The budget of the Bahamas Government has been the subject for discussion over the past couple of weeks, and decisions made on spending and taxation over the next twelve months. Fiscal prudence has been mentioned, nevertheless it appears that government expenditure is slated to grow, not decrease.
The National debt now stands at approximately 2.3 billion dollars. Both political parties share equally in the present cash strapped dilemma by borrowing in the name of Bahamian people. However, getting beyond the blame game, it is clear that PLP’s, FNM’s and Independents continue to demonstrate a poor understanding of how prosperity is created.
According to James Gwartney and Richard Stroup, economists responsible for the Economic Freedom of the World study, “Sound economic organisation is the key to economic prosperity. Countries that adopt policies that encourage the creation of wealth will prosper, while those that fail to do so will continue to stagnate. This is true for both wealthy industrial nations and poor developing countries. The future prosperity of both is directly related to the soundness of their economic organisation. This is the central message of modern economics.” (What Everyone Should Know about Economics and Prosperity pdf)
Four Sources of Income Growth
The authors contend there are four sources for income growth; improvement in worker skills, capital formation, technological advancement and better economic organisation.
For far too long Bahamian Politicians have used business as the whipping boy for poor public policy that has impacted these four areas directly in very negative ways.
Let’s look at each of them:
Worker Skills – The Ministry of Education has failed in its responsibility to turn out a high percentage of students with the basic skills of mathematics and English. The impact on employee productivity and expense to the employer in basic training are obvious. The government must find a way to make the Ministry of Education accountable for their results. If they do not, they only have themselves to blame for the failure of the Bahamian masses to have the ability to obtain prosperity.
Capital Formation – Modernising equipment can also impact productivity, however, in the Bahamian context enabling legislation for venture capitalists is important. Individuals seeking alternatives for investments provide venture capital.
Present policies prevent foreign investors entering classes of business that are reserved exclusively for Bahamians. Venture Capitalists lend money to businesses because they obtain shares. Allowing this “new activity” may be one area to encourage venture capitalists with a minor change in policy to legally allow foreign investment in local entrepreneurial activity.
Technological Advancement – The Bahamas is continually behind the eight ball in this area. What happened to the E-Commerce legislation that was to provide the framework for entrepreneurs to take us into the first world of Internet banking? The country must keep pace with these international developments if it is to continue to be one of the leaders in the Region.
Also, why has privatising BaTelCo taken ten years? This is a fundamental step on the road to the e-commerce promised land, but the government has not been able to get it done. As a result they are now adopting a plan that is not privatisation but the selling of a minority position.
Better Economic Organisation – Economic efficiencies are more likely in a climate of certainty. In this sense, evidence of laws that protect private property, and property rights, that are enforced and universally applicable are factors in economic organisation for productive outcomes.
Government please step back
In order to achieve these fundamental objectives, everyone in society has to understand their role. But for this to happen, government has to step back from wanting to be involved in every detail of society. The Bahamas cannot afford both guaranteed lifetime government employment and constantly expanding expenditures and taxes. Therefore, citizens have to ignore government’s call to be their saviour because there is no such thing as a free lunch.
In the final analysis, it is the effort of individuals that create prosperity and if the government does not start to preach this from the halls of parliament to the beaches of every island, the country will surely fail as many neighbouring countries have already done.
Prosperity will continue to be the proverbial pot of gold at the end of the rainbow if there is not a fundamental shift in the way government operates in these competitive times.
The Nassau Institute