The Scarlet Pimpernel Blog
Wednesday, 15 September 2010 06:55
By The Scarlet Pimpernel
A reasonably adequate exposition of the proper role of a government during economic crisis should proceed from a distillation of the government’s political philosophy, its mission statement, vision of the future and socio-economic policies.
The discussion would require recognition of the comparative importance of fundamental human rights, personal freedoms, egalitarianism, and other civilized ideals. After completing this feat, likely to nobody’s satisfaction, it would behoove us to examine each of the economic activities undertaken by the state in the light of government’s relative capacity to carry out its requisite functions.
Then we would be obliged to perform a detailed analysis of the outcomes of the economic crisis policies adopted by the government. More suitable as a syllabus for a college course, this borders on the overly ambitious for a commentary, so I resigned to only review (critique) what the government of Antigua & Barbuda proposes to do to revive the economy from recession in Part 1, and outline programs and policies the government should consider adopting to effectively resuscitate the economy in Part 2.
Government’s Crisis Response
In his 2010 budget speech, the Minister of Finance and the Economy, the honorable Harold Lovell, elucidated the abysmal state of the nation’s economic affairs and outlined the government’s plans to rescue the economy. The minister stated that the government had “… developed a strategy to address the fiscal and debt challenges and to transform the economic and social landscape of Antigua and Barbuda …” Cognizant that the planed transformation cannot be achieved “without high and sustained levels of economic growth,” the government developed an Economic Action Plan (EAP), which focuses on programs with the “precise objective” of supporting investment by the private sector to encourage economic activity, generate wealth and create jobs. A year later, clear and convincing economic indicators show that the state of the economy is worsening. Permit me to evade further remarks which may be viewed as “partisan”; merely clear your conscience, open your eyes and draw your own conclusions.
Imagine our government of intellects faced with the toughest economic quandary of their political careers, aggregating the most ingenious ideas derived from numerous meetings with the best and the brightest, local and imported “brains for hire”. Then, upon reaching agreement as to what the People will buy, the premium concepts are sanitized, packaged, embossed with catchy acronyms like “NEST” and “EPA”, and then proselytized via the government’s formal and informal public relations networks. This strategy worked well in the past, but in this era when the same financial stick is “licking” the wild and tame goats alike, neither party loyalty nor public relations embellishments is any match for the belly-growling reality of the rapidly diminishing value of a dollar these days.
Why did this seemingly well intentioned compilation of ideas that appear brilliant on paper, fall miles short of stated objectives? The “plan” seems only to have created jobs, wealth and economic growth for the mercenary minds that created it, and may be doing more harm to the economy than good. Unsuccessful government policies and programs, implemented during economic crisis are often retrospectively analyzed in abstract terms, but in reality, they result in untold hardship and suffering at the level of the most vulnerable. Unsettled by this thought, I confess obsessive investigation to uncover the root causes of the government’s recent economic policy failures and how they could have been avoided or can be corrected.Wrong Crisis Approach
The Minister of Finance told the nation that his government’s “… approach to economic development has always been one of facilitation rather than crowding out the private sector” and emphasized that “the government does not intent to take over the private sector’s role as the engine of growth”; thus, the current recession is viewed as a “… unique opportunity for the government to partner with the private sector to help the economy rebound ...”
By all objective estimates, the economy is not responding, so what more must the government do to alleviate the widespread suffering resulting from the current recession? Observe that the government describes its role in the current economic crisis with words like “facilitate” “support” and “encourage”; all of which indicate indirect actions with respect to addressing the single most important issue facing the nation. Except for meeting IMF requirements, the government’s response lacks aggressive, proactive measures, and does not convey a mature sense of crisis leadership.
Having reduced corporate income tax and introduced a comprehensive system of incentives and concessions, the government reported that “… a 54.0 per cent increase in private sector foreign currency deposits and growth of 5.3 per cent in private sector savings deposits … indicates that there is money in the system,” but the private sector is being “understandably” cautious. Recognizing this as a euphemism for the private sector’s shortage of confidence in the government, it becomes evident that Lovell’s so-called partnership may be a sinking leaky ship. Government policy that places full responsibility on the private sector to grow the economy holds the economic growth of the nation hostage to private sector’s unenlightened notions of risk aversion at a time of economic crisis. Further, the level of private businesses’ tax payment delinquency is strong indication that government dependence on the private sector to bring our economic ship to shore is dangerously misplaced and a new approach is desperately required.Government Innovation as an Engine of Growth in Economic Crisis
Clearly, I do not take issue with the primacy of the private sector as “the engine of economic growth” in good economic times when investor confidence is high and expectations of meritorious margins are justified. But even then, the private sector should never be the only engine of growth in a small, vulnerable economy like Antigua & Barbuda. Moreover, the government has a “special” obligation to the People during economic crisis to desist from just being a vivacious cheerleader for the economy.
I vigorously contend that our economic recovery begins with an understanding of the proper role of government within the context of the current economic crisis, and a realignment of the current rescue policies to enable the government to get up off the sidelines and into the game. This is the crucial first step toward responsible crisis governance.
The government needs to stop trying to explain its way out of agonizing failure and seek understanding of the innovative concepts and policies that guided other countries’ recovery from economic crisis in the past and even now. For example, after numerous failed programs instituted by President Herbert Hoover, the New Deal policies of the subsequent administration under President Delano Roosevelt’s are widely credited for reviving the United States economy from the Great Depression of the 1930’s. There have been many similar examples since then, including small economies that are successfully recovering from the current global economic crisis.
New Zealand, which reached the brink of insolvency during the 1980s, was able to reverse the process. All government functions were turned into self-standing businesses with chief executive officers appointed for five-year terms, who could be terminated at any time for non-performance. The success of this policy led to taxes being cut dramatically and revenues going up by 20 per cent. The rule in New Zealand still is that government functions must be performed efficiently and cost effectively or heads will roll.The Alternative
Contrary to IMF wisdom, and against the reigning sentiment on both sides of the political color line, I strongly oppose the retrenchment of government workers. The need to reduce the wage bill does not, in and of itself, give merit to the idea of sending home over two thousand workers to suffer indefinitely, meanwhile there is at least one hundred million dollars of unnecessary expenditure that should be cut from the budget before the first worker is sent to the bread line. Government workers need to be retrained, retooled, redistributed and made productive contributors in the economy if we are to avoid widespread poverty and impending national misery. Brilliant ideas can change our landscape and outlook if we have the courage to look beyond the dark cloud of the usual mouthpieces who are devoid of 21st century ideas. Workers should not have to suffer simply because the light of innovation is absent from current government economic crisis policies.
The government needs to prune and fertilize statutory corporations to deliver long term benefits to the nation, instead of the shortsighted “fire sale” tactics currently proposed. I feel an abiding sense of patriotic outrage and intellectual disconnection when I realize that because there was no hell to pay for the “giveaway” sale of the Royal Antiguan Hotel, the government intends to replicate this travesty many times over. Divesting ownership (“fire sale”) of the people patrimony without consulting the owners (citizens) at a time when statutory corporations most need to be reorganized and made competitive to help rebuild the economy is insanity on stilts. If the government divests “profitable” statutory corporations as proposed, to wealthy local cronies and foreign campaign contributors, under the guise of giving them to the People, the needed profits from these statutory corporations will be lost, and obviously, more taxes will have to make up the shortfall.
My caution to the government comes from Samuel F. Miller, who is credited for saying, “[t]o lay with one hand the power of government on the property of the citizen, and with the other to bestow it on favored individuals … is none the less a robbery because it is done under the forms of the law …”The Quantum of Failure
A government’s growing track record of failed policies points us to the concept of “bankruptcy,” which is a paramount invention of the capitalist, private enterprise system; it is essentially, a mechanism for putting an end to costly failure. Unfortunately, the efficacy of this facility is unavailable in government where it is most needed, because no such institution has yet been conceived for the political process.
As in the case of Antigua & Barbuda, chronically unsuccessful economic policies have no inherent termination. In fact, there is no need to avoid conspicuous failure or ineffectual policies, because government failure demonstrates the need for greater spending. At the root of the government’s tenacity in failure is its unwillingness to objectively measure and take responsibility for the devastating effects of its failures; maybe it is time to calculate the quantum of the “tax oppression index” in Antigua & Barbuda.
In Part two (2) of this article I will outline programs and policies the government of Antigua and Barbuda should adopt, at first to lessen the burden of the economic crisis, and then to reverse the recession. For example I will demonstrate how substitutions of the political appointees that currently manage potential revenue generators like the Central Marketing Corporation (CMC) with competent, professional leaders who understand crisis management and “comparative advantage,” could provide adequate food safety and security for the nation, lower the cost of food, particularly the proverbial “basket of good” by at least 40%, meanwhile acting as an engine of economic growth.
The Scarlet Pimpernel is the nom de plume of an Antiguan born “knowledge broker” whose intercontinental exploits involve work as a university founder and educator, military strategist, international legal consultant, United States prosecutor, published author, trade advisor in Latin America and international investment counselor.
The inimitable acuity of the “Pimpernel” is sought after by entrepreneurs, investors and governments from Dubai to Brazil. Recent work, created for Latin America, which speaks to the conjunction of technology and education to reduce cost, motivate students and improve testing results will be translated and introduced to school systems across the Caribbean later this year. “Employing anonymity to domesticate the ego ...”