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What GM and Puerto Rico have in common

1 17 0
23.07.2019

What do General Motors and the Commonwealth of Puerto Rico have in common? Both experienced deep financial distress and organizational dysfunction in recent years, culminating in bankruptcy or the legal equivalent thereof.

And in each case, the fundamental cause was not mistakes or misconduct by the people in charge — though there were plenty of both. The problem was that, in a real sense, no one was in charge.

Clear and consistent lines of authority and accountability are the hallmarks of any well-run organization.

At GM, however, the buck stopped nowhere. Legally binding but conflicting demands of shareholders, unions, federal, state and local governments, even car dealers, buffeted the company for decades, distracting from the basic mission — making popular cars — and forcing it to meet obligations with borrowed cash. Finally GM collapsed into federally subsidized bankruptcy in 2009.

Acquired from Spain by the United States in 1898, and subject to American sovereignty and policy experiments ever since, Puerto Rico is governed by, or financially beholden to (partial list): Congress; the Treasury Department; bondholders, public-sector unions; two machine-like, island-based political parties; and the U.S. shipping industry — which gets rich at Puerto Rico’s expense via a protectionist law barring lower-cost, non-U.S. vessels from supplying the island.

With growth and reform stymied, Puerto Rico lived off artificially easy credit — U.S. law made its bonds “triple........

© Washington Post