Sharing the Wealth

In little more than two decades, Puerto Rico has lifted itself from a sleepy agricultural backwater to a modern state brisk with industry, commerce and tourism. Much of the reason for this transformation lies in the historic economic program "Operation Bootstrap," which provided large tax incentives to lure development capital to the island. For all the progress, however, living conditions for many Puerto Ricans remain poor.

Last week, in his State of the Commonwealth Address, Governor Luis Ferre recommended another historically significant development program aimed at giving workers a greater share of the economy's wealth. Basically, the notion is to have the government underwrite the cost of stock purchases in private and public corporations for workers who could not otherwise afford it. In addition to giving Puerto Ricans a second income, the plan is expected to stimulate consumer demand and spur business growth. The idea was developed by San Francisco Lawyer and Economist Louis Kelso (TIME, June 29, 1970), who helped draft the program. He has been working for years to get such a plan adopted in the U.S. at both the federal and state levels.

If approved by the island's legislature, as expected, the program (called Commonwealth Co-Investment Plan) would work this way: a body known as the Proprietary Fund for the Progress of Puerto Rico would be started and managed by six directors, three appointed by the governor and three voted in by shareholders. The fund would raise money by borrowing from banks and other financial institutions, selling securities and getting government grants. This capital would be used to develop new Puerto Rican ventures or expand existing ones.

Added Stimulant. Preferred shares of the fund, which would operate like a mutual fund, would then be sold through banks to any employed citizen who earned $500 to $7,800 a year. To buy the shares, investors could get government-backed loans, for which they would not be responsible in case of default. A total of 800,000 workers would be eligible to buy up to $10 million worth of $1 preferred shares issued the first year. As an added stimulant to the economy, the government would match the investor's purchase of preferred shares by buying him an equal amount of common stock in the fund. Until the loan was repaid from dividends and other income from the securities, the shares would be held by the bank. Thereafter the worker would own the shares outright and get all the income.

The new program poses some difficult questions. For example, only those who hold jobs would be eligible for the program. Thus participation would be denied to the neediest citizens, and there are a lot of them; the island's jobless rate is about 12%. Still Ferre's recommendation is a bold call for action in meeting Puerto Rico's social and economic needs.

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