Ingranomics Part 1
By Ian G. Strachan
Last week we looked at some of the positives of the FNM’s term in office. It’s time now to look at the flip side. What did they get wrong; where did they blow a golden opportunity and what damage have their decisions caused?
PLAYING IT BY THE BOOK
You’ve heard it many times but the world has been grappling with a global economic meltdown. The USA, our biggest trading partner, has 14 million people unemployed and eight million people who can only find part time work. In one year alone (2008-2009), U.S. unemployment increased by a mind-blowing 60 percent, from around nine to 14 million. As the USA goes so do we.
The Ingraham administration weathered this crisis and it has been weathered largely through government borrowing and a concomitant refusal to adopt serious austerity measures. The result is a scary level of national debt which is costing us roughly $300 million a year to service (almost 40 times what we are spending this year in the Ministry of Agriculture and Marine Resources).
Now the orthodox economic approach, as I understand it, is that when your economy makes a downward turn--which all economies naturally do--governments must increase their spending to stave off unemployment and to keep money flowing.
Governments normally spend on infrastructure in times like these, so that when the economy rebounds, private business can more easily and effectively do its thing and the citizenry generally can enjoy a good quality of life (in so far as infrastructure lends itself to that). Governments also have to figure out where to cut taxes as an incentive or to ease pressure and where to increase taxes and or tighten tax collection so they can continue to do their work despite the lean times. (NIB has been more diligent about collection, for instance, and this year we saw a reduction in the prime rate.)
Few governments in the world run on a surplus; they mostly run on a deficit and borrow to make up the difference. A developing island nation like ours, with a little, one dimensional economy, but with citizens who have First World expectations, has had serious pressure placed on it these last four years. Ingraham had no choice but to increase borrowing to maintain the bubble we live in and avert disaster; there was simply no other option.
The question voters must ask is, did we borrow money for projects that put us on the best possible footing going forward as a country? Did we use this economic crisis as an opportunity to set our house in order and do some things we didn’t previously have the will to do? Did our government also do everything in its power to increase its revenue base (a challenge in lean times) while at the same time being sure not to burden the small man with more taxes at a moment when he was least able to sustain it?
The FNM’s heavy emphasis on infrastructure, (and the kinds of infrastructural work chosen), has not eased the level of frustration and suffering in the country; in fact it has increased it for many.
First of all, infrastructure work has not acted as a major stimulus to the economy. We are still experiencing almost zero growth. These massive projects have not put a whole lot of money into the Bahamian economy. One, the work has been done for the most part by foreign firms and two, most of the materials needed are imported, which means more money leaving than staying. Three, they haven’t employed anywhere near the necessary number of Bahamians (even temporarily) to significantly ease the hardship in the society. We needed to employ 7-10,000 to truly lift ourselves out of the doldrums and it just hasn’t happened.
One project that could have employed that many people in the short and long term is Baha Mar, but the deal cut with China ensures that much of the money spent will go right back where it came from and most of the temporary jobs too. It was just a lousy deal and Parliament never should have agreed to it. The PLP will argue that the FNM’s stopped, review and cancel policy stalled projects like Baha Mar and caused our economic slowdown. I don’t buy it.
But whereas the FNM may argue that they invested the millions they borrowed in infrastructural improvements that will stand the test of time (they hope) and did not frit it away on nebulous programs/schemes that might have questionable long term benefits to the country, their approach was unimaginative, overly conservative and made life worse for Bahamians in the short to medium term. The Ingraham administration demonstrated an unwillingness or inability to innovate or experiment. (The humble Self Starter Programme was the riskiest innovation they attempted in my view, but I would love to be corrected.)
The road works caused a number of homegrown businesses to die and displaced others. It also made it difficult for businesses all over the island to deliver goods and services and made it difficult for employees to get to and from work. And this has been going on for two and a half years. I can’t begin to imagine how much that has cost individuals and businesses in time and money. And the FNM government has been unable to convince anybody that they intend to make amends in some way during their term in office.
In the final analysis I can’t name one industry that the Bahamian government has helped to experience major growth through its powers to borrow, invest and to incentivize with tax breaks, so much that thousands of new, permanent jobs were created. No, forget thousands, even hundreds. Fishing? Farming? Light manufacturing? Have we simply resigned ourselves to more decades of low productivity in these areas? There’s nothing we can do to get things going in these sectors?
We are spending eight million out of our 1.9 billion dollar budget on Agriculture and Fisheries. That’s less than one half of one percent. That is tragic. Even a man as well meaning and thoughtful as Larry Cartwright can’t make miracles happen with that (especially in a nation where the men scoff at farming and fishing and all want to work a hotel job). According to Cartwright 76 percent of government land leased to farmers is abandoned and 25,000 acres of available arable land lies dormant waiting for a small farmer to apply. Well, I guess we’ll keep waiting.
DIG UP DIG UP
The FNM could have followed the recommendations of the experts they hired decades ago and created a single, Bahamian-owned bus company through public-private partnership and the economic times would have provided the perfect cover for doing so. This would have reduced traffic congestion, brought greater discipline and order to the society, increased efficiency, created new, permanent jobs, created opportunities for new satellite businesses, lowered the cost of living for many and hopefully increased tax revenue. All for a fraction of the cost of the road works.
Instead, they chose to do road work and more roadwork. As such, many believe Ingraham chose to reward his political allies with contracts and pass on the headache of the buses to future governments. Instead he’s given two thirds of our nation a head ache. His gamble is that the new roads will be appreciated by May 2012. But he may very well lose that bet and lose power because of these roads. I wonder, how much of these road works have been forced on us by these agreements we have made with China or Baha Mar? The government should publish the Heads of Agreement docs in the papers and on line.
If I am going to risk losing an election over something unpopular, I’m going to at least make sure I lose over something that really will make life better for as many people as possible and will do the most lasting good. Few think the Big Dig Up will do either.
They could have spent some of those millions in capital works on expanding The College of The Bahamas, which is a major employer and which empowers thousands and can empower even more Bahamians young and old. Higher education is the most reliable avenue to escaping poverty, yet only 10 percent of Bahamians get a college education. Expanding the college would create jobs within it and around it, it would allow more money to stay in The Bahamas since more students could attend, and it would ensure that we have a more competitive workforce in this information age.
COB needs more land, more classrooms, better labs, and bigger and better dormitories. Ingraham should have invested not in roads but in the future of our youth. He should have bought up the land surrounding the Oakes Field Campus, re-amalgamate BTVI and COB, and develop COB according to a Master Plan. Instead Ingraham slammed brakes on the college’s growth by cutting its budget in 2009 and 2010, and he continues to ignore, abuse and mismanage BTVI (like the PLP before him).
What he will try to sell us on is that he modernized New Providence. I suppose he tried in his way, but there are some holes in that one. Big holes. (I think I drove into one last night and almost drowned).
More next week.
Sep 26, 2011