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Would Statehood Strengthen Puerto Rico’s Economy?

While Puerto Rico is in a strong economic position compared to other Caribbean and Latin American economies, it is not well off when compared with the 50 states of the United States. Puerto Rico has a higher poverty rate, a more fragile infrastructure, and less federal support than any state. The Island also continues to struggle with debt, with the austerity measures required by PROMESA, and with low labor force participation.

Some observers hold that Puerto Rico is simply too poor to become a state. Does Puerto Rico’s economy disqualify the Island for statehood?

Did current states face this issue when they were territories?

Were former territories impoverished?

All the territories that have already become states are more prosperous as states than they were as territories.

Most were economically challenged as territories. One example is Kansas, where a drought and high levels of violence in the run up to the Civil War created a famine. The settlers in Kansas Territory, which was at the time known as “Bleeding Kansas,” relied on food sent to them from the states to stave off starvation.

Hawaii is another example of a territory which became much more prosperous as a state. Hawaii faced economic challenges similar to those of Puerto Rico when it was a territory, but since statehood has become one of the wealthiest states, with one of the lowest poverty rates.

What were the effects of statehood?

Several territories debated whether they would be able to afford statehood. The federal government bore the costs of territorial governments in many cases — and also often chose the governors. Some territories feared that the costs of supporting a state government would be higher than they could afford.

Alaska was one of these territories. However, by 1960, though poverty for indigenous people was still high and the cost of living was much higher than in the contiguous 48 states, Alaska was already identified as a high-income state. The poverty level in Alaska is now lower than in the U.S. as a whole, and the average income is higher.

Puerto Rico already supports its own government.

Idaho was an example of a territory that recognized that federal support would be greater under statehood. As a territory, they were receiving $28,000 a year in federal funds. This would increase to $3.5 million upon statehood.

This is similar to the position of Puerto Rico. As a state, the territory would receive billions more dollars in federal funding, because it would be treated equally with the states. Now, Congress is legally allowed to treat Puerto Rico differently from the states.

Puerto Rico’s economy and statehood

Economic need has historically been a reason to choose statehood. Wealth has never been a criterion. Territories have sometimes brought significant resources to the nation, as California did in the Gold Rush, but more often have been struggling economically until they became states.

In every case, territories have been successful as states once they achieved admission. Puerto Rico’s economy is far more integrated with the United States than any other territory which has become a state already.


Image courtesy of Ethan Jamison

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