First Published: 2004-11-25

The current debate over more and different taxes to pay for an expanding public sector has focused fresh attention on our economy and standard of living.

Some are calling for more regulation and a bigger welfare system. Others are promoting a stronger private sector and less government.

At a recent Chamber of Commerce seminar, COB lecturer Olivia Saunders said growth would require more tax revenues for government to “expand economic and social structures”.

The Nassau Institute, an independent policy group, says more taxes will allow the government to promise a free lunch without restraining public spending and waste.

Meanwhile, with the support of international agencies, the government is pushing a range of measures that include expanded NIB benefits, national health insurance, a broad-based consumption tax, and yet more levies for a state pension scheme. And that’s just what we know about so far.

Proponents justify these changes by pointing to the need for a more equitable society, with a better safety net for the poor. Ideologically, this is based on the principle that economic security promotes happiness, and is beneficial for growth and social stability.

In this context, many of us have the view that although the country is awash with great wealth (much of it inherited), this is not being shared enough and the vast majority of Bahamians are deprived of opportunity and forced to live in grinding poverty. But this is a distortion of reality.

Poverty is not simply a measure of inequality between those who are well off and those who are less well off. Social scientists point to a much deeper set of deprivations, including extreme vulnerability and social exclusion.

So what exactly is poverty?

Aid organisations say it means people who live on less than one or two dollars a day, which applies to about 20 per cent of the world’s population. Rich countries (in the OECD) define it as those who live on less than half of a country’s median household income.

In 1998 the median income in the Bahamas was just under $29,000 per annum – meaning, by this measure, that those earning under $250 a week are considered poor.

But according to the World Bank, “Poverty is hunger and lack of shelter. Poverty is being sick and not able to see a doctor. Poverty is not having access to school and not knowing how to read. Poverty is not having a job and living one day at a time…poverty is powerlessness and lack of representation.”

We doubt if there are many Bahamians who fall into these dismal categories.

One of Tough Call’s correspondents says that Bahamians who think they are poor just need training in how to run their lives. In other words, although there are clearly different levels of income, very few Bahamians are unable to help themselves or to get help if they want to.

The voluntary contributions low-income people make to support the lifestyles of wealthy preachers or to build monumental churches, the expensive clothing and cars they buy, the lack of worker productivity, the careless reproduction of unwanted and uncared for children, the studied indolence of the boys on the block – they all point to a culture of irresponsibility and self-indulgence.

And even in our current economy, there are already lots of benefits for low income earners. In addition to handouts for the lower middle class like scholarships, mortgages and small business loans that are rarely repaid, there are the National Insurance benefits that are justifiably skewed towards low income earners. Not to mention our massive public health and education systems.

At the most basic level, our social safety net includes food stamps, day-care, routine medical care, school lunches and uniforms, housing subsidies and work relief – all administered by the Department of Social Services. And this does not even take account of the various charities and service organisations whose members contribute so much time and money.

Three years ago, a government study shed light on the living conditions of Bahamian families for the first time; after interviewing some 2000 householders around the country. The level of absolute poverty was defined for the first time in our history.

Surprisingly to some, the main conclusion drawn was that there was very little real poverty in the Bahamas. And the conditions that contribute to it are relatively easy to address. A lengthy analysis of the results of this study has been undertaken recently to help guide policy decisions.

Poverty in the Bahamas was found to be less than in Barbados (with about the same size economy) and also less than in the United States (with its much larger economy).

To determine this, the study calculated the least amount of money needed to satisfy basic needs – and then looked at consumption patterns to set a national poverty rate of 9.3 per cent (or about 28,000 people – half of which are children).

This so-called ‘poverty line’ is based on spending of $2,863 a year, or $55 a week (now about $3,000 a year with inflation) to buy an adequate low-cost diet with allowances for non-food essentials. About 5% of Bahamian households fall below this threshold.

Almost half of these very poor households are headed by single women, supporting five or more dependents. They rent substandard houses – less than half have piped water and about a third have no proper toilets.

As one would expect, proportionally more poor people live on the sparsely-settled southern islands, where there are few public services and little to do. Many eke out a traditional subsistence living, and there are more children and elderly for each working person.

According to the study, it would take $24 million a year to eliminate poverty in the Bahamas; about what we spend now on the Department of Social Services. That’s because the poverty gap – or average shortfall of a poor person from the poverty line – is only about $81 a year.

But subsidies alone won’t remove the differences in living conditions or other deprivations. The real keys to poverty reduction, the study says, are education and employment. And many analysts think these are better addressed without more government intervention or higher public spending.

Economists say better education will raise the productivity of some unskilled workers and increase the scarcity of the rest, raising incomes in both cases. And this would be combined with tax concessions and subsidies for those on the lowest rung of the ladder.

There is much to be said for some radical and innovative thinking in this area.

According to the study, a strong link exists between the level of education and the likelihood of being poor. About half of Bahamians with only an elementary education are poor, while less than 2 per cent of those with a college education are. And perhaps as a consequence, more than a third of poor household heads are unemployed.

As Mrs Saunders said at the Chamber seminar, “(The) poverty issue shadows unemployment. The unemployment dilemma is structural – the economy is not arranged so as to employ a sufficient quantity of the workforce.”

Most economists today would agree that individuals create wealth, not governments. And the most economically free countries are among the most prosperous. But our government wastes hundreds of millions of dollars a year on state enterprises that are either complete disasters (like the post office, ZNS and Bahamasair) or that could be much more effective and profitable if they were left to the private sector (like BTC and BEC).

According to Tom Bain, the Bahamian financier who recently tried to buy half of the Bahamas Telecommunications Company (until the government took its marbles home), we are at a critical juncture and need to get it right economically or face serious decline. And economic decline would mean a lot more poor people.

Our Gross Domestic Product (the value of goods and services our economy produces) is about $5 billion and our population is about 300,000, producing a per capita GDP of $16,000. The plain fact is that if we want to grow this per capita income, we have two basic choices: either produce more goods and services, or reduce the population.

“If we are to reduce costs, drive up productivity, and fight for our market share and economic future, we must unleash our economy, starting with our utilities,” Mr Bain said recently. “Let the business of government be government, and the business of business be business.”

It is easy to see the value of this view. The government already spends more than $235 million a year on social services and public health, education and housing (and has been doing so for decades). How effective is this spending? Are we getting value for money?

Look at education. There are about 50,000 students in 147 public and 47 private schools, but exam results show a serious imbalance between the public and private sectors. More than half of all students in private schools get good BGCSE grades compared to only about a quarter of public school students.

The living conditions study suggests several possible causes for this…teachers, school environment, access to supplies, and readiness of the students themselves. We have to determine which is more potent – and set about making the necessary changes…not simply spending more money.

As one of Tough Call’s correspondents put it: “Teachers, supplies etc, can make a difference. But the student’s home environment is probably the strongest factor. The school system needs to have parenting classes ( including birth control lessons) and citizenship classes to study the constitution.

“If some of it takes root, the next generation has a better chance of having parents who are at least alerted to the issues of raising better ( and hopefully fewer ) children, who have self-respect. Then teachers could concentrate on teaching skills rather than dealing with behavioural problems.

“If we had self-respect, we wouldn’t accept negligence as the norm, and lack of accountability as the solution.”

And instead of wasting time on badly written copies of other countries’ regulatory laws that will never be enforced anyway, the government should use its considerable legal acumen to fix our unjust and dysfunctional judicial system – we are certain that even our despised lawyers would be willing to pay a tax for that.

Instead of whining about not having enough resources, why don’t we clamp down on the innumerable minor offences and petty nuisances that make life so unpleasant for honest and productive citizens in the Bahamas and that are so easy to address. Like cleaning up the Montagu mess, or stopping people from dumping garbage everywhere, or curtailing fights and foul langauge on the streets.

These same honest and productive citizens could then set about unleashing the power of market economics to everyone’s benefit.

In his 2000 book ‘The Tipping Point’, Washington Post writer Malcolm Gladwell demonstrated that the best way to understand social transformations is to realise that little changes have big effects. And change can happen dramatically if we want it to.

Particularly in a small society like ours, starting an epidemic of social change doesn’t necessarily require millions of dollars, legions of consultants or armies of troops. We just need to focus on a few key areas:

“We are actually powerfully influenced by our surroundings, our immediate context, and the personalities of those around us.” Gladwell wrote. “Taking the graffiti off the walls of New York’s subways turned New Yorkers into better citizens…In the end, tipping points area reaffirmation of the potential for change and the power of intelligent action…With the slightest push – in just the right place – (the world) can be tipped.”

More on that another time.

The column ‘Tough Call’ by Larry Smith is published in The Tribune every Thursday and is reprinted here as a courtesy. Mr. Smith founded and successfully grew an advertising agency over 20 years. Under his direction Media Enterprises diversified into short-run commercial printing and publishing, and is now the largest non-fiction book wholesaler in the Bahamas. He has 30 years experience as a journalist and publicist and has contributed numerous articles and columns to the Bahamian press. A former reporter at the Nassau Guardian, local correspondent for Reuters and editor at the Bahamas News Bureau, he conceived and edited the Bahama Almanac (published 2000 by Media Enterprises), wrote the commentary for Mike Toogood’s Portrait of an Archipelago (published 2004 by Macmillan Caribbean), and edited the Bahamas Environmental Handbook (published 2002 by the government). In 2003 he took a year’s leave of absence from Media Enterprises to lead a transition management team at the Nassau Guardian after the paper was acquired by local investors. After leaving the Guardian he was contracted by the Tribune as online manager/editor and columnist. He has a degree in political science and journalism from the University of Miami.

Help support The Nassau Institute

Leave a Reply

Your email address will not be published. Required fields are marked *