The Missing Agrarian Middle Class

Abstract

During the middle decades of the twentieth century, Puerto Rico embarked on one of the most rapid processes of industrialization and economic development the world had ever seen. Yet the industrial economy that this process produced had two fundamental flaws: it featured little by way of local capital formation in the manufacturing sector, and it was incapable of producing sufficient employment for the island’s labor force. What explains these flaws? This article seeks to answer this question by drawing on the rich literature on development in East Asia. I engage with four theories that explain successful East Asian development on the basis, respectively, of unique insertion into the international political economy, robust industrial policies, economic nationalism, and agrarian reform processes that preceded industrialization. While Puerto Rico benefited from all of these factors—which may explain the relative success of development on the island—they differed qualitatively from the East Asian cases, with the possible exception of international political economy. I suggest that these differences might in turn be explained by substantial differences in pre-existing agrarian class structure. The absence of a significant stratum of smallholding agricultural producers in Puerto Rico distinguished the island from East Asian societies. It also helps explain the lack of local capital formation and employment generation built into the Puerto Rican development model, as well as the shape of industrial policy and agrarian reform and the ultimate weakness of nationalist impulses.