Submitted by Looking Glass
Another deficit budget is hardly surprising. Given the economic structure and reliance on fickle tourism and construction more deficit budgets will likely continue. The net effect will be to expand the gap between happiness and misery. There is a correlation between public and private debt in a population whose mental set permits lavish consumption and government unrestrained borrowing and spending, moreso when personal saving is insufficient to finance government spending. The inability of governments to generate surplus will result in more debt, drag us deeper in the red and on to perdition.
Our predicament reminds me of Marlow’s Dr. Faustus, a man of learning who, longing to possess the treasures of Nature, sells his soul to Mephistopheles (the Devil) for 24 years. In the last couple decades we sold the country for not much more than a seat at the beggar’s table and the retention of power. Today we are at the bottom of the table, mega billions in debt and the lenders/givers are taking over. Hell has no limits.
The road to perdition (deficits, debt, corruption, unprincipled regimes etc.) didn’t happen overnight. As previously stated, it is not the direct result of the current world financial crisis. Nor is it the consequence of a natural business cycle. Past regimes forewent the exacting standards of fiscal discipline. They forgot that economic prosperity depends on the productivity with which national resources are employed, and indulged in non-income generating and short term employment generation projects. In the process they failed to keep programme spending to real per capita terms, i.e. increase spending by no more than inflation. The current world crisis merely exposed our ‘limitations’ and hasten our socio-economic decline.
Both parties are guilty of, among other things, an absence of smart thinking, moreso the BLP. But it is hypocritical to blame the current administration for the current condition, even though they are guilty of, shall we say, ‘errors in judgment’ and are savvy short.
Debt increases when pre and post election promises are to be fulfilled from an empty trough. The situation was made worst when the loan promised by a sister island fell through (Why the loan didn’t materialise is another story) Had the PM apprised the people about the horrendous national debt and the cost it would have given him some breathing space and a less costly budget. Bajans would have a good reason to revise their expectations. Instead people are kept in the dark and covered with mulch like mushrooms. Why keep the debt a secret? Is it because of something to hide, protection of others or externally dictated? Failure to apprise the people set in motion a shining system of vanities and illusions as distant from the truth as Pluto.
The national debt (the sum total of “all-budget” loan guarantees and contingencies) is more than trebled that stated by the last regime, and is a lien against the people and the as yet unborn. Polished words and self-indulgent regurgitation of utterances of those thought to be significant, like dubious accounting, obscures reality and deepens the inevitable in the form of a dismal decade of distress and discontent. Maybe like Dante we need to go further into exile (perdition) to learn just how salt is the bread and how steep the stairs.
We seem to have a collective delusion, insisting that government has or should have the where-with-all to supply the ingredients for a grand, conspicuous lifestyle and prodigal extravagance to which we have a right. We believe the external world has a natural right to provide the necessary ingredients for a greedy lifestyle. The delusion is justified by blaming the external ‘environment’ for failing to accommodate us. We fail to recognise the incidence of limited resources, the limits to growth, and that growth per se does not constitute ‘well-being.’ Missing are responsibility and self subordination
Response to the recession based on unrealistic expectations borne of rational behaviour is at best a plaster that leaves the wound to fester. Rational behaviour, like economics, is a human concept not a natural law. Stimulus however implemented can’t save the day. A tight monetary policy a la Milton Freidman if it can be implemented will likely be disastrous, and a booming Real Estate economy merely underscores imminent disaster. Moreover, it is a myth to think that money and technology alone will save us.
The G20 refinanced the IMF in order to stabilize the world economy. The funds promised to the IMF will likely be invested in those European countries with one foot in the grave and those LDCs that are crucial to the G20 survival. We haven’t the track record, strong fundamentals or policies to justify inclusion in the latter category. Sure we will receive traditional aid (to reduce illness and disease etc) but not aid in the form of development financing and investment projects. What little we get will go to debt service and increase our indebtedness. Reliance on the Mother Country to bail us out each time is a pipe dream. Has anyone anywhere advised the PM accordingly, and if so did it fall on death ears? The textbook apart one wonders about the wisdom of the local confreres.
We cannot talk about the next decade without comprehending the present and understanding the past. And we are not immune or excused from world events. The recession is far from over, at least as far as labour is concerned, which is not good news for tourism. We are stuck with a growing underclass of increasingly landless unemployed and underemployed souls unable to feed themselves. With the immigration doors essentially closed the return of the ration card may not be far of. We are short on worthwhile resources, unable to generate new profitable and intangible assets, have neither dollars nor products to pay for imports and remain dependent on borrowing. We can’t swap debt for corporate equity, print money like the USA and Europe, or socialise risk and business at the expense of taxpayers. The Central Bank cannot issue enough money to keep the economy rolling without causing inflation. And financing debt from taxes has its limitations. It is a mistaken belief that low interest rates alone will facilitate business and conservation. Macro economic policies alone will not rescue the perishing.
Oil without which the world will collapse is not in unlimited supply and alternate forms of energy—bio-fuels, cold fusion etc—are many years away. Despite conventional wisdom (and regardless of the recession) declining world economic activity demand for oil will rise and so to the price, which will be reflected in almost everything we consume.
Already the international financial system is being revised. The US dollar will likely be replaced as the “unit of exchange.” Inflation will increase our debt load, import costs and compound our difficulties. China, Russian and Brazil fearing US inflation might erode their investments and exports are seeking and will have a bigger say in the IMF and the world economy. The new capitalist system will facilitate the horizontal organization of corporations (globalization). They will control trade and business, and there will be little or no room for import substitution investment.Given the above it is difficult to envision success in a country not structured for long term success. Optimism is a cloudy lens. Without Barley Loaves the next decade looks like a dismal one. Where people see no future it makes sense to live for the present. This in time will weaken the nation, undermine its culture and could invite social unrest
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