This article originally appeared in The Bahama Journal on November 16, 2009.
Professor of Economics at Northwood University and former President of the Foundation for Economic Freedom Dr. Richard Ebeling said on Sunday, that it is the more or less bad decisions of governments around the world that is to blame for the path the economic disaster has taken.
"The recovery process need not have been as long nor need this recession have been quite as severe as it is turning out to be if not for a variety of misguided government policies. In other words, governments have made the healing process a bit worse than it had to be," Dr. Ebeling said while he appeared as a guest on Love 97/JCN weekly talk show Jones and Company with hosts Wendall Jones and Godfrey Eneas.
With both the United States and European Union (EU) countries instituting huge stimulus packages to try to bolster employment or support businesses that have been shaky, the professor insisted that the stimulus packages are in essence simply band-aid solutions
Dr. Richard said the fact of the matter is that these same stimulus practices are ending out to be counterproductive.
"Any government whether it’s the US government or EU governments has no money to spend that they don’t either first tax away from the citizenry or borrow from the financial markets," he said.
For example, Dr. Ebeling explained that for every dollar that the US government spends on a stimulus public works project is one dollar less that the taxpayer has- thus no net effect.
"If the government borrows the dollar, its one dollar less in the financial system for a private borrower to borrow to start a business or to expand a business. Even just an ordinary citizen won’t be able to obtain the money to buy a home or to send their child to college, therefore there is no net affect.
"What [these stimulus packages] do is takes that money out of the hands of private individuals who otherwise could have invested it to expand a business or to invest in machinery, equipment or technology to create a long term sustainable basis for a recovery in the economy. The government just squanders the money it borrows," Dr. Ebeling said.
Dr. Ebeling further highlighted that the stimulus packages offered by governments around the world including our government do not include any sustainable employment and or growth.
"You hire someone with these taxed or borrowed dollars to repair a highway or put a new tarred roof on a school building. While that is fair enough, that money is gone and at the end of the day that one job is not an industry or factory that is making a marketable product that can provide sustainable employment in the years ahead," he argued.
Questioned about some potential alternatives to stimulus packages, Mr. Ebeling said governments should have lowered taxes and cut its own spending so as to put less pressure on the financial market from its borrowing.
The Bahamas government has implemented its own stimulus package and has recently announced the creation of some 2,500 temporary jobs over a six-month period.
While these temporary jobs are much welcomed, Mr. Ebeling’s theory along with the theories of other economists is that the stimulus packages provide no sustainable growth and are more or less solidified as the government has labeled the jobs as temporary work, promising no sustained employment.
"Bahamians have less money to borrow themselves, and Bahamians have less money to invest, expand a business or improve their own lives because the government is running a public works project.
"The money doesn’t fall from heaven and resources don’t appear like rain from the sky –and the fact is, if the government continues to borrow and spend, it’s the private individuals that won’t have it to spend and the net effect is not positive," he said.
A country like The Bahamas, which is heavily dependent on the tourist dollar, should now be focused on developing more businesses while weaning itself off of the need for tourism and foreign direct investment, he said.
"If people are having bad times in other places and then they don’t plan holidays then the focus should have been on what the people [Bahamians] themselves can do to fill the gap," Dr. Ebeling said.
This, he noted, could have been done by deregulating some government controls that make it difficult to start or expand businesses here at home and it could have been done by cutting tax and government expenditure to free the resources that the country has available to be creatively and innovatively applied by the people in the society itself, rather than relying upon the brainstorms of bureaucrats who may or may not understand really what people want and how to deliver it," he said.
Dr. Ebeling said he is not persuaded that the stimulus package offered in the US is the reason for the economic recovery in the US.
He claimed the recovery would have come anyway as has been the case with previous recession over the last six decades.
That money, he said, should be left in the hands of private, successful, heroic entrepreneurs and that would be the basis of growth employment and raising standard of living for fellow countrymen.
"Politicians should not take the hard earned money of taxpayers and redistribute it in buying votes and that’s what it amounts to," Dr. Ebeling said.
