Understanding the Puerto Rican Blackout: Bank Regulation, Bureaucratic Inefficiency and Leadership

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  • November 2, 2018

This afternoon I watched the outstanding PBS Frontline documentary, “Blackout in Puerto Rico.” The program unwraps the story of why it took 7 months to restore electrical power to most of the island of Puerto Rico, following the devastation wrought by hurricane Maria in September 2017, and the complicated reasons why the infrastructure of the island had fallen into severe disrepair in the previous decades. The full 55 minute program is available on PBS’ website when you login with your local affiliate account, or via Apple TV. The 30 second episode trailer provides a good overview:

I’ll share several observations and reflections after watching this excellent program.

Banking Regulation is Essential

This PBS Frontline program does an outstanding job highlighting the role played by Wall Street brokers and mega-banks in financing Puerto Rico’s staggering debt. This is not only a story of financial mismanagement by Puerto Rico’s elected leaders, but also yet another troubling example of why we need regulation in financial markets. Left to their own devices. banks and bankers will loan more money to organizations (including U.S. territories) as well as individuals than they should responsibly accept. I’m reminded of the outstanding book, “All the Devils Are Here: The Hidden History of the Financial Crisis,” by Bethany McLean (@bethanymac12) and Joe Nocera (@opinion_joe). I wrote a bit about that book in my 2011 post, “Connect the Dots: The Political Revolution We Need in the USA.” Last week, our elected officials in Washington passed legislation and signed into law new rules which roll back the historic Dodd-Frank legislation which was passed in 2010 as a response to the banker-induced financial crisis of 2007-08. We need enlightened elected officials in the United States who do not act as the pawns of corporate interests, and can maintain needed regulatory limits on financial institutions to keep greed in check.

Unfortunately, those needed elements of the political puzzle were not in place for Puerto Rico in the 1990s and 2000s, and combined with other factors to bring the island to third-world conditions in its power grid and infrastructure by the time Maria came knocking in 2017.

Colonial Heritage is Grim

Many citizens of the United States may not be comfortable with this reality, but Puerto Rico’s continuing status as a U.S. territory is a legacy of our own history as an empire and a colonizing nation. Like many of the American colonists of 1776, Puerto Ricans are citizens without representation in our national government. We should either bring Puerto Rico into the United States as a state with full rights, or cut it loose as an independent nation to go their way in the community of nations. The PBS Frontline special paints a grim picture of this future, where Puerto Rico is unlikely to receive the investment and financial assistance it would need to grow out of its financial and economic morass. As conditions around the island continue to be poor, even with restored power in most areas, there is an ongoing “brain drain” of talent from the island. Younger families are thinking about their own children and their prospects for the future. Those look MUCH brighter (literally and figuratively) on the mainland of the United States than on Puerto Rico. No one knows what this hurricane season will hold, but there will doubtless be more strong storms in the years ahead. By its mandate, FEMA was only able to restore capacity, officially not build capacity and infrastructure beyond that which existed pre-Hurricane Maria. The history here is grim, and so is the outlook for the future.

Bureaucratic Processes Can Be Stupid

We need regulations to keep greed in check, but we also need rules which don’t hamstring government officials into making stupid decisions. The Puerto Rican head of FEMA operations is interviewed in this Frontline special, and explains why two different companies were awarded $25 million and $30 million federal contracts to provide tarps to the island, but neither had any track record or experience in providing these types of products or services to others in the past. Incredibly, a third company finally got tarps from China to Puerto Rico, even though that evidently violates U.S. import laws, whose previous product specialization was hookah tobacco. The FEMA administrator’s defense of this ridiculous series of bureaucratic blunders was, “we followed all our federal acquisitions policies.” Obviously in this case, some exceptions of the rules were called for.

Good Leadership Essential

It seems pretty clear, viewing this Frontline special, that the lead FEMA administrator in Puerto Rico wasn’t and isn’t “the sharpest tool in the shed.” Out of desperation and apparently not having other options, the US government eventually tasked the US Army’s Corps of Engineers with the mission of restoring the power grid in Puerto Rico. They did this over the course of 7 months with the help of contractors which (yes, I know it’s amazing) did have some experience with electricity contracts, but not specifically with restoring power grids.

As is the case in every organization and with every challenge, good leadership is essential. It’s crazy to learn from this PBS Frontline documentary how much faster the emergency response for things like tarps to cover homes were in places like the Philipines following Typhoon Haiyan in 2013, than they were in Puerto Rico in 2017. It does seem that FEMA was much better in responding to hurricane damage in the Houston area last fall, than they were during Katrina in 2005. Some lessons have been learned and applied, but there is so much more to do when it comes to increasing the efficiency and rationality of our government agencies.

I highly recommend all PBS Frontline specials, including this one on “Blackout in Puerto Rico.” I always feel like I am a better educated citizen when I watch a Frontline special and discuss it with others. Climate change is a reality, and we’re going to keep seeing severe weather in the Caribbean and in other parts of our amazing planet. I am very thankful to the journalists at PBS Frontline and for the funders which make their journalism possible. I hope we can continue to apply lessons learned to the inadequate disaster response in Puerto Rico following Maria not only in improving government services on the island, but elsewhere as well.

The work of our first responders, disaster relief agencies, and government representatives as well as contractors is so important in times of need. Let’s continue to educate our students and our fellow citizens about these historical events, as well as the importance of efficient and humane responses to them so we can do better in the future.

“Hurricane Maria 2017 09 19” (CC BY 2.0) by anttilipponen

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