Mr. Philip Galanis: Mercantilist at large?

First Published: 2011-05-07

Mr. Philip Galanis is concerned that there will be no business opportunities available for Bahamians in the economy as the government loosens restrictions on foreigners entering businesses like non-ethnic restaurants and entertainment facilities.

He asks rhetorically, "What’s left for us" in his recent Nassau Guardian opinion piece.

A chartered accountant by trade, Mr. Galanis must know that economic growth is not a zero sum game where foreign investors come in and Bahamians leave. Unless of course he’s suggesting that we’re not smart enough to compete?

Maybe he thinks Bahamian’s will prefer to frequent the foreign businesses instead of our home grown enterprises, but his declaration that The Bahamas economy is for Bahamians can only be designed to stoke the flames of xenophobia. His protestations to the contrary not withstanding.

In discussing this subject recently with Professor Richard Ebeling (see his blog In Defense of Global Capitalism & Human Progress here: http://bit.ly/2YMpiZ ) he pointed out that the citizens of Soviet-era Lithuania, where he did some consulting, felt the same way. "They had a sincere fear that when they were independent, again, a handful of foreign investors would buy up the entire Lithuanian economy, with nothing left for the Lithuanian people."

Dr. Ebeling also pointed out that "if they prohibited or restricted direct foreign investment they would be limiting their ability to recover from the destruction of Soviet central planning to the relatively small savings pool of the Lithuanian people, themselves. That direct foreign investment could greatly expand the available savings for investment, capital formation, and retraining of the Lithuanian labor force for reintegration and participation into the global division of labor — and all the resulting benefits from it."

Furthermore, he advised, "over time, as foreign investment improved standards for living within Lithuania, as well as increasing the value of Lithuania’s "human capital," more and more Lithuanians would be earning the higher incomes out of which they could save. And out of that savings would come the ability, again, over time, to open their own businesses, investment in existing businesses, and end up competing (successfully) against the very foreign investors who would have enabled the investment and capital formation process to take off and accelerate."

And, finally, Dr. Ebeling pointed out that "by investing a portion of their wealth in the Lithuanian economy, those foreign investors were, in fact, tying their economic future to the success and growth, and prosperity of Lithuania. In a real sense, they were becoming — choosing to be — economic "citizens" of Lithuania, with as much interest in the improvement of the economic, social and political conditions of the country as those actually born within the boundaries of the Lithuanian state."

Substitute the effects of the "Great Recession" with that of the "destruction of Soviet Central Planning" and the exact same principles apply here in The Bahamas.

In the final, an economy grows and wealth is created by businesses competing with each other, not unlike the way Mr. Galanis competes against other people in the accounting profession. His new business did not force his competitors to close shop and leave. More than likely employment was created for more Bahamians at the same time.

If the consumer is better off at the end of the day, more savings and investment by Bahamians will attain over time. Mercantilism is as bad today as it was in the 16th century and an open economy is a boon for more Bahamians.

In other words, there’s lots left for Bahamians Mr. Galanis, and that’s what wealth creation is all about.

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