We have not heard much about the US Virgin Islands from the mainstream media in some months. Most information about the Virgin Islands right now comes from local publications, which have hinted at serious problems, but have generally not taken a comprehensive look at the islands’ situation, in contrast to Puerto Rico. Even if the coverage of Puerto Rico is terrible, at least it exists!
The problem of limited information has ended now as the New York Fed takes the pulse of the Virgin Islands’ economy nine months after Hurricanes Maria and Irma, and finds the territory in a deplorable state:
Based on the latest available data, total employment in the U.S. Virgin Islands dropped by an estimated 12 percent (4,500 jobs) between August 2017—right before Irma and Maria—and November. As of May 2018, only a fraction of those job losses (about 600) have been reversed. As shown in the charts below, the Virgin Islands’ economy appears to have been dealt a considerably bigger blow from the storms than was the case after either Hugo (1989) or Marilyn (1995)—though not nearly as severe as the 30 percent decline New Orleans experienced after Hurricane Katrina (2005). The economic effects of Irma and Maria also look substantially more severe in the Virgin Islands than in Puerto Rico, where employment fell by about 6 percent right after Maria but has since reversed more than half of those job losses.
Because tourism tends to be particularly sensitive to the aftermath of natural disasters, the Virgin Islands’ dependence on this industry largely explains the relatively severe economic hit. In contrast, Puerto Rico’s economy is fairly diversified, with a growing but relatively modest tourism industry. As a means of illustrating this difference, note that the accommodation industry—which represents just over 2 percent of private-sector jobs in Puerto Rico—accounts for roughly 13 percent in the U.S. Virgin Islands. As is typical following major storm-related disasters, the accommodation industry in the Virgin Islands saw a particularly steep slump after the storm: as of December, employment in that industry had fallen by 1,300 jobs, or 35 percent, comprising three in ten of the territory’s lost jobs. Employment in the broader leisure and hospitality sector—which also includes restaurants and bars but largely caters to visitors—fell by 2,200 jobs, or 29 percent, in the Virgin Islands, representing nearly half of the total job loss. It is clear that such a big hit to such an important industry would have a severe effect on the local economy. In Puerto Rico, by contrast, leisure and hospitality job losses accounted for only about a quarter of the total job loss.
The Virgin Islands, like many other Caribbean countries, has a small and fragile economy that is heavily dependent on one or two industries in order to survive. When the island nations of the Caribbean were established as colonies, they were largely used as plantations for the growing of crops like sugarcane. But with the advent of the modern global economy, most of these islands stopped being competitive in agriculture and turned to tourism to survive.
It’s difficult for many of the smaller islands to develop thriving economies due to both limited human capital and the geographic location. Plus, why stay in the Virgin Islands to make money when the standard of living is so much higher in the US?
The Caribbean islands that perform the best, such as the Dominican Republic, tend to have a larger landmass and a bigger population or natural resources they can exploit like Trinidad and its oil supply. Puerto Rico is in terrible shape, but they are still doing better than the Virgin Islands precisely for these reasons.
Furthermore, the Virgin Islands’ economy have taken several hammer blows in the past, which I covered here. The HOVENSA oil refinery closed down in 2012, and nothing replaced it. The economy also shrank substantially after the US closed several tax loopholes in 2004, and tourism never fully recovered after the 2008 crisis either.
Why aren’t we hearing about this if the need of the islands is so dire, especially after the media has spilled so much ink on “heartbreaking” human interest stories from Puerto Rico? The most likely explanation is politics.
I’ve ridiculed the media’s coverage of Puerto Rico in the past because it is incredibly one-sided and designed to present Puerto Rico as “Trump’s disaster.” The purpose of this coverage is to enrage Puerto Ricans and sympathetic Americans to get them to go out and vote for Democrats, particularly in the key purple state of Florida. It’s all about the 2018 and 2020 elections.
The Virgin Islands, however, has a much smaller and less concentrated population, and they are less politically important. Therefore, the media is happy to let them flounder, ignored, since they aren’t critical to the mission of “GET TRUMP.”