Welcome Surprises

First Published: 2003-06-04

If you had lost your belief in the “tooth fairy”, two surprising announcements may help to remind you of that childhood delight. They are Kerzner International’s decision to expand operations on PI, and government’s demonstration of fiscal restraint in the decision not to raise salaries. The Prime Minister is to be congratulated and Kerzner International to be thanked for pulling the country back from a precipice.

It is particularly encouraging to note that Prime Minister Christie has deferred pay increases to the public service, a politically difficult decision, but a manifestly responsible one. If it is the policy of his government to reduce spending and welcome foreign investors, then he is protecting the value of the Bahamian dollar and a standard of living many Bahamians assume to be their due.

The relief across the country is palpable. It is as though a burden has been lifted, and optimism revived. Fears and hopes are often exaggerated, but there are two good reasons for optimism; concrete evidence of government determination to hold fast on spending and the confidence displayed by Kerzner International.

A crisis is also a learning opportunity. A good place to start learning is to understand the nature and consequences of unbalanced budgets and deficit spending that led to the crisis. Government spending is based on what it can collect in taxes and on what it borrows and inflates. If government spends it, the private citizen cannot spend, save or invest and stagnant or declining growth is the result. The cap on credit to consumers, recently imposed by the Central Bank, is one of the undesirable consequences of unbalanced budgets and repeated annual deficits.

“Unfortunately, the harmful consequences of deficit spending are not clearly visible in the haze of popular notions and prejudices. It takes economic knowledge and logical reasoning to perceive that deficit spending consumes economic wealth and substance and mortgages the future, that it is a potent prescription for stagnation and poverty, an open invitation to monetary inflation and depreciation, and a free-for-all for social and political conflict”. Hans Sennholz: Debts and Deficits, 1987, pp. 12, 13.

The country has had a reprieve. The opportunity to do the right thing presented itself, and the Prime Minister made the responsible and right decisions.

Congratulations Mr. Prime Minister.

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