Puerto Rico grew impressively in the decades after the second world war, even outperforming Asian “tigers” such as South Korea, Taiwan and Singapore (which has roughly Puerto Rico's population). Since the 1970s, however, Puerto Rico has been outpaced badly by the Asian tigers and Ireland, another place to which it is often compared. It has also diverged from the United States, losing ground even to lowly Mississippi.

Many things have gone wrong. Most important, however, is that the United States government assumed too big a role in the Puerto Rican economy, and its largesse enabled the commonwealth's government to do the same. Through hubris, clumsiness and sheer size, these governments knocked Puerto Rico off the promising path that it was following, and the island's economy is now lost in a thicket of bad incentives. Two federal intrusions stand out: an oversized welfare state, and misguided rules on business investment.

Economist