MEASURED in terms of area or of population the Virgin Islands, acquired by the United States in 1917, do not seem very important. The fifty-odd islands and islets of this diminutive American possession cover in all no more than 140 square miles, and the three which are sufficiently large to be inhabited by settled communities -- St. Thomas, St. John and St. Croix -- have a combined population of only 25,500.

There are two reasons why the Virgin Islands are interesting and important to a far greater degree than is suggested by these statistics. First, they are of strategic value to the United States. In fact, the United States bought the islands during the World War primarily for military motives. We did not want them to fall into German hands, and as long as Germany was undefeated there was the possibility that she might purchase the Danish West Indies or, by annexing Denmark, lay claim to them by right of succession. Of course, it is difficult to imagine that the United States would have permitted Germany to seize the Virgin Islands even had she overrun Denmark. Nevertheless, to make assurance doubly sure, the American Government bought them for $25,000,000 -- more than it had paid for any other territorial acquisition.

It is often said that the possession of the spacious, landlocked harbor of St. Thomas is necessary for the defense of the Panama Canal. This would appear to be true in a negative rather than a positive sense. It is not so much that the United States requires St. Thomas for its own naval purposes as that it does not want a hostile Power ensconced at a place where it could threaten American naval supremacy in the Caribbean, our mare nostrum. The expression "hostile Power" is appropriate because we must not forget that three presumably friendly Powers -- Britain, France and The Netherlands -- already possess West Indian harbors that are just as well situated for forays against the Canal as St. Thomas. The United States Navy could therefore get along without St. Thomas. Command over the northern entrances to the Caribbean could easily be maintained from the base at Guantánamo Bay and from San Juan harbor in Puerto Rico. Should the Navy need further points d'appui, there is always the fine harbor at Culebra Island, within sight of St. Thomas but administered as a part of Puerto Rico, or Samaná Bay, an excellent site that might be leased from the Dominican Republic. What the American Navy really requires to insure its complete control over the Caribbean is a base at the southern end of the Lesser Antilles in the vicinity of Trinidad. Only thus can it cover all the approaches to that sea.

The American naval station, established at St. Thomas after its purchase from Denmark, was abandoned in 1931 when the administration of the colony passed from the Navy to the Department of the Interior. Since then the Marine Corps air base has been the only important military establishment on the islands. As if to underline the fact that St. Thomas is not an indispensable element in American defense plans, the Government recently decided to expend large sums on San Juan harbor, one hundred miles west of St. Thomas, in order to make it the center of American naval activities in those waters.

The other reason for the current interest in the Virgin Islands is the significant experiment in economic rehabilitation which is now under way there. Throughout the West Indies the economic and social conditions of the masses are becoming progressively worse. In some of the islands, where the twin plagues of decreasing production and increasing population have reached alarming proportions, the situation is indeed tragic -- hopeless, some observers say. This is certainly true of Puerto Rico and several of the Lesser Antilles. Last year the British Government became sufficiently alarmed at conditions to send out a Royal Commission to investigate conditions in the British colonies and propose remedial measures.

The Virgin Islands are comparable to many of the other Lesser Antilles in size, in their largely Negro population (approximately 90 percent of the total), in climate and products, and in economic and social problems. In a very real sense, the attempt now being made by the United States to rehabilitate the Virgin Islands is of much more than local importance and is being followed with wide interest. The British Royal Commission, for instance, visited St. Thomas and St. Croix, where they were quite favorably impressed with the American rehabilitation projects.

Originally the Virgin Islands depended almost entirely on agricultural products, largely sugar and cotton. Sugar production reached its peak in 1812; thereafter it declined, especially in St. Thomas and St. John where it had practically disappeared by the middle of the last century. On St. Croix cotton cultivation reached its highest point in 1797; today it is non-existent, having been wiped out by the pink boll worm. In St. Thomas the decline of agriculture was compensated by the rise of commerce. Its harbor became the busiest entrepôt of the West Indies, a position which it began to lose only when the sailing vessel gave way to the steamship. The World War and the American purchase, by depriving St. Thomas of its long-enjoyed neutral and free port status, only hastened the decay, which the withdrawal of the naval station in 1931 all but completed. This evolution is reflected in the population statistics for St. Thomas. In 1797 the island had 4,734 inhabitants; in 1835, 14,022; in 1901, 11,012; in 1930, 9,834. Some ninety percent of the inhabitants live in the city of Charlotte Amalie, where they or their forebears were attracted by the thriving activities of the port in its heyday. Though that day is now long past, most of the unemployed have refused to return to the land. A large part have been reduced to living on public charity -- indeed, at the height of the depression one half of the population was affected by unemployment.

When the first civil Governor, Professor Paul M. Pearson of Swarthmore College, arrived in 1931 he found the population in despair and on the verge of starvation. Obviously a thoroughgoing program of rehabilitation was called for. Under his direction comprehensive plans for putting the islands back on their feet economically were drawn up and set in motion. When the New Deal took power early in 1933, this process was speeded up by increased government expenditures on both temporary relief and long-range rehabilitation. These activities were carried on by such agencies as the Federal Emergency Relief Administration, the Federal Surplus Relief Corporation, the Civilian Conservation Corps, the Reconstruction Finance Corporation, the Federal Housing Commission, the Subsistence Homesteads Corporation, etc.

Each of the three islands has its own peculiar geographic, economic and social characteristics, and in each the process of rehabilitation has followed independent lines. In St. Thomas the terrain is so rugged that only a small part of the population stranded by the decline of commerce can be "homesteaded" on the land, either to cultivate it or to raise cattle. The rest of the unemployed must find some other occupation in Charlotte Amalie or else emigrate -- an outlet that can no longer absorb the numbers it once did. Among the activities encouraged by the Government are the tourist trade (there are those who think St. Thomas can become an American Bermuda), various cooperative handicraft industries and low-cost housing. There are also several privately-owned plants making rum, bay rum, bitters, etc. Progress is slow and setbacks discouragingly frequent; yet the present Governor, Lawrence W. Cramer, has expressed the hope that eventually the island's dependence on shipping and on federal relief can be broken.

St. John, though nearly as large as St. Thomas, has only 750 inhabitants, of whom less than a dozen are whites. A century ago, before slavery had been abolished, its population was 2,500 and its landscape was dotted with sugar estates. The latter are now in ruins and the inhabitants have returned to the more or less self-sufficient state of primitive peasantry that prevails in the nearby British Virgin Islands. About the only commercial products of St. John are bay leaves (for bay oil and bay rum) and charcoal (for consumption in St. Thomas).

It is on St. Croix that we encounter in their most acute form the serious problems characteristic of the West Indies in general. Efforts to diversify the agriculture of St. Croix have failed. Cotton, once an important item of export, is grown no more. Until recently cattle were raised for sale in Puerto Rico, but this market has been cut, at least temporarily, by a tick quarantine imposed by the Puerto Rican authorities. In recent years attempts have been made to cultivate tomatoes, limes, sisal and onions, only to be abandoned as unprofitable. St. Croix has thus had to fall back on sugar and its by-products.

Immediately after the World War the sugar industry everywhere enjoyed a brief moment of fabulous prosperity -- the "Dance of the Millions" it was called in Cuba. In St. Croix the principal beneficiary of this boom was the West Indian Sugar Factory, Ltd., a Danish company owning over one fourth of all the land as well as the largest sugar mill. Then in 1920 the bubble burst, and raw sugar prices on the New York market dropped in half a year from 20½ cents to 4 cents. During the following decade the St. Croix sugar industry failed to recover from this staggering blow. Other setbacks, such as the American prohibition legislation (which ruined the rum industry), the hurricanes of 1924 and 1928, and the general increase in costs of freight, labor and local government, only accentuated the industry's difficulties. The West Indian Sugar Factory, which in 1920 had made a profit of over $1,000,000, suffered during the decade 1921-30 a total net loss of $1,204,190 -- a sum equal to more than one-third of its gross sales. In 1930 it went bankrupt and ceased operations. Disaster stared St. Croix in the face, and only the timely intervention of the American Red Cross saved many from starvation.

The American Government sought to persuade private capital to buy up the bankrupt sugar lands and mills, but without success. Consequently, the machinery in the mills fell into disrepair; the land grew up to brush or was given over to cattle grazing,[i] an occupation which employs few people; while the municipal treasury required increasingly large financial subsidies from Congress.[ii]

Having failed to interest private capital, the Government itself was obliged to assume the task of restoring the land to production. Therefore, in April 1934, the Colonial Council of St. Thomas and St. John chartered a corporation known as the Virgin Islands Company. This concern was financed by the National Industrial Recovery Administration and its function was to revive trade and industry in the islands. It is interesting to note that the charter had to be obtained from the Council of St. Thomas and St. John because that of St. Croix, the island that stood to profit most from the operations of the Company, refused to grant it. This refusal reflected the deep social cleavages that have persisted there since the days of slavery. A few facts will illustrate this situation. In 1930 a score of men owned 80 percent of the entire island, while 65 percent of all those who died were buried in paupers' graves. In 1933 only 43 out of the 14,000 inhabitants paid an income tax. At that time the property qualification for voters was an annual income of $60 or the ownership of property valued at $300 (universal adult suffrage was not introduced until 1938). No more than 400 men were eligible to vote; and in the Council elected by them policy was naturally dictated by the prejudices of the private growers, the mill operators and the small commercial class. This gentry opposed the Government's going into business on the grounds that it was "socialistic" even though they had no reasonable alternative to propose.

The Virgin Islands Company was conceived, according to Governor Pearson, as "a partnership program by which the Government of the United States and the people of the Virgin Islands coöperate in a long-range social, economic, and industrial program, the profits being available in the islands for educational and social purposes." The Company is not a relief project in the ordinary sense of the term for it is supposed to make whatever legitimate profits it can, those profits to be used in the islands for general social amelioration.

When the Virgin Islands Company was created, the economic life of St. Croix had been at a virtual standstill for four years. In order to get the wheels of production into motion again the Company bought up a considerable amount of idle land and two dilapidated sugar mills, one of them with a rum distillery. By June 30, 1938, the Company had spent $2,463,439.41 in reclaiming 5,000 acres of land, repairing the plants and getting operations started. Its total income during the same period was $522,730.54 -- a good showing when we consider that its production is only now getting under way.

The Company engages in what it describes as a "general business." It manufactures raw sugar, some grown on its own land and some bought from private growers and homesteaders; it sells this sugar to refineries in the United States; it manufactures high-grade "Government House" rum; it prepares a special distillate used by the Angostura-Wuppermann Corporation in St. Thomas for making bitters; it raises poultry and eggs for the local market; it sells cattle and milk; it crushes rock for sale to the Government; it rents tractors and other equipment to the private growers of St. Croix; etc. Sugar accounts for 57 percent of the Company's business, and rum and the special distillate for 34 percent.

According to the official estimates for the 1939 crop only about 39 percent of the island's cane was produced on the Company's land; 22 percent was raised by 356 different growers on Government homestead land (about which more will be said shortly), 9 percent on the land of a large private mill, 7 percent by 9 estates, and 23 percent by some 572 miscellaneous small growers. Over 60 percent of the total crop was thus produced under the Government's rehabilitation program. Further, the Company ground 63 percent of all the island's cane. At the time of writing, one third of the employable persons on St. Croix depended on the Company for their livelihood.

The Virgin Islands Company thus occupies a predominant but hardly a monopolistic position in the island's principal industry. However, it is the only producer able to continue operations under adverse conditions or to experiment with new industries. On it falls, in a very real sense, the responsibility for keeping St. Croix going economically, as was the case this last year when the sugar crop was seriously blighted by drought. St. Croix is marginal sugar land, for the rainfall is not always adequate to insure a normal crop, and it is up to the Company to attenuate the spread between the bad and the good years.

The homestead program, which was started in 1932 and is administered independently of the Company, is another promising phase of rehabilitation. Several of the old estates on which it had become impossible to make a profit were bought up with Federal funds, subdivided into homestead plots and sold to capable agricultural workers on easy terms. A municipally-owned estate has also been cut up and sold in small parcels. Altogether these subdivisions amount to 374 homestead allotments averaging 6½ acres each. Up until 1938, when the drought greatly reduced the crop, a high proportion of the homesteaders made their interest and amortization payments in addition to caring for their current living expenses. The homesteaders are not as scientific producers as the estates or the companies. But that is really a secondary consideration, since the primary object of the program is to make as many people as possible self-supporting rather than to expand production, which is limited by the Sugar Act of 1937 to 9,200 tons a year. The homesteaders are provided with new and proper homes, which contrast strikingly with the wretched hovels they lived in previously. The Virgin Islands Company is likewise supplying some of its laborers with improved housing, gardens and community centers. In addition, two low-cost housing projects for urbandwellers have been erected by the P. W. A. Housing Division.

One more Government-sponsored agency deserves mention -- the Agricultural Experiment Station. Its object is to improve the techniques and breeds in the sugar and cattle industries, and to develop small, subsidiary agricultural occupations. It tries to popularize the use of better methods among the homesteaders and to encourage the cultivation of food crops -- the Virgin Islanders produce no more than half the food they consume. The educational and research work of the Station is an indispensable part of rehabilitation.

The Government has done much towards putting St. Croix on a self-sustaining basis. But it must do more if it is to clinch the victory already within its grasp. At present raw sugar leaving St. Croix pays an export tax of $6 a ton, which puts local producers at a disadvantage. Congress might well repeal this duty and in its place provide that the Federal internal revenue taxes now collected on St. Croix rum be turned over to the local treasury, as they are in Puerto Rico. The sums returned to the island in this way would balance its municipal budget, thus obviating the necessity for any more deficit appropriations from Washington. Further, the Virgin Islands, alone among all the sugar producers under the American flag, are at present denied benefit payments from the sugar processing tax. Congress should remove this discrimination against the St. Croix sugar industry. The Government has done so much to revive the Virgin Islands that it would be unfortunate if its whole program were to be jeopardized by a failure to effect these simple changes in the law.

In the Virgin Islands the United States has spent, for relief and for reconstruction, many times more per capita than has been spent by any European Power on its West Indian colonies. The Virgin Islanders are American citizens; we do not regard them as subject peoples whom it is our duty merely to keep alive. We seek to raise their material standard of living, to improve their sanitary and health conditions, to open the door of opportunity to all of them by means of universal education. Yet this is not done purely in the name of sweet charity. Our ultimate object is to prepare these hitherto underprivileged people to support themselves by their own industry. Only in this way can the islands remove the stigma placed upon them by President Hoover when he described them as "an effective poorhouse."

[i] Eighty percent of the island's total area was so used in 1935.

[ii] The Virgin Islands are divided into two municipalities, one for St. Thomas and St. John, one for St. Croix.

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