Democracy is a complex process. As we support the expansion and growth of democracies across the world, we should appreciate the challenges it will create for us. Even as our own democracy is becoming increasingly dysfunctional before our eyes, we cling to the notion that it will produce effective outcomes elsewhere, that the new democrats of our creation—Hamid Karzai and Nouri al-Maliki come to mind—will make the choices we think they should make rather than the ones that suit their own political calculus.
The simple reality is that elected politicians each make rational choices based on their own, often very personal, balancing of a variety of factors. They may be elected to serve the interest of their constituents—however that is defined—but the reality is that their motivations are far more complex than that.
It is rare that the future of a community and the process of democratic decision making can be seen in stark relief, but such is the moment that faces the United States Virgin Islands. This week, the legislature of "America's Paradise"—a 105,000 person territory just east of Puerto Rico—will vote whether to approve an agreement negotiated between Virgin Islands Governor John deJongh, Jr. and Hess Oil and PDVSA, the national oil company of Venezuela, the two giant oil companies who together own the now-shuttered HOVENSA oil refinery on the south shore of St. Croix, the largest of the U.S. Virgin Islands.
At stake in the pending vote is nothing less than the economic future of St. Croix, and to a great extent the U.S. Virgin Islands as a whole.
The HOVENSA refinery was constructed a half-century ago on pristine waterfront land, as part of a strategy among the federal and territorial governments to end sugar cane cultivation on St. Croix and replace the largely agrarian economy with an industrial center. Each government had something to benefit from the strategy. For the local government, the industrialization of St. Croix offered the prospect of building a middle class society, while it would allow the United States federal government to get out of the business of being the overlord of a predominantly black, plantation economy.
For fifty years, the strategy worked. Family incomes in the U.S. Virgin Islands grew to far exceed its Caribbean nation neighbors. The Virgin Islands became an economic magnet for workers from the "down islands" seeking greater economic opportunity, and remittances home became an economic driver for the region. Then, eighteen months ago, Hess Oil and PDVSA closed the refinery. Under assault by Wall Street—and in particular hedge fund manager Paul Singer of Elliot Management—Hess Oil terminated all of its refining and distribution activities to focus exclusively on exploration, while new refinery capacity in Venezuela made the HOVENSA refinery expendable for PDVSA. In January of 2012, with no advance notice, the refinery was shut down.
The impact of the refinery shutdown was devastating for St. Croix, and for all of the Virgin Islands. The impact on the small, closed economy was devastating. In the wake of the refinery shutdown, 2,400 jobs were lost on an island of 50,000 residents. Overnight, the local unemployment rate skyrocketed from around 4% to nearly 20%. The shutdown devastated the Territorial public finances as well. As recently as five years ago, the refinery contributed nearly $200 million in corporate and personal income, gross receipts and other taxes to the Territorial treasury, an amount comprising 22% of the General Fund revenues.
In light of that backdrop, the pending vote would seem to entail little drama. After all, on the face of it, the prospect of restarting the refinery under new ownership offers the possibility of new life for a community and economy that is experiencing deep pain. Refinery economics have turned around from a half-decade ago when refineries were closed across the east coast of the United States, and there are now active suitors for the St. Croix facility that remains one of the largest in the world. The prospect of reopening the refinery offers the potential of hundreds, if not a thousand or more high paying jobs. In addition, for the Territorial government that has reduced its workforce by 20% over the past several years, a reopening of the refinery offers the prospect of stabilizing its public finances, and securing the future of a depleted public employee pension fund.
But if public hearings and town meetings held in recent days are any evidence, the prospect of passage remains up in the air. At a meeting the other day on St. Croix, a majority of those in attendance indicated that they opposed the reopening of the refinery. The issue at that meeting, as well as in legislative testimony, was framed using the paradigm of health vs. money. Local activists challenged Territorial legislators not to vote for jobs at the expense of public health, while others suggested that data collected by the EPA and the US Department of Health provided little evidence of adverse health affects beyond personal anecdotes.
Obscured in the "health vs. jobs" arguments was the harsh reality that if the HOVENSA refinery is not reopened, the share of the St. Croix population living in poverty will increase for years to come, with the poorer health outcomes that that outcome entails. All one has to do is look at the example of Detroit to see this issue in black and white. With the closing of industry within that city, the air and water may well be cleaner, yet with the economic decline of Detroit, public health outcomes have deteriorated for children and adults alike. Industrial jobs and public health are not necessarily at odds with each other.
While a “yes” vote offers the prospect of economic rebirth, a “no” vote will assure years of litigation between the Territory and the oil companies, as each has very different interpretations of their rights going forward in the absence of a sale to a new owner, and bankruptcy of the refinery holding company would likely ensue. Rather than the prospect of new jobs and revenues to the local government, if the proposed agreement is ultimately rejected by the Territorial legislature, the only thing the Territorial government will have to show for it will be millions of dollars of legal fees, further draining the public treasury of scarce and badly needed public funds.
But this is a democracy, and thus the votes will not necessarily turn based upon these differing visions of the future. Rather, each of the legislators will consider their own priorities. They certainly will consider those two outcomes, but balanced against those will be the vagaries of local politics, with very personal and obscure twists.
With two days left before the vote, there were only five committed votes in favor of the proposed agreement. Had a vote been taken within a few months after the refinery closed down—while the pain of job losses was still fresh—no doubt attitudes would have been different and senators inclined to vote "no" would have viewed things differently. Yet up until the day of the vote, I continue to believe that the result will be a "yes" vote, because the lesson of Detroit is so clear, and because the future welfare of a generations of island residents may rest with the outcome. But these are democratic votes, and it is a democratic process. And as Tip O'Neill famously said, All politics is local.
And time changes perceptions. Had a vote been taken within a few months after the refinery closed down—while the pain of job losses was still fresh—no doubt attitudes would have been different and senators now inclined to vote "no" would have viewed things differently.
This week, those voting "no" may well look at the show of hands at the public and expect that he or she will be rewarded come election time for doing so. But only time will tell. Public attitudes evolve and the pendulum of public opinion may well swing back, and those who voted "no" may not be rewarded for their vote. But perhaps they won't be rewarded for that "no" vote. If at the end of the day the Territorial legislature turns its back on the prospect of reopening the refinery, the day may come when the people will wake up economic hardship of the path they have chosen. On that sunny Caribbean morning, they will look at the economic devastation around them and wonder, who let this happen? How did they let it come to this?
Note: Since the publication of this piece, the Senate of the U.S. Virgin Islands voted 11-3 to reject the agreement with the owners of the HOVENSA refinery on the island of St. Croix.
The simple reality is that elected politicians each make rational choices based on their own, often very personal, balancing of a variety of factors. They may be elected to serve the interest of their constituents—however that is defined—but the reality is that their motivations are far more complex than that.
It is rare that the future of a community and the process of democratic decision making can be seen in stark relief, but such is the moment that faces the United States Virgin Islands. This week, the legislature of "America's Paradise"—a 105,000 person territory just east of Puerto Rico—will vote whether to approve an agreement negotiated between Virgin Islands Governor John deJongh, Jr. and Hess Oil and PDVSA, the national oil company of Venezuela, the two giant oil companies who together own the now-shuttered HOVENSA oil refinery on the south shore of St. Croix, the largest of the U.S. Virgin Islands.
At stake in the pending vote is nothing less than the economic future of St. Croix, and to a great extent the U.S. Virgin Islands as a whole.
The HOVENSA refinery was constructed a half-century ago on pristine waterfront land, as part of a strategy among the federal and territorial governments to end sugar cane cultivation on St. Croix and replace the largely agrarian economy with an industrial center. Each government had something to benefit from the strategy. For the local government, the industrialization of St. Croix offered the prospect of building a middle class society, while it would allow the United States federal government to get out of the business of being the overlord of a predominantly black, plantation economy.
For fifty years, the strategy worked. Family incomes in the U.S. Virgin Islands grew to far exceed its Caribbean nation neighbors. The Virgin Islands became an economic magnet for workers from the "down islands" seeking greater economic opportunity, and remittances home became an economic driver for the region. Then, eighteen months ago, Hess Oil and PDVSA closed the refinery. Under assault by Wall Street—and in particular hedge fund manager Paul Singer of Elliot Management—Hess Oil terminated all of its refining and distribution activities to focus exclusively on exploration, while new refinery capacity in Venezuela made the HOVENSA refinery expendable for PDVSA. In January of 2012, with no advance notice, the refinery was shut down.
The impact of the refinery shutdown was devastating for St. Croix, and for all of the Virgin Islands. The impact on the small, closed economy was devastating. In the wake of the refinery shutdown, 2,400 jobs were lost on an island of 50,000 residents. Overnight, the local unemployment rate skyrocketed from around 4% to nearly 20%. The shutdown devastated the Territorial public finances as well. As recently as five years ago, the refinery contributed nearly $200 million in corporate and personal income, gross receipts and other taxes to the Territorial treasury, an amount comprising 22% of the General Fund revenues.
In light of that backdrop, the pending vote would seem to entail little drama. After all, on the face of it, the prospect of restarting the refinery under new ownership offers the possibility of new life for a community and economy that is experiencing deep pain. Refinery economics have turned around from a half-decade ago when refineries were closed across the east coast of the United States, and there are now active suitors for the St. Croix facility that remains one of the largest in the world. The prospect of reopening the refinery offers the potential of hundreds, if not a thousand or more high paying jobs. In addition, for the Territorial government that has reduced its workforce by 20% over the past several years, a reopening of the refinery offers the prospect of stabilizing its public finances, and securing the future of a depleted public employee pension fund.
But if public hearings and town meetings held in recent days are any evidence, the prospect of passage remains up in the air. At a meeting the other day on St. Croix, a majority of those in attendance indicated that they opposed the reopening of the refinery. The issue at that meeting, as well as in legislative testimony, was framed using the paradigm of health vs. money. Local activists challenged Territorial legislators not to vote for jobs at the expense of public health, while others suggested that data collected by the EPA and the US Department of Health provided little evidence of adverse health affects beyond personal anecdotes.
Obscured in the "health vs. jobs" arguments was the harsh reality that if the HOVENSA refinery is not reopened, the share of the St. Croix population living in poverty will increase for years to come, with the poorer health outcomes that that outcome entails. All one has to do is look at the example of Detroit to see this issue in black and white. With the closing of industry within that city, the air and water may well be cleaner, yet with the economic decline of Detroit, public health outcomes have deteriorated for children and adults alike. Industrial jobs and public health are not necessarily at odds with each other.
While a “yes” vote offers the prospect of economic rebirth, a “no” vote will assure years of litigation between the Territory and the oil companies, as each has very different interpretations of their rights going forward in the absence of a sale to a new owner, and bankruptcy of the refinery holding company would likely ensue. Rather than the prospect of new jobs and revenues to the local government, if the proposed agreement is ultimately rejected by the Territorial legislature, the only thing the Territorial government will have to show for it will be millions of dollars of legal fees, further draining the public treasury of scarce and badly needed public funds.
But this is a democracy, and thus the votes will not necessarily turn based upon these differing visions of the future. Rather, each of the legislators will consider their own priorities. They certainly will consider those two outcomes, but balanced against those will be the vagaries of local politics, with very personal and obscure twists.
With two days left before the vote, there were only five committed votes in favor of the proposed agreement. Had a vote been taken within a few months after the refinery closed down—while the pain of job losses was still fresh—no doubt attitudes would have been different and senators inclined to vote "no" would have viewed things differently. Yet up until the day of the vote, I continue to believe that the result will be a "yes" vote, because the lesson of Detroit is so clear, and because the future welfare of a generations of island residents may rest with the outcome. But these are democratic votes, and it is a democratic process. And as Tip O'Neill famously said, All politics is local.
And time changes perceptions. Had a vote been taken within a few months after the refinery closed down—while the pain of job losses was still fresh—no doubt attitudes would have been different and senators now inclined to vote "no" would have viewed things differently.
This week, those voting "no" may well look at the show of hands at the public and expect that he or she will be rewarded come election time for doing so. But only time will tell. Public attitudes evolve and the pendulum of public opinion may well swing back, and those who voted "no" may not be rewarded for their vote. But perhaps they won't be rewarded for that "no" vote. If at the end of the day the Territorial legislature turns its back on the prospect of reopening the refinery, the day may come when the people will wake up economic hardship of the path they have chosen. On that sunny Caribbean morning, they will look at the economic devastation around them and wonder, who let this happen? How did they let it come to this?
Note: Since the publication of this piece, the Senate of the U.S. Virgin Islands voted 11-3 to reject the agreement with the owners of the HOVENSA refinery on the island of St. Croix.
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