On July 9th the Nassau Institute, a co-publisher with The Fraser Institute gave the local media a Press Release announcing the 2003 Report on Economic Freedom in 123 countries. The full Report is available on the Web at www.freetheworld.com
Mr/Ms. H.Humes, in a letter to the Tribune of July 28, states the Report “seemingly suggests that the Bahamas is losing its freedom because of prudent economic policy and the management of our finances”. The writer has drawn an incorrect conclusion. It is more accurate to say that economic freedom is lost because of IMPRUDENT economic policy.
The writer also asks “why do these persons, (referring to the Nassau institute we presume) as qualified as they are, keep on suggesting that The Bahamas must allow Bahamians to invest externally whilst there is a rush by foreigners to invest in the Bahamas?”
Again Mr. Humes is misinformed on the facts leading him to an incorrect conclusion. Whilst it is unfortunate that Bahamians cannot invest in other countries as readily as others can invest in The Bahamas the fact that we are not free today to invest overseas is largely due to the decisions to change the monetary system set up after 1968. Prior to this date The Bahamas was an extension of the sterling monetary system Even though the pound notes were different the rules that applied to their use were the same as those applied to residents of Britain. Sovereignty for the Bahamas meant replacing the colonial currency board with a Central Bank in 1974, which decision has had profound consequences for holders of Bahamian money, and which gave the Bahamas government license to spend beyond its means leaving Bahamians “with a legacy of debt and exchange control on capital flows”
H. Humes states “after 30 years of sovereignty….. foreigners are making millions” and Bahamians should too. The facts are that some Bahamians have made and probably continue to make millions – in Bahamian Dollars. However they cannot readily be converted to hard currencies for overseas investment.
Resentment against foreigners often expressed in the Letters columns of the newspapers is not the answer to the problems we create for ourselves. It is an excuse for our own failure. The restrictions on Bahamian dollars for investment abroad are due to decisions by the governments Bahamians voted into public office ever since 1968.
In the Economic Freedom Report, the Bahamas rates zero (out of 10) every year since 1975 in the sub-category of Freedom to Own Foreign Currencies. It has not changed nor would it be expected to change so long as Currency Controls are required.
By 2001 The Bahamas has dropped from 9th place in 1975 to 55th place. The other categories are:
The Size of Government,
The Legal Structure and Property Rights,
The Regulation of Credit, Labour and Business.
Freedom to Exchange with Foreigners
For the record, The Nassau Institute has never recommended abolishing Exchange Controls – as desirable as freedom to exchange the B$ for other currencies would be for everyone. The Institute has recommended reduced government spending and increased foreign investment to reduce the size and cost of the National Debt as necessary steps in eliminating the controls.
Persons interested in understanding the exchange control issue, as well as other subjects on the Bahamian economy can visit www.nassauinstitute.org. where the Institute’s perspectives are clearly set out.