The economic situation in Porto Rico is giving rise to the formation of classes based on wealth. With the introduction of available markets and modern methods of commerce and industry which followed the American occupation, the land values rapidly increased. The small landholder, seeing the increase in price which came about and believing that it was to his best advantage to sell his land, disposed of it to the representatives of large landholding concerns for what, to him, was a fabulous price. As soon as the money from this sale was expended, the original landholder found himself absolutely dependent upon the mercy of a wage-paying employer. In this way a great part of small landholdings passed into the hands of representatives of large landholdings and caused the formation of the two groups, the capitalistic group, which is limited to a comparatively small number of people, and the wage-earning group, which comprises probably 90 per cent of the population of Porto Rico. As a result we lack in Porto Rico the great middle class of financially independent farmers which constitutes the strength of the United States and the more prosperous European countries. A serious and systematic effort to build up a prosperous and independent middle class, either by encouraging small-farm or other industries, is necessary if the majority of the people are to attain the advantages which they should enjoy, and if the social and economic status of the Island is to be made equitable and stable. The reduced wage system and the absolute dependence of the wage-earning group has given rise to a great many labor disturbances within the last few years. These labor disturbances have included both city and country groups and have in nearly all cases been caused by an effort to better the working conditions and to secure an increase of wages. In the great majority of the cases there is no doubt but that the laborers were justified in asking for better conditions than those which actually existed. That the disturbances sometimes ended in riots and led to the destruction of property is the fault of the educational condition of the people, who are easily excited and led to believe that only by the use of violence can they secure the things which they demand.