The Elusive Puerto Rican Informal Economy

Funny thing happened to me while I was trolling the economic data for Puerto Rico yesterday.  Surprise, surprise, I found yet another paradox.  According the Puerto Rico Government Development Bank (GDB), Puerto Rico's Economic Activity Index and Retail Sales are growing.   How is this possible?  With lower population and lower employment rates, shouldn't the economic activity be shrinking?  How can there be more money in the economy when there are less people working?

Ask yourself, how could there be more money in an economy, when there is less income?  The only logical conclusion is that there is another source of income.  Now ask yourself, what other sources of income are there that aren't from employment?  Now you might respond, clearly you are overlooking self-employment. Unfortunately, the labor data available for the GDB doesn't support this theory.  On the contrary, self-employment is at it's lowest since 2008.  So if it's not self-employment, then what could be the source of this money?

According to Occam's Razor, the only answer to this riddle is the elusive Puerto Rican informal economy.  Estimated at $17 billion dollars, or 27% if gross domestic product  [of Puerto Rico], the black market is the primary target for both the IVU and the IVA.

When the debate surrounding the IVU caught my attention back in 2006-07, I started watching the growth of a local pulgero, a flea market.  I watched as the IVU became the law of the land, the size of the pulgero grew rapidly.  However, as the years went by and the informal economy continued growing, my local pulgero maxxed out.  Recently, the number of stalls, constructed out of wagons (steel enclosed trailers typically used for goods transport), has roughly stayed the same.  I share my heuristic, to call into question, the origin of the informal economy.

I love the way, the Puerto Rico informal economy has become an accepted fact.  I love it for the irony it represents, for not only does this represent the cash-based economy where goods and services are exchanged outside of law, it also includes drugs and guns trafficking.

It boggles the mind that so many "law-abiding" citizens are complicit with major crime and the syndicates they represent.  Since it is, by definition, off the books, there is no way to estimate the breakdown of the estimated $17 billion.  I wonder though, how much of this economy is drawn from drugs, guns, and prostitution?

Of course, within a kleptocracy like ours, an informal economy is the most nefarious type of corruption.   It slowly leaches into our daily lives, increasingly corrupting more and more of our society.

Much heralded, is the community that protects the gang that helps them to survive, providing "jobs" and income for the community where none existed.  But I wonder....how many of the participants in Puerto Rico's informal economy would openly support murderers, thieves, and extortionists?  Especially, if you factor in that Puerto Rico's population is approximately 95% Christian?

Sadly, I'm left with only the illogic from Star Tek's classic "I Mudd" episode.  "You say that Jesus and The Bible are your strength, but openly allow murder, stealing, and bearing false witness.  But if God was your copilot, you wouldn't take what isn't yours."