by Rick lowe
Tomorrow is a big day in the life of public policy in The Bahamas when Prime Minister Hubert Ingraham addresses the nation on the current world economic crisis and the expected fall out for The Bahamas.
We had a preview of what might say in the news of Friday when Mr. Ingraham alluded to how a recession in the US affects The Bahamas when making remarks at a Coin of The Realm event last Thursday evening.
Most of us know that when the US catches a cold The Bahamas contracts pneumonia, but the prime minister is not reported to have hinted at what policy prescriptions he and his political friends might attempt to implement.
Will they expand the initiatives of paying mortgages and electricity bills for people or will they encourage Bahamian families and charitable organisations to assist each other more?
Certainly we should not expect him to pressure the business community and banks to do more when many of them are already faced with the most severe downturn in decades?
And we should not encourage the growth of the welfare state because history reminds of the damage that inflicts.
So what can the government do?
Well the danger with government bailouts is they seem to encourage like behaviour and claimants come out of the wood work, but they might consider a couple things:
a. Reduce taxes to spur growth
b. Reduce the size and expenditure of the government
c. Abandon price controls
d. Fix public education, or better still, privatise it
e. Sell off public assets as Mr. James Smith recently suggested to help reduce government debt
f. Balance the budget
As Dr. Richard Ebeling noted in a recent essay, "There is no doubt that a serious period of economic adjustment will be needed to restore balance, stability and growth in the economy. But the adjustment period need not be very long or severe if the right policies are implemented."
One can only hope that Mr. Ingraham does not convey that politicians are the saviours of each and every Bahamian. He must remind us that we bear personal responsibility for our debts and we should visit our bank to see what arrangements we can make to extend our payments etc until the economy turns around.
This is certainly not the time for election style propaganda. Leave that to the opposition political parties, the government bears the responsibility for enough already.
Rick,
Putting aside our most fundamental political and economic differences and coming in from the left as it were, I read your list of prescriptions with interest, and found myself agreeing with more than one of them – (b, especially with regard to the size of government – jettisoning dead wood would certainly reduce expenditure), (a modified c, seeking not the abandoning, but the loosening of price controls) and (e) to be precise.
However, two of them are entirely contradictory.
You speak really glibly about “fixing” or even “privatising” the public education system, but what do you really know about its workings? Having taught teachers on and off for the last eight years, and having spent the last year under the auspices of the MInistry of Education (and having worked for the past five in close conjunction with it) I fear that we have failed to develop the aptitude in the nation to deliver a sensible education to our children. There are fundamental issues with which we have to deal, starting with the training of our teachers and the retraining of our senior education officials.
Fixing the system, as you say, will require a long-term, sensible investment of government funds, and a managing of the fallout of the miseducation that we have engaged in for over a generation– not something that will be either cheap or easy.
Privatising it, I suspect, will be no solution. As a nation, we prefer the uncritical acceptance of information culled from elsewhere to the development of radical ideas from within, and the vast majority of us cling to ideas about society, life and the world that died around 1985. That does give us the means necessary to educate the Bahamian people for the twenty-first century.
In either case the change in the education system (which I agree is crucial) will not be cheap and will require public as well as private expenditure.
Further, as we do not value thought, creativity or true education as a society, I cannot imagine a Bahamas where financing a privatising of education will not create more problems than solutions at this point in time.
My five cents.
Thanks for dropping by Nico.
I’m glad we’re on the same page (for the most part), and I don’t think we are too far off on “fixing” the educational system either.
Education has been run by government for all of my 50 plus years, and longer, and the results have not changed. I happen to believe it is because the incentive to do well has been removed by the various government policies in play.
I would bet you you dollars to donuts that if you put many of the same teachers in a private system they would perform better…or they would be fired.
Whether the ideas come from abroad or are home grown is irrelevant. We should all want to get on with the job of getting our children to learn, and those people that you know so well after working with them all these years are responsible for the failure. They do not even report the entire truth to the nation as the hotel industry studies have shown. And you are not going to fix a problem by denying its existence.
Simply put, you see fixing education it as a job for government and I see it as a job for individuals.
If parents could move their children to schools that perform better, the schools producing the under achievers will disappear and will be replaced by better schools with teachers and administrators that understand, if they don’t better educate our children, their personal opportunities will diminish.
It is the future generations I am concerned about, not those teachers and administrators that are apparently doing a lousy job.
Hi Rick,
As for the update on the economy by the Prime Minister, I am expecting something upbeat–while cognizant of current issues.
But, the statement that when the USofA catches a cold, the Bahamas catches pneumonia is true in many regards. However, its the preparation for and of any circumstance, which mitigates the issues surrounding the US economic fluctuations–something in which, the entire world feels, to be totally frank and we are not, the only country to experience tremors when the USofA goes through a challenging period.
But, as for your policy prescriptions, I have some issues with them. Especially, if built on the backdrop that the current framework for business, while not being the best in regards to modernized regulation, are very favorable compared to other jurisdictions in regards to the taxes and severity of penalties incurred in the case of infractions.
However, point by point, your points and my responses, to them;
a. Reduce taxes to spur growth:
Not really a plan to steer a country or an organization out of economic challenges. In fact, if demand is down on any good or service that the lowering of the tax is aimed at, then it really serves no purpose. I hear the car companies, while taxes have been reduced to the dealerships, demand for automobiles, by their charge, and has been soft as of late.
b. Reduce the size and expenditure of the government:
Indeed. However, at this point and time in the government services, this would be more of a danger than it would help. We are not quite sure of the true effectiveness of the human resources we have, to cut staff and services, en-masse.
In a nutshell, we may throw out the baby with the bath water.
c. Abandon price controls:
Perhaps! But, we have to worry about tourism and business related inflation. We are a major hub for transport, of persons, of many persuasions and occupations–some of them very high earning. Price controls on basic items in this country, works to mitigating that seasonal and, if we have a good tourism year, pervasive.
d. Fix public education, or better still, privatize it:
Fix yes. Privatize, why? We have private schools already.
Furthermore, you would have to have folks able and willing to pay for it. While the crisis in education is a pain, it can easily be fixed by moderate, and, not even radical, changes in the Min of Education and the system it works behind in regards to the methodologies of the BGCSE.
e. Sell off public assets as Mr. James Smith recently suggested to help reduce government debt:
Reduce government costs, overall? Sounds just about fair!
f. Balance the budget:
Ha. The magic phrase. But, it goes hand in hand with the overall “operational re-construction” of the entire public services; personnel, operations modernization; penetrating policy; meaningful and coherent human resources and policy guidelines and the collection of “fair” taxes.
Basically, the public services, which includes Education, is severely out of whack!
We may not need a wrecking ball. However, things need to change to a more balanced and measured approach, to bringing “service” to the Bahamian people.
We can’t forget what we’re doing out here–providing services to the Bahamian people.
Best,
Youri
http://globalviewtoday.blogspot.com/
Dear Youri:
Thank you for your thoughtful reply. Obviously I come from a Libertarian perspective, so I do not look for Government solutions to everyday and personal problems. I’ll try to respond to each of your points:
a. Reduce Taxes to spur growth – as we must all agree, government does not create growth. That is what the private sector does. There may be a misunderstanding about import taxes. Duty, now known as Excise Tax, was actually increased on all vehicles except Hybrids, which are not exported by the manufacturers to date. It was a good PR move, but that’s about it so far. In other words, the price of all vehicles imported at this time was increased. Also, vehicle sales have slowed as result of a Central Bank credit policy advisory to banks.
b. Reduce the size and expenditure of government – so we agree, it’s just that the timing is bad? There is no quick fix, so government can phase in the privatisation of most of the services they offer. Once open to competition who knows how many similar services will pop up. Look at how many local garbage collection companies we have now.
c. Abandon price controls – After 40 centuries of price controls there is no study that confirms their usefulness. Unless causing shortages is a desired result.
d. Fix public education, or better still, privatise it – Dr. Milton Freidman suggested a voucher system over 50 years ago now. In other words, government gives parents a voucher for the sum they pay out per student and they can take that to the school of their choice. That way, if the school is failing their child, the parent has options. Bad schools will eventually be closed or fixed. Every administration since 1973 promised to fix education. I think they have had enough time now.
e. Sell off public assets… – This is no different than privatising education in my view.
f. Balance the budget – So when will the “operational reconstruction” begin?
If I am lucky I have 20 to 30 years left in this realm and I have been hearing of government fixing the mess they control all of my adult life. I could not vote in the first two elections when I became of age as I lived abroad, but I have voted in every election from 1982 to 2007. I have vigourously worked in campaigns for the FNM and for Pierre Dupuch when he was an independent candidate and you know what? Many things have only grown worse.
Government agencies are not interested in providing service as there are no consequences if they don’t. When people are annoyed with the business I work at, they can take their business elsewhere. It’s quite different when you need a government service.
Thanks again for dropping by and commenting.
I like your blog by the way.
Hi Rick,
Thank you for the compliment on the blog. I’m trying to build it. Any tips on how to get it rising quickly on the Google and MSN search engines?
In any event, just one point I’d like to point out, in regards to government not creating growth.
I don’t think I said, or, meant to imply that government can create growth- even though it can, if we count communist and socialist governments and the accounting practices of valuing GDP’s under each set government administration. However, government can create the atmosphere to what type of growth, in certain and in many cases, most areas.
As for price controls, the evidence that it controls prices, at the loss of the supplier, is evident. But, it serves the purpose, as it does now in a USD denominated country, to control inflation. Depending on what you want, inflation over price stability, is something that needs to be discussed from another aspect and area than this topic would allow. However, while I am no fan of price control, if we were not tied to the US dollar and the tourism dollar, I would have seen it done away with–if ever I used it, at all.
As for the operational re-construction; I hope it can start like, today! It is something I think any government can deliver on. Now may not be the bad time to fire people amidst the bad times, however, the time must come and we can do it, with a strategic and compassionate plan forward.
As for private education; I don’t think it can work, even if we wanted it to work. The resources are too small and the population, in comparison to the services infrastructure available, cannot accommodate it.
High virtue, however impossible!
Best,
Youri
http://globalviewtoday.blogspot.com/
Dear Youri:
I completely agree that governments can promote an atmosphere that helps the private sector grow.
However you state, “I don’t think I said, or, meant to imply that government can create growth – even though it can, if we count communist and socialist governments and the accounting practices of valuing GDP’s under each set government administration.”
Are you saying that depending on the criteria you use the Communists grew their economies?
That somewhat contradicts proper accounting principles doesn’t it?
Hi Rick,
Accounting principles is a separate issue.
Growth, in any area, regardless of the investment vehicle, is growth.
Best,
Youri
http://globalviewtoday.blogspot.com/
p.s.
Besides, “proper” accounting principles, is rather subjective.
Sorry, I should have said economic policies.
We do know that the “growth” in Russia was a mirage however.