Bootstrap Theory

Bootstrap theory refers to social practices and laws dedicated to helping people help themselves; these practices range from the Puerto Rican industrialization project titled “Operation Bootstrap” in the mid-20th century to U.S. ideology and social policy in the post-welfare reform state.

Bootstrap theory was first intimated in an official policy called Operation Bootstrap (Operation Manos a la Obra), an ambitious project to industrialize Puerto Rico in 1948. The architect of Operation Bootstrap was Teodoro Moscoso (1910–92), a supporter of the then recently established Popular Democratic Party, who argued that a densely populated island like Puerto Rico could not subsist on an agrarian system alone. Therefore, U.S. companies were enticed to build factories that provided labor at costs below those within the United States, access to U.S. markets without import duties, and profits that could enter the mainland free from federal taxation.

To entice participation, tax exemptions and differential rental rates were offered for industrial facilities. As a result, Puerto Rico's economy shifted labor from agriculture (food, tobacco, leather, and apparel products) to manufacturing and tourism (pharmaceuticals, chemicals, machinery, and electronics). Although initially touted as an economic miracle, Operation Bootstrap, by the 1960s, was increasingly hampered by a growing unemployment problem and global free-market competition.

In more recent years, bootstrap theory reached a high level of mainstream acceptance as welfare came to represent an unpopular token commitment to a poor, disproportionately minority population that was thought to unfairly usurp government resources and tax dollars. After President William J. Clinton signed the Personal Responsibility and Work Opportunity Reconciliation Act on August 22, 1996, welfare was abolished and replaced with a bootstrap theory-motivated structure called “workfare.” First, workfare forced people who had been on welfare to enter the labor market, and second, it shunned the “paternalism” of welfare by allowing citizens to remove themselves from a possible cycle of dependency.

Under these circumstances, “bootstrap capitalism” became a main rationale for ending federal or state support for the impoverished. Bootstrap capitalism was manifested in three distinct modalities: wage [Page 93]supplements, asset building, and community capitalism. First, bootstrap theory was realized in wage supplements from tax credits for both low-wage workers and their employers. Second, asset building from promoting institutional development accounts to micro-enterprises was a key facet of bootstrap theory. Third, bootstrap theory relied upon the idea of community capitalism whereby federal aid gave earmarked funds to create community financial institutions, as well as block grants—federal funds given to individual states for applications of their choice. Bootstrap theory is an overall commitment to individualism, meritocracy, a strong work ethic, free-market competition, and private ownership.