 43 of them in the fiscal year 1949-50. The dollar volume of exports is two and a half times as great as in 1942. The net insular income (in current prices) has doubled, and the number of people employed in nonagricultural pursuits has risen by about 50 percent. Less than 36 percent of the employed population is now engaged in agriculture. By this criterion, Puerto Rico is already an industrial country. The labor force is acquiring skills, and public education is going forward rapidly. There has even been talk of a rolling mill and an oil refinery.
The variety of the new industries is impressive. The following abbreviated list, giving value of exports in thousands of dollars for fiscal 1949-50, illustrates the range:
|Artificial flowers||899||Hard candies||402|
|Cotton piecegoods||411||Radio receivers||1,336|
|Cordé handbags||124||Rayon fabrics||111|
|Crocheted beading||220||Shoes and slippers||340|
|Glass containers||853||Sunglasses and|
|Hair and bristles||246||Synthetic hormones||1,389|
Not all of the development has been in manufacturing. Puerto Rico is at last capitalizing on its climate to attract tourists. More than 60,000 vacationists visited the island during 1950, and 75,000 are expected in 1951. More than $10,000,000 in tourist trade has already been added to the island's economy. The completion of a $7,000,000 hotel, of a new 88-room wing on another, and other projects have removed the shortage in accommodations and gone far toward realizing the original goal of 2,000 hotel rooms by 1952 to house 100,000 visitors a year. A fishing survey has been made, and a hotel school from which 100 Puerto Ricans graduate annually has been founded. A jai alai front-on costing $1,000,000 and a mountain resort with an 18-hole golf course are under way. Tourism promises to be a big industry of the island.
What, then, has happened to the population problem? It has not vanished! For a permanent improvement of living standards in Puerto Rico, fertility must come down. The crude birth rate has not fallen but has remained almost unchanged for 50 years. During the depression it got down as low as 38 per 1000, but by 1947 it had risen to 43, dropping subsequently to less than 39 in 1950. The death rate, on the other hand, has fallen precipitately. It fell from 18.5 per 1000 in 1941 to 9.9 in 1950--a drop of 48 percent in nine years. The life expectancy has accordingly risen to approximately 57 years. As a result, the natural increase is going forward at an astounding rate. During the seven years of 1944-50, when the industrialization program was getting into full swing, the average natural increase was more than 2.8 percent. If no migration had occurred, this would have meant that the population would double in 25 years. The natural increase during this period was considerably higher than that experienced ten years earlier (from 1935 to 1939), when the rate was less than 2 percent and the period required for doubling the population was 35 years. Yet in the later period the population did not grow so fast, because a sizable emigration siphoned off approximately a third of the natural increase. The total gain in population between 1940 and 1950 was only 336,000, whereas if the migrants had not left it would have been more than 500,000. Emigration many times larger than during any previous period thus reduced the population growth of the last decade by approximately a third; but even so, the actual increase of 18 percent was one of the fastest in the world.
Observers have frequently suggested that the island's population pressure would have calamitous results. In a recent popular book on fertility, Puerto Rico is included, among other countries, in the statement that "unbalanced and unchecked fertility is ravaging many lands like a hurricane or a tidal wave." The only catastrophe that would immediately relieve the demographic crisis, like the explosion of a boiler, would be a sudden rise in mortality from some cause. But the death rate, instead of rising, has continued to decline rapidly. This remarkable achievement is sometimes regarded as itself a calamity, because, with the birth rate remaining high, the natural increase has been spectacular. A decline in mortality, however, is the opposite of a disaster. The only ground for apprehension, then, is that fertility will remain excessive for so long that it will ultimately prove impossible to hold the health gain. This is the only context in which the calamity attitude makes sense. Much depends upon the length of time over which the population growth takes place. It is quite true that any rate of population growth, if continued long enough, would eventually use up all the island's space and resources. The current pace of growth, given the already high density, would do so very quickly. It would, for example, give the island 4,400,000 inhabitants by 1985, 8,800,000 by 2020, etc. Within 150 years there would be standing room only, even assuming a rather high rate of emigration. The island lacks the resources to support even the present population at a high living standard, let alone two or three times the present number. Those who foresee a calamity in the future if the existing trend is not changed are perfectly correct. The gains from economic development would be only ephemeral if the birth rate were not affected. Yet the question is not one of the indefinite future, but of the next 20 to 50 years. Will the birth rate actually begin to decline, and will it do so in time to rescue the island from poverty and prevent a rising death rate?
Despite the industrial spurt during the last few years, there is still serious unemployment. In 1949 there were 79,000 unemployed, representing 11.3 percent of the total labor force, and there was a great but unknown amount of underemployment. The magnitude of the unemployment problem can be visualized more clearly when one realizes that the 80 new industries added between 1942 and 1950 had only 13,715 employees in 1950. In addition they created something like 10,000 associated service jobs. These gains seem pitifully small in relation to the total of the unemployed, or in relation to the 15,000 new persons who enter the labor market each year. Moreover, it must be remembered that Puerto Rico is being subsidized on a large scale by the mainland Government. Prior to 1939 the island generally sold more than it bought, but during the nine fiscal years from June 1939 to June 1948, imports were 50 percent greater than exports; the total excess is $594,000,000. The deficiency has been made up by Federal funds. True, a sizable portion of these Federal transfers represent the excise taxes which must be remitted to the insular treasury, but even if the excise returns are considered as exports, there is still a marked trade deficit. The Federal Government is more than balancing this by its contributions. There is no sign, therefore, that the program of industrialization has reached a point where it can provide jobs for all or maintain even the present standard of living. As H. S. Perloff says, the people of the island have become adjusted to an income level which they cannot pay for through the normal channels of trade. It is an artificial adjustment. When a fast rate of population growth is placed on top of it, the reason for uneasiness about the immediate future is apparent.
It may seem idle to worry about the birth rate when emigration can take away the surplus people from a small island. As we have seen, however, even during the recent peak period the stampede to the mainland removed only about a third of the natural increase. To absorb all of it, about 63,000 people would have to leave annually. Over a long span of years there is no place that would welcome them. Populations are growing rapidly in most countries of the world. Latin American states have proved reluctant to take Puerto Ricans, and although the mainland is legally available, a steady stream of 63,000 per year would soon change that. Naturally, Puerto Rico does not wish to shirk its responsibility by dumping people indefinitely on the rest of the world. Furthermore, their loss is an economic drain, first because they are in the productive ages of life, second because they are generally more skilled than the rest of the labor force, and third because they leave when times are good and return when times are bad. During the four dark years from 1931-1934, Puerto Rico gained nearly 9,000 people by migration, whereas during the six good years of 1944-1949 it lost over 150,000. People will not leave their homes unless there are opportunities abroad and they have the means to make the journey. Although the island has never in modern times been free of a large contingent of unemployed, it is not the unemployed themselves who migrate. A sample study of Puerto Ricans in New York City, where 90 percent of the migrants settle, showed that 85 percent of them had quit jobs on the island to come to the mainland. In other words, they were not simply seeking a job by migrating, but rather a better job. The wage differentials are large. Migrants coming in the postwar period earned an average of $28 on the first job in New York, as compared to an average of less than $15 on the last job in Puerto Rico. As long as this differential persists, and as long as mainland jobs are available, Puerto Ricans will migrate. The more educated, enlightened and modern they become, the more responsive will they be to differences of economic opportunity as between the two places. The number, therefore, could conceivably swell to the point where all, or more than all, of the natural increase was being removed, as happened in the case of Ireland. But over any extended period such an exodus would be neither likely nor desirable. At best it would merely postpone the time when the birth rate would have to fall.
Obviously, much hinges on Puerto Rico's future birth rate. Since the death rate has been lowered faster than in other countries in the past, the birth rate could presumably also be lowered faster than usual. If this should occur, and if emigrants should be numerous and generous with remittances, the island would have a chance of ultimately achieving a decent standard of living.
The speed with which the birth rate will drop depends on two things: whether or not the Government adopts a direct and emphatic birth control policy, and whether or not the industrialization program continues. We have seen that when the insular Government started to take action, it placed the emphasis on economic remedies, not on family limitation. A law was passed in 1937 authorizing the teaching and practice of contraception for reasons of health, and clinics were set up for this purpose. But though the program had some effect in acquainting the public with contraception, it was not pressed sufficiently to affect the birth rate. Many Puerto Ricans are anxious to limit the size of their families, and an all-out government campaign involving careful instruction, mobile clinics, systematic education and vigorous publicity would doubtless enjoy considerable success. Such a program may prove politically expedient. If so, it will greatly benefit the island. If not, the main hope lies in indirect influences.
Is an imminent decline likely, therefore, as a result of social and economic changes now occurring? I believe that there is. Offspring are already fewer in the cities than in the country, they are fewer in the higher income groups than in the lower, and fewer among the educated than among the uneducated. One investigation showed, for example, that urban mothers who have finished childbearing have had an average of 5.8 births, while the rural mothers have had an average of 7.3. The difference is greater as between higher and lower income strata, and still greater as between well and poorly educated groups. Such differences are precisely the kind found at the beginning of a period of declining fertility, for it is the urban, white-collar and literate classes that first begin to limit their reproduction.
The low fertility classes are being steadily augmented. Although still thought of as rural, Puerto Rico is actually quite urban and is fast becoming more so. By 1940 the proportion of people who dwell in urban places had risen to 30 percent, and by 1950 it had reached 40 percent. In fact, the gain in urban percentage during the 1940-50 decade was as great as it had been during 30 years previous. An equally impressive gain in education has been made. In 1899 only one-fifth of the population aged 10 and over was literate, whereas today about three-fifths can read and write. The proportion of the population in school grew from 2.7 percent in 1899 to 19.5 percent in 1948; the proportion of pupils in the advanced grades rose sharply; and between 1941 and 1948, the annual expenditure on public education increased by four and a third. Finally, per capita income (corrected for price changes ) rose from $122 in 1940 to $173 in 1946. These are basic indices of social and economic change, and they all suggest the emergence of conditions which, according to everything known about human reproduction, set the stage for widespread birth limitation.
The desire of Puerto Rican women to limit their offspring is shown both by attitude studies and by the increasing popularity of sterilization. In addition, the statistical trends show that the Puerto Ricans, like their fellow citizens on the mainland and the people of other advanced nations, are beginning to adjust their reproduction to current economic changes. Their marriage and birth rates are incipiently showing the same cyclic fluctuations observed elsewhere. The birth rate reached a low of 37.4 per 1000 in 1933, rose gradually to 42.6 in 1947, and fell again to 38.7 in 1950. Such fluctuation shows evidence of deliberate postponement of childbirth. Analysis by birth-order shows that in 1946 and 1947 the rise in the rate was sustained by an increase in first births, while the number of third to sixth births per family declined. It is by cutting down the number of later births that women lower their fertility, though the effects may be concealed for a while if marriages have been high, as they have been in postwar Puerto Rico.
These, then, are the grounds for expecting an early drop in Puerto Rican fertility. A vigorous birth control policy on the part of the Government would hasten the decline. But if the industrialization program continues, as it probably will, and if a sizable emigration is maintained, the island should achieve a modern population balance based on low birth and death rates within the next 30 to 40 years. There will doubtless still be too many people for a really high standard of living, the tragic consequence of demographic blindness; but perhaps not too many for the kind of civilization we think of as modern.