Weekly Review – September 24, 2020

Published on September 24, 2020 / Leer en español

See all editions of the
Weekly Review

Dear Readers:

This past weekend I had the opportunity to read Albert Camus’s speeches accepting the Nobel Prize in Literature in 1957 and came across the following passage in which he describes his generation as those “who were born at the beginning of the First World War, who were twenty when Hitler came to power and the first revolutionary trials were beginning, who were then confronted as a completion of their education with the Spanish Civil War, the Second World War, the world of concentration camps, a Europe of torture and prisons – [who] must today rear their sons and create their works in a world threatened by nuclear destruction.”

Notice he didn’t even mention the flu pandemic of 1918, which killed approximately 50 million people. The point is not that we have survived multiple catastrophes in the past (though we have) but rather to take up Camus’s challenge to forge “an art of living in times of catastrophe in order to be born a second time and to fight openly against the instinct of death at work in our history.”

The question today is how to live through so many crises (bankruptcy, hurricanes, earthquakes, COVID-19, racial strife, economic depression) without resorting to a shallow, childish, and trite optimism, while also avoiding the wily seductions of cheap cynicism and destructive nihilism.

Four days later Camus answered his own question in another speech at the University of Uppsala, when he calls on us to balance “reality and the rebellion that mankind places in opposition to that reality, each causing a mutual and endless resurgence within each other, a resurgence that is the very definition of joyful yet heartbreaking life.”

It is up to us to seek, then, a balance between reality and rebellion “that is the very definition of joyful yet heartbreaking life.” As a philosophy of life, I guess, one could do worse.

Sergio M. Marxuach, Editor-in-Chief

Insights + Analysis from CNE

Part II – Can We Rebuild Puerto Rico’s State Capacity?

By Deepak Lamba Nieves, Ph.D. – Research Director, and Sergio M. Marxuach, Policy Director

Once upon a time, Puerto Rico had a high degree of state capacity, defined as “the set of skills, capabilities, and resources necessary to perform policy functions, from the provision of public services to policy design and implementation.” (Wu et al, 2018) With time, however, those skills, capabilities, and resources eroded due to several reasons: the dismantling of the professional civil service; the outsourcing and privatization of key capabilities; and years of diminished financial resources due to austerity policies. Yet, even as Puerto Rico faces multiple crises today, its government is being called to execute at a high level. This gap between low capacity and high expectations is perhaps the most important political issue we face right now, yet no one seems to talk about it.


Between the early 1990s and the Great Recession of 2007, the field of public administration was dominated by theorists who advocated in favor of adopting private sector strategies to “maximize value” in the public sector. (Mazzucato and Kattel, 2020). Among those strategies we find the setting of efficiency targets, outsourcing “non-essential functions”, the privatization of some government services, establishing competition between public and private service providers, deregulation, providing public workers with financial incentives (“skin in the game”), and the deliberate fragmentation of public agencies. The overarching objectives were to make government smaller, more efficient, and hopefully more responsive to the needs of the people.

In many cases, though, the adoption of these policies resulted in an erosion of public-sector capacity to perform its basic functions and in the transfer of significant rents from the public to the private sector. The general decrease in state capacity in countries that adopted these policies came to a head with the global financial crisis of 2008, when it became palpably clear the world economy would collapse in the absence of large-scale state intervention and international policy coordination.

The Great Recession of 2008 prompted a rethinking of the proper role of the state in advanced, as well as in emerging economies. That debate, in turn, has come to the foreground again as the world faces its worse pandemic in a century. In the words of Mazzucato and Kattel:

Tackling grand challenges requires revitalizing private and public investment, innovation and collaboration. It is not about more state or less state, but a different type of state: one that is able to act as an investor of first resort, catalysing new types of growth, and in so doing crowd in private-sector investment and innovation—these are in essence functions about expectations about future growth areas.

Yet, it has been widely reported that the Trump administration’s reluctance to employ the Defense Production Act and other policy mechanisms to “crowd-in” private investment and to coordinate public and private responses to the pandemic in the United States, may have resulted in the loss of thousands of lives. Instead a small clique of advisers around Jared Kushner, mostly management consultants and bankers, blindly advocated for the market “to take care” of ventilator shortages and the lack of personal protective equipment.

Well, in the end, the market failed to work its magic, and state and local governments were left to pick up the slack on their own.

Meanwhile, in Puerto Rico, we have witnessed during the past months incredible situations that make us wonder if the central government of the island has any capacity left to execute necessary initiatives and fulfill basic goals for the benefit of society. The mess with the disbursement of Pandemic Unemployment Assistance (“PUA”) funds, the collapse of the primary vote, and the fact that, three years after the hurricane, only a handful of homes have been rebuilt under local post-disaster reconstruction programs, are just some recent signs of the lack of state capacity.

It is worth noting that increasing state capacity is not an easy task, as it is not just about pulling out a list of new programs and reciting what has worked elsewhere. Achieving improvements in state capacity requires, among other things, transforming the power relations between the state, its agents, and society, and changing patterns and practices that have been entrenched in government for years.

Unfortunately, we find it easier to see and name examples of government incapacity than local experiences that serve as possible role models. But there are interesting examples in places we don’t usually look at. For instance, some initiatives in the mountainous region of the island come to mind: the creation of a consortium between five municipalities that seeks to reactivate a hydroelectric plant and use solar panels to generate electricity; and the municipal case-tracking program to control the spread of COVID -19. Although none of these examples represent comprehensive solutions for our great problems in the energy and health sectors, a closer look will surely reveal some useful clues to address and improve state capacity.

Weak Economy, Loads of Debt: Is there a new debt crisis over the horizon?

Source: The Wall Street Journal

The Wall Street Journal reports that “Before the novel coronavirus crippled the job market and household incomes, Americans had amassed $4.2 trillion in consumer debt, a record even when adjusting for inflation. That excludes a further $10 trillion in housing debt. Expanded unemployment benefits didn’t cover all the lost pay of higher-earning workers, especially in or near expensive cities. Many lenders that let borrowers skip monthly payments now expect to get paid again. By some measures, the outlook for higher-earning workers appears worse than during the 2008 financial crisis.”

On Our Radar...

The Administrative State Under Assault – Professors Cass Sunstein and Adrian Vermeule argue in the New York Times that “More than at any time since the 1930s, the administrative state is under constitutional assault…[and] some judges, lawyers and legal academics are calling into question the very structure of modern government.” Read their analysis and what they propose to do about it.

Why Did COVID Overwhelm Hospitals?According to The Wall Street Journal the relentless search for financial efficiency may have been the culprit as “Health systems kept a tight rein on employee numbers and expanded outpatient care, helping their finances but making them less prepared for a medical crisis. The coronavirus pandemic set off a scramble for nurses the same way it did for masks and ventilators. Many couldn’t be found.”

Keeping an Eye on China – The United States’ Department of Defense recently published its most recent strategic assessment of the People’s Republic of China (“PRC”). “These reports have assessed the contours of China’s national strategy, its approach to security and military affairs, and potential changes in the PRC’s armed forces over the next 20 years, among other matters. 2020 marks an important year for the People’s Liberation Army (PLA) as it works to achieve important modernization milestones ahead of the Chinese Communist Party’s (CCP) broader goal to transform China into a “moderately prosperous society” by the CCP’s centenary in 2021. As the United States continues to respond to the growing strategic challenges posed by the PRC, 2020 offers a unique opportunity to assess both the continuity and changes that have taken place in the PRC’s strategy and armed forces over the past two decades.”