Puerto Rico’s current debt crisis has parallels with fiscal problems in Cuba in Haiti in the 1920s and 1930s. In his new book, Bankers and Empire: How Wall Street Colonized The Caribbean, Peter James Hudson discusses how banks backed U.S. imperialism in the Caribbean, and how this sometimes violent history has shaped the region. World Policy Journal speaks with Hudson about the influence American financial institutions held and the resistance their meddling helped ignite.
WORLD POLICY JOURNAL: Why is the history of banks and financial institutions so important to your understanding of the history of the Caribbean?
PETER JAMES HUDSON: There are two different ways I could answer that question. The first way is a more roundabout way, and it involves my own trajectory as a scholar—as someone who, as a graduate student, was deeply influenced by social and cultural history and by cultural studies. Right before I started studying the history of banking, a lot of my colleagues and friends were doing “history from below.” There was a real emphasis on workers and peasants and slaves as the makers of history, as well as questions of resistance by marginalized people and questions of the consciousness of marginalized people against forms of oppression. I was living in New York at a time when there was a visible presence of banking—on Wall Street, obviously, but also a more recent push by institutions like City Bank or Wells Fargo to rebrand themselves and expand their territory. It got me thinking about the limits of “history from below” and the limits to work that focuses on the peasant or the slave or the worker. I felt that one really needed to think about the institutions that structure the decisions of marginalized people, that structure the lives of marginalized people, and that, in some ways, help create the cultural and political and economic context through which marginalized people live and fight. I realized that banking and financial institutions are huge in this regard and define our lives in so many ways, but we rarely talk about them, especially in a historical sense. That led me down the path into the histories of institutions like JPMorgan Chase and Citibank.
The second answer to the question, which is more direct, is the sense that the Caribbean has always been a place of foreign exploitation from the early days of sugar or cattle or tobacco up through the 20th century, when it’s a place of offshore financial havens, hidden tax shelters, and the flags of convenience of merchant vessels and insurance companies. The Barbadian essayist and novelist [George Lamming] had an anthology called The Enterprise of the Indies, referring to Columbus’s exploits there, and I think that the enterprise of the West Indies or the Caribbean is something that continues to shape the region. It still remains a place of foreign exploitation, and I think that there needs to be more work done to understand these institutions on an economic and political level, where that money is coming from or going to, and what the role of countries in North America and Europe is in that exploitation.
WPJ: In your book, Bankers and Empire, you discuss American banks’ expansions into Haiti, Cuba, Puerto Rico, the Dominican Republic, and Panama. How did banks influence countries in the Caribbean?
PJH: Haiti became independent in 1804 and then went under U.S. rule in 1915, whereas throughout that time the rest of the Caribbean remained to some degree under either British or U.S. influence: Puerto Rico and Cuba under the U.S. or Jamaica, Trinidad, Barbados, etc. under Britain. The nature of the relationship between financial institutions and questions of politics and sovereignty is complicated. In the case of Haiti, City Bank, the precursor to Citibank, had made itself powerful enough by World War I that it was in control of the Haitian National Bank, controlled Haitian monetary policy, distributed the Haitian debt, was largely in charge of sugar production on the island, and ended up having an impact on the migration of Haitian workers to American-owned plantations in Cuba and the Dominican Republic. The folks at City Bank basically had a direct line to the U.S. State Department, and it was largely due to their direct influence that U.S. Marines landed in Haiti. They didn’t simply pick up the phone and say, “this needs to happen tomorrow,” but they created the conditions and influenced the secretary of state and made it so that intervention was almost an inevitability.
In places like Cuba, the influence is a little bit more complicated. In many cases, Cuban politicians squabbling within the islands would use the threat of intervention to their own advantage. They would claim that a political party that was in power was undermining the sovereignty of the island—undermining the sovereignty of the Caribbean people—and, in a paradoxical way, would say “we need U.S. military intervention to help stabilize the country to return our sovereignty.” But in many ways this was also tied to questions of finance. By about 1926, JP Morgan, City Bank, and the Chase Manhattan Bank of New York were very involved in both Cuban sugar production and the floatation of Cuban sovereign debt. The Cuban president at the time, Gerardo Machado, very clearly stated that the work of the Cuban government was to protect interests of foreign capital in Cuba. He would do anything in his power to accomplish that, and he went so far as to suppress labor unions, execute militants and protestors, and basically impose a reign of terror on the island toward the end of the 1920s until he was deposed in the early 1930s. He was supported by the U.S. government until a point of crisis when the U.S. finally decided that it couldn’t support him anymore. But in all cases, there is a direct line between the national palaces of the Caribbean and Wall Street—and, beyond Wall Street, bankers in Montreal and Toronto.
WPJ: In addition to writing about how banks and the U.S. government worked together to impose imperialist policies, you also write about how they sometimes came into conflict. How did banks use these investments to push or circumvent financial regulations?
PJH: Let me give one example. In 1985, Harvard University Press published Citibank, 1812-1970, commissioned by Citibank president Walter Wriston. The book was not simply the kind of vanity history often published by corporations to mark their anniversaries. Instead, it was written as a policy document—as a means to explore the bank’s history as well as a path forward, especially in regard to the legislation and regulations governing banking. To that end, the book identifies the period from around 1893 to the Great Depression as critical to the bank. These were years of great profitability, which came from the rapid modernization of the institution. They attempted to circumvent regulations while pressuring politicians to ignore the new financial entities that the bank, in partnership with corporate lawyers Shearman and Sterling, was in fact operating illegally. In circumventing banking legislation, they (along with many other banks of the time) created a parallel entity, a “securities affiliate,” that became one of the primary institutions to engage in activities expressly prohibited by the National Bank Act: owning stock in other national banking associations, working as an investment bank, and organizing branches (especially foreign branches).
In terms of pressuring politicians, City Bankers including Frank A. Vanderlip and Roger L. Farnham had long conversations with President Taft and members of the Attorney General’s office wherein they effectively convinced them to blunt an investigation into the legality of the National City Company (the security affiliate), while squashing a report that suggested it should be dissolved. The report didn’t come to light until the Pecora Commission hearings of the 1930s—leading to the dissolution of the National City Company and passage of legislation restricting the combination of commercial and investment banking. Meanwhile, during the 1920s, the expansion of the City Bank came largely through the expansion of the National City Company. The president of the bank during this latter period, Charles E. Mitchell, was castigated in the 1930s for his speculative and unsound banking practices, but was portrayed in the 1980s as a sort of prophet of deregulation. When Travelers Life and Citicorp merged in 1998, in many ways it represented the beginning of a return to the golden age of deregulation and freedom of the 1920s.
WPJ: Puerto Rico just declared a form of bankruptcy. Do you see any relationship between this and the histories of banks in the Caribbean that you write about?
PJH: First, without going into the history of Puerto Rico over the last 120 years or so, I think this is a continuation of colonial policy. Puerto Rico’s lack of sovereignty since 1898 and its attachment to U.S. financiers and businessmen has continued in different forms over the past century or so, but I also think there are parallels for Puerto Rico in other parts of the region.
What Puerto Rico is going through now in terms of its $70 or $80 billion of municipal debt very much reflects what Cuba was going through in the late 1920s and early 1930s, when it had contracted all kinds of debt through the Chase Manhattan Bank. This debt is a bit different from Puerto Rico’s contemporary debt, but it was ostensibly taken on to build a municipal highway, to build schools and sanitariums, and to provide unemployment relief. But most of the revenue generated from that debt simply went back to the banks, and in some cases, into the pockets of government officials. By the early 1930s, people were setting up against both the Cuban government and the banks, arguing that there was no way the country could take on more debt—that it was fiscally insane, and given the fact that sugar prices had been plummeting for a decade (sugar was the main source of revenue for the Cuban government) and there was high unemployment, there was no way that Cuba would ever be able to repay this debt, it didn’t make sense to take on more, and it didn’t make sense to actually pay it back since it was contracted under an illegal regime. And so there was a discussion within Cuban society about this being odious debt. It was debt was contracted under Machado, and Machado, at a certain point, had ceased to be the legitimate representative of the Cuban government and so wasn’t in the position to actually take on the debt. So they defaulted—as the Puerto Ricans have done—on a number of payments. Eventually, they lost the battle over odious debt and over the debt repayments, but I think that refusal based on the fiscal crisis of the Cuban state is something that parallels the Puerto Rican situation.
I also think that one of the parallels of contemporary Puerto Rico and the Caribbean of the 1920s is the role of civil society in protesting against the debt, and the fact that it’s civil society saying, “We have a stake in the solvency of our country, we have a stake in the sovereignty of our country, and we’re going to take the protest into our own hands.” To me the most important group here has been the students at the University of Puerto Rico in Rio Piedras, who just finished a two-month strike against the modes of austerity that that regime had imposed on them with the raising of tuition fees and the attempts by the Puerto Rican state to gut the budget of the university. They had been protesting, from what I understand, as early as 2010 against these modes of austerity. Even before the sovereign debt crisis exploded onto North American consciousness in the last year or so, Puerto Rican students have consistently been involved in the fight against these regimes of debt.
The parallels are in Cuba, where the Cuban students were some of the most prominent protestors against the Machado regime and in favor of the return of sovereignty, and in Haiti under the U.S. occupation. The end of the occupation began in 1929 at an agricultural school, where, when the occupation government refused to continue funding groceries for students, students protested. This protest spread from one school to many schools, which soon led to a general strike, and then it led to a nationwide protest that hadn’t been seen since the early days of the occupation in 1915. Eventually, a number of commissions were sent by the United States to Haiti, and they eventually recommended the withdrawal of the U.S. Marines and, finally, the nationalization of Haiti’s banking system. The parallels I see are both in the role of foreign finance in determining the sovereignty of these countries and in the critical role of civil society and those people who have most at stake in Caribbean society in refusing the burdens of debt and refusing the regimes of imperialism that basically bankrupt multiple generations.
This interview has been edited and condensed for clarity.
[Interview conducted by Maya Singhal]
[Photo courtesy of Wikipedia Commons]