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What Business And Government Could Learn From Each Other

by Lance Oliver

January 28, 2000
Copyright © 2000 THE PUERTO RICO HERALD. All Rights Reserved.

Despite efforts by the administration of Gov. Pedro Rosselló to modernize public-private sector relations, and as much as both sides could potentially learn from each other, there remains a gap of understanding between the people who run the government and those who run the main engines of the Puerto Rican economy.

In recent conversations with half a dozen people who are accustomed to moving in the island's business circles I've heard several misconceptions.

"If you counted the off-the-books economy, Puerto Rico would be richer than any state," one fellow said to me recently. He cited a statistic suggesting that 30 percent of the island's economic activity is unreported.

Assuming that figure is correct, however, (another serious estimate I've heard is 24 percent) and assuming that there is zero off-the-books economic activity in the United States, a 30 percent increase would still leave Puerto Rico with significantly lower per capita income than any state. Aside from drug dealing, the vast majority of that unreported income consists of people cutting lawns and trimming hedges for very low pay.

Those who would diminish Puerto Rico's economic challenges also like to cite the high sales of luxury cars and the record-setting per-store sales recorded at local retailers such as JC Penney, whose Hato Rey store outsells any other in the chain. What they don't take into account is that despite the recent building boom in retail space, Puerto Rico still has far fewer square feet of retail space per capita than the United States. Sales are concentrated in fewer stores. An importer sells a lot of Mercedes-Benz cars because there is less competition.

Another factor inflating those sales figures is the negative savings rate in Puerto Rico. If people spend a lot of money it doesn't necessarily mean they're wealthier than we think. It also means they have more debt than is reasonable.

One person who is accustomed to moving among both the top circles in the public and private sectors told me recently, "The business people all think they could run the government better, but what they don't realize is you can't run a government like a business."

"They think times are good," he went on, "because they are doing well. They think the government and the press are too negative and focus too much on problems in society. So I ask them for a show of hands. How many of you have your children in private schools? How many of you live in a closed neighborhood? How many of you have private security? How many of you have to have your car's front end aligned because of the potholes in the roads? Those are all signs of a system that is not working the way it should."

Being able to afford to buy your way out of society's problems does not mean they no longer exist or can be reasonably ignored. While many business people do put time and money into projects for the good of society as a whole, others make a cursory show of contributing or else contribute to causes that benefit the fellow wealthy, rather than the neediest.

The government knows first-hand the problems that exist because, especially in Puerto Rico, the government is expected to solve each and every one of them. Whether it's a hurricane or simply a lack of income, the government is the first resort for relief, not the last.

But while business people soothed by their own personal success could learn from some time in the public sector, the government types could also pick up some pointers.

Government officials could learn from successful business people that understanding and responding to the needs of the customers is key to success.

The government in Puerto Rico responds most often, however, to the noisiest constituency of the moment rather than to the common good. There are legislators wringing their hands over the troubles of a thousand colmado owners or a few hundred truck drivers, but a person with real business sense would remember to look first at the big picture. There are 3.8 million "customers" of the Puerto Rico government and their interests as a whole must be met first.

No good business person would make decisions that would please 1 percent of the customers to the detriment of the rest, but government does it all the time.

For much of the 20th century, government and business were adversaries, especially in the days when absentee owners were squeezing the blood out of desperate Puerto Rican workers. Those times have changed. Government and business should not be partners, exactly, because they have distinct jobs to do and different goals and responsibilities.

But it would be great if they learn from each other a little more.

Lance Oliver writes The Puerto Rico Report weekly for The Puerto Rico Herald. He can be reached by email at:

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