A New Contract With America

Author: Richard R. Tryon

Does privatization work to save taxpayers and improve public services at the same time?

by Richard R. Tryon

This third in a series of articles crafted to give impetus to a New Contract with America utilizes the history of Puerto Rico to trace how the notions of socialism got mixed up with symbols of patria on an island that suffered and still does from some 500 years of what most call ?colonial? rule.

This paper will show the advantages of shifting the emphasis in P.R. from its socialist inspired leadership that put Muñoz Marín in league with Rexford Tugwell, the last appointed Governor in 1942, to one that recognizes the maturity of the people of P.R. to be able to call for and monitor local level responsibilities, not only in education, but in many other services like communications, water/sewer, roads, and public transportation. P.R. is not alone in the need for this part of a New Contract with America.

All students of economics and political science, at least most of those involved in the last 100 years have little trouble in reporting that they were taught to know that man is a social animal that must live in communities and that certain parts of community life need to be operated as ?natural monopolies? regulated so as to obtain a fair return, if private investors are needed, and regulated anyway, if only public funds are used, so as to insure integrity and to avoid corruption!

Any student of political science will have no problem in reciting many of the endless streams of evidences of how public projects are the most important source of funds for political corruption. Why? By nature, so many of them are viewed as unique and long term investments for which no easy way exists to measure how much it should have cost vs how much it did! The famous Brooklyn Bridge in New York City is a classic case of how a $4 million dollar project turned into a $14 million wind-fall for the Tammany Hall crowd of politicians. George Robeling, the German inventor of wire cable was ready to build the bridge via his company for the lower figure. Tammany Hall found ways to take over the project and require endless changes and escalations to the point of the higher number. Keep in mind that all public projects have every reason to work the same way and practically no way to avoid it!

In Puerto Rico they are building a new light weight railroad from Bayamón to Santurce in the greater San Juan area. It is going to take twice as long to build and 2-3 times as much before it is finished and nobody yet knows how it will be used! Like the new Coliseum in Hato Rey, parking will be an after thought and an opportunity for an extension of the project! Even then, it remains to be seen if the train will somehow deliver Puerto Ricans to the door steps where they now try to park their cars to avoid walking, which must be a sign of inferiority or lack of power.

Unfortunately, where 60 years ago the whole world had much less in the way of security and comfortable living, Puerto Rico had virtually nothing! A few very wealthy owned most of the land and what little industry existed, the common man or ?jíbaro? had virtually nothing. Well, not quite. They had strong bodies, healthy spirits and lots of children. Of course, many were weak and died as no real medical care or support systems existed. Out of this came the twin towers of social reform- the one became the ?father of what many would call the Puerto Rico nation- Luis Muñoz Marín and the other, strangely, was the last of the Yanquí appointed Governors- Rexford P. Tugwell, a one time city planner from NYC, NY. Both were self described socialists, men that just knew that unless the masses won the vote and gained control so as to take from the rich and build for the poor, the cycle of poverty would not be broken. Well, the cycle has not been broken, but P.R. is now showing that it is close to breaking the bank. Not because corruption siphoned off all that much, but because the support system may be losing interest in keeping the full subsidy in place. Sixteen billion a year in Federal grants and distributions has made it possible for P.R. to look so much more vital than its Caribbean neighbors that it has become the land of opportunity for those who can migrate to it.

In the process of building P.R., Marín and Tugwell tired to start as many businesses as possible to put the people to work. That is still being done by Fomento and its new controlling name PRIDCO. The Agriculture Department in 1942 became the controller of the Land Authority and today the results show that the sugar industry and its prized Sugar Corporation are, if not dead, meaningless except insofar as they structure made to support it keep other activity from happening. Such is also the case for virtually every other business started by this socialist approach, with the exception of those that relate to essential services. The cost of running the inept and inadequate water and sewer service is just passed on to the consumer who has no choice but to pay whatever is demanded, even when service is denied for prolonged periods of time. Just because your phone did not work for six months or more was no reason to relieve you of the monthly charge for having it! Losing water and sewage meant no charge on the meter, but lots of time and cost to carry other water to your place.

The costs of living with inadequate roads is incalculable but real. Electrical power meters don?t charge when the service is out, but the alternative costs are real and may involve a back-up generator and its fuel, or just the extra costs of living without energy to do work faster. Throughout America and especially in P.R. the people have grumbled about all of these failures but students of economics and political science have told us that these natural monopolies will always be with us! But, in the last fifty years, many of them have been changed.

The Campofresco Company in Paso Seco or Gabia operates a growing plant north of Santa Isabel almost adjacent t the Coamo-Santa Isabel interchange of the Luis Ferré Expressway- the first modern toll road in P.R. It took over the failed Dept. of Agriculture efforts to grow pineapple on the North coast of P.R. about sixty five miles away over the mountains and it must truck the harvest over those mountains or else go the long way around. Thanks to the introduction of more toll roads built by private investors with an incentive to get the roads built and in service much faster, this problem has been mostly solved. One small link may remain, if not yet finished after debating with authorities about environmental and other issues. So, it is clear that the road building of the last ten years has paid a big dividend in terms of moving more traffic and in serving the ability of industry to be efficient in the moving of goods and services all over the island.

After terrible strife the phone company the PRTC was finally privatize and it now works a lot better even though it also has to now compete with cell phones and other long distance carriers. It still has legal protections to be engineered out; but the advantages to P.R. are coming.

The Water and Sewer (ASA) named for the time when ancient concrete aqueducts moved farm waters through many parts of the island is now managed by a private industry management company and it has helped clean-up the mess and ?constipation? of the decision process. Still the current government longs for the heritage of their party that built the original centralized and socialistic plan to bring services where none existed. That job is never ending, but Privatizing is an alternative that can escape the corruption and allow for opportunity for competition.

In fact, the point of this paper is to show that privatization gives the chance for competition in all cases. We should be encouraging in all of the U.S., where practical the installation of sun and wind power to augment what is on the grid that is generated by burning of fuel or nuclear reactors.
The smallest component acts as a brake on the charges that the generators can use as selling prices. The ability to buy from remote sources provides opportunity to save as has been shown in many cases. It also allowed the foolish policies in California that made it pay dearly for its short-sighted plan. But, the point is still that actions by individuals should be encouraged to add to the available power and keep competitive pressures in place so as to benefit the people.

The advent of wireless and other satellite based technologies has removed the need for socialized communication systems. The savings to consumers speak volumes about the inefficiency and high cost of the central government approach. Nobody has found a bigger scandal than that of the Enron Company, unless it is the larger case of dishonesty by its auditor, Arthur Anderson. Clearly we are at the point where we should encourage a lot more privatization to avoid corruption and encourage competition. To reach such a position, however, it is necessary to have a political process that can deliver it! A New Contract with America in the hands of a party committed to delivering it can help. In P.R. that is a big question.

Both parties that have shared control have failed to encourage candidates and voters have failed to understand the advantage of escaping from the notion of ?patria? that made is so hard to sell the phone company. One wonders what would have been the result if P.R. had not done so? The deficit would be some $2 billion larger.

The next and final chapter will wrap up the series aimed at breaking the back of opportunity for corruption.