Notes From a Native Son: An Open Letter to Minister Sinckler

Hal Austin

Hal Austin

Dear Minister,

It is my understanding that you will be holding a seminar on the economy on June 27, at which it is hoped solutions to the economic crisis in Barbados will be aired. As I have not been invited, and will not be in Barbados at the time, as a loyal Barbadian I will like to make one or two suggestions for your consideration.

Let me begin by stating that I am somewhat amazed that after nearly six years we are now having this national discussion, it is one that we should have had five years ago. However, this is not a party political point, just one which recognises the urgency of the mission. It is also important that invitations to take part in the national conversation is not based on party loyalty, but on what one can contribute to the quality of the debated.

The Problem:
It is easy to make excuses blaming the continuing crisis on the previous administration – which, as I have mentioned, left office nearly six years ago – or on the global ‘crisis’, which to my mind is a total misreading of what is taking place in the global economy. To remind you, the global economy is growing, driven in large part by China and the other emerging economies, and indeed by the United States; the question is how a small island economy fits in this global reality, rather than how the reality fits in to the needs of a small island economy. In other words, your growth strategy must be based on what is taking place, rather than what took place in previous decades or what you would like to take placed.

The new global architecture is different: first, despite the background noise about globalisation, global inequality is getting worse. There is now a greater divide between the wealthy and those just making ends meet, both on a national and individual level. Barbados is now at a fork in the road and you, your colleagues in government, technocrats, advisers and business people must make a crucial decision: do we want a fairer society, or is it every man and woman for him/herself? Before answering, just remind yourself of recent events in Greece, Turkey, Spain, France, London, Brazil and the rise of organisations such as Occupy and the Far Right in Europe. If it reminds you of events before the Second World War, you are perceptive.

It is now a universal truth that an unequal distribution of global or national wealth will impact on growth – and social harmony. If you accept this position, and it is one promoted by both the International Monetary Fund and the US government, then the core strategy is the redistribution of wealth in Barbados. Global inequality is one of the dark stains over the three decades of financial globalisation. Of all the fast-growing economies  – Brazil, Russia, India, China and South Africa – all are marked with the deeps wound of abject poverty sitting cheek by jowl with obscene wealth. The wealth divide in Brazil is wider than in any other significant nation in the world, China bars its rural citizens from moving to urban areas and there are good reasons why the Chinese government bases its growth projections on growth of 7.5 per cent – that is what it takes to prevent social breakdown. This is a nation with 19 per cent of the global population, but only 6.5 per cent of land mass, five per cent of businesses are officially owned by the state, but 50 per cent of workers are on the state payroll.

Over the last 30 years, 450m rural workers have moved to urban areas and a further 234m are trapped in the repressive Hukou system – a permit to move from their rural base, that is why it has a policy of exporting its population. Further, it also has 6 per cent of available water and 1.1 per cent of its oil. The old Chinese development model was based on massive importation of resources, add value through cheap labour, then export at prices that made the rest of the world take notice. It has now moved in to phase two of that development, based on the 300m – and rising – middle class, what economists call demand-driven growth.
Put simply, with a middle class the size of the US, and with rural workers all wanting to move to urban areas, where the jobs are, China can continue to grow by providing the consumer needs of its own population.
Things we take for granted these emerging middle class people need: from fridges, washing machines, television sets, to motor vehicles, insurance, overseas holidays; within the next decade they will dominate global tourism. India has got its own problems, with the vast majority of its citizens illiterate, or being just able to read and write.

Roadmap:
We have got to decide as a society if these are the development models we want, or do we aspire to a more even distribution of wealth and prosperity. We are all familiar with the US and its terrible disparity between the wealthiest and poorest, as the Obamacare debate quite clearly exposed. The top ten per cent of Americans own 47 per cent of the wealth; 14 per cent of Americans receive food stamps. IN short, there is no perfect path to development.

New Programmes:
Of course, issues of wealth redistribution must be handled sensitively, but you must be bold and brave. First, the bulk of global wealth is in property and in most Western liberal democracies property tax is biased towards home owners: mortgages get special tax treatment, the increase in the value of the property often goes untaxed, and, in those jurisdictions in which there is no inheritance or death tax, the value of property is passed on to future generations free of taxes. Without going in to too much technical details, these are the basic facts on property taxation. Ignore the loud mouths and introduce an inheritance tax; impose a tougher taxation framework on property; introduce higher taxes on second and holiday homes; and homeowners who are not domicile in Barbados for taxation purposes introduce a new and tougher foreign residents’ tax. For non-citizens who have retired or settled in Barbados, for tax, health or social reasons, tax them on their global earnings.

Corporate Taxes:
I suggest you revisit your corporate taxation arrangements and target those corporations that use Barbados as a tax haven. Stop cross-border corporations from using the tricks of internal accounting, such as transfer pricing. I suggest a two-tier taxation regime for such cross-border companies, an initial tax claim, based on the declared revenue of the branch or wholly-owned subsidiary domiciled in Barbados. The onus then moves to the company to prove that all the revenue was not profit, get them to list expenditure item by item. They will have to detail such charges as income tax, national insurance, proper internal transfer pricing, etc. Once the final numbers are agreed, then the second and final tax demand will be issued. This also sends the right message to those multi-national companies looking for a haven to hide their enormous profits. They will be told in no uncertain terms Barbados is not playing ball. I suggest you read the SEC report on the American Insurance Group.

SMEs and Social Enterprise:
Ignore the badly argued advice that suggests that every new micro-, small, and medium enterprise must pay corporation and income taxes and national insurance. Tax breaks for new SMMEs is an incredible incentive for talented, skilled and enterprising people to set up new commercial, social enterprise and cooperative businesses. This does not mean they get away tax free, most of these people will still be paying VAT. What you have to do with skill is introduce tax breaks – on the principles offered to foreign-owned new businesses – with a limited period.

Sovereign Wealth Fund:
Minister, set up a Sovereign Wealth Fund which will become the vehicle for national investments, by rolling a number of existing public and statutory organisations in to a single body. Whatever you do, however, it must be managed by professionals and the government and central bank must be kept at arms length – and it must be independent of the national insurance scheme. Give the SWF a performance target, for example, 1.5 per cent above base rate, and a pre-determined asset allocation objective; leave the stock selection to the experts – and give it the authority to do deals.

Leisure and Tourism Infrastructure:
As I have said be bold, in fact be bolder than bold. For decades Barbadian politicians and policymakers have been scared of big capital projects. In fact, we have had two since the end of the Second World War and only one-ish since constitutional independence. The first was that remarkable job done by Sir Grantley Adams to reclaim the space between Pelican Island and the mainland. To this day the full importance and economic significance of that project is not fully recognised, either by ordinary Barbadians or by our economic historians. It is a disgrace.

The second was the ABC highway, interesting but a botched project – stand by the airport, decide the quickest way to get tourists to the West Coast, and cut across the country. It was municipal vandalism of the worst kind. But we are where we are. Any leisure development must be based on the needs of ordinary Barbadians and tourists are fully welcomed to enjoy the facilities. Think of developing Seawell as a small town centre, with at least one low-cost hotel, boutiques, restaurants, shops and a visitor centre; install a mono-rail track running east from the airport to Codrington College, in the first stage, giving travellers an opportunity to enjoy excursion rides; also think of developing the area around Ragged Point and Culpepper Island as an all-year funfair and visitor centre, with rides, and an aquarium, etc. The other part of the leisure infrastructure you should consider is the construction of three leisure and sports centres – one in St Michael, one in St John and one in StLucy/St Peter. A dry-ski ride in the Scotland District, complete with an indoor climbing wall, squash and badminton courts, a cinema, restaurant and piazza, giving people a vision of the East Coast and developing the local economies will be very popular. The unthinking will rubbish these ideas on the question of costs, but that is because they are limited in imagination. The role of government is to facilitate, provide the legislative and regulatory framework, not own or build everything. Your job is to draw up feasible plans and invite funders, foreign and local.

Finally, please remember that sound growth is built on structural reform, rather than fancy fiscal and monetary games, and the financialisation of the economy is key to this. Look again at the massive reserves the nation has sitting there doing nothing, waiting for some imagined external shock. It is based on an outdated economic theory. Use some of the money to develop the nation.

I know yours is a tough job, but I wish you and your colleagues good luck. One thing, do not tolerate people talking for talking’s sake at your meeting, often repeating the old and tired mantras. As for new ideas, or in management speak blue sky thinking; tell them to think the unthinkable., start with a blank sheet of paper, do not reject any new idea, no matter how ridiculous it may seem. The world is changing. China will overtake the US as the leading global economy by 2020, one thing to remember is that China is a communist country and all the banks are state-owned. So it is a different economic game entirely.

Whatever you do, do not allow the Chinese to poke you in the eye; those bi-lateral arrangements are biased towards the Chinese, including allowing their imported workers to stay on in the country they have worked in. Say no to that; tell them that your immigration rules must be respected.

Sincerely,

Hal Austin

155 thoughts on “Notes From a Native Son: An Open Letter to Minister Sinckler


  1. The lady on the VoB panel (not Senator Bradshaw) sums it up perfectly. Twenty years later we are having the same discussion about the economy.


  2. “Twenty years later we are having the same discussion about the economy.”
    **************
    …and twenty years hence we will likely be having the identical discussion. What else would you expect if you have a bunch of pseudo academics talking about something in which they have no experience, that they clearly do not understand, against a background of global turmoil that is beyond their comprehension and in an epistemological context that completely eludes them all….
    ….and moderated by David Ellis ???

    THE BLIND LEADING THE BLIND…..shoite man, even Onions sound intelligent in such circumstances.


  3. @The Dummy

    Yes this is Barbados but her case was recommended to the Board by the executive. Transparency in the transaction must exist.


  4. I doan know what structural adjustment shift Donville and the rest talking about….IS MOVING the country from TOTAL DEPENDANCE on sugar and tourism by INTRODUCING and SUCCESSFULLY FESTERING THE OFFSHORE INDUSTRY TO NO.2 REVENUE earner not enough? Gimme a break man…..did the BLP not thru Tom Adams and later OSA not occasion this…….NOW tell me what the DLP did in their last 5 yrs to direct any sorta movement at all in any direction except DOWNWARDS…..and dont give me that no money shii..Oh please…!


  5. They can talk all the pig manure until the cows come home from both sides of the political fence.
    Yes, continue to emit political hot air and blame the BLP for everything under the Bajan midday Sun.
    Yes go ahead Donville shift the focus to the BLP’s inadequacies and past transgressions.
    Continue with the bullshit and arrogance towards the just as dumb Santia Bradshaw.

    You know exactly that your cabinet has been presented with a non-negotiable command to layoff as the first phase of restructuring temporary employees and not to renew the contracts of some of those hired or engaged on such terms of employment in “discretionary” areas of the public sector.

    Yes Donville, continue to deny that students will be asked to make a meaningful financial contribution towards their university education.

    But one thing you can deny or bullshit around is that the country is about to run of forex and the IMF has been put on notice that the country might soon require some help in the form of a standby arrangement and all that is entailed.
    Now deny that on the VOB programme, Mr. Minister of Finance de facto and soon de jure!


  6. bush tea who u telling to stfu .u littlte tin horn dictator. were u given a rule book as to what should be said or how many times FOOL . if u such an expertise on economic affairs why don.t u abandon that bush hut and become PM. …a word of advise in closing those who forget the past doomed to repeat IT u igrunt runt. next time u ue such language to me i will tell u wereto Fining go.


  7. @ ac
    Bushie was just advising you to take the miller’s advice… LOL
    …and the reason that Bushie don’t want the PM pick is that Bushie prefers the old ‘bush hut’ to illaro court…. 🙂
    …so ac, you see how hot it is in Arizona?…. you better let the man come home yuh!!


  8. After hearing Donville Innis scaving attack on the private sector this morning on VOB, describing them as being ‘lazy and ineffective’, government could not even get an idea from my organization.

    The long and short of what is happening, is that, this government wants the business class to pour their money in the economy in the form of investment which to my mind would give the “tiefing, crooked politicians” more money to build up garrison constituencies like Gall Hill, Deacons, Church Village, Haynesville etc and the turn round and pay these mendicants $500 for a vote in the next election. Let everybody sink.


  9. Donville Inniss may be a hard worker and even a successful businessman, but he is far too tactless to be effective on a program like brass tacks….


  10. OWEN ARTHUR /CLYDE MASCOLL
    Please come to our Rescue
    This is easy
    Parliament meets -2 DLP parliamentarians fail to turn up. Government loses vote . Government defeated . News Elections to right the wrong

    Easy

    Squeezzy
    Japanesesy


    • Surely Donville and his cohorts should recall in 1991 when the private sector lost confidence in the government what followed. This bashing of the private sector will not do. Even if he is correct they will have to be coached and persuaded to get on board.


  11. Look………..Barbados is stuck in a time warp, cannot move in any direction but down. neither the ruling party nor the useless opposition has the required brain power.


    • This has nothing to do with party. This is about the people getting involved in their government.


  12. You are so right BU, bashing a private sector that does not have any confidence in them already, will only force them to retreat, sit back and watch the cookie crumble. Most, if not all of them would have secured them selves already in whatever way, waiting for the collapse. Well, this what the Barbadian voted for. The BLP was going to privatize, let old people pay on public transport etc. Who has the last laugh now?


  13. Right David…
    Leadership AIN’T an easy thing when the going gets tough.
    LOL….any monkey can sit in the driver’s seat when the going is easy and even…..
    Leaders NEED to be specially selected, nurtured, groomed and developed…. The WHOLE society DEPENDS on how well we are able to do this….
    This is why places like the one in Crumpton Street are critical…..back in the 1990’s it would have been more difficult to see this…

    Bushie says let us bring back GP and Hants to make national policy… 🙂


  14. Uh see the above coment by juicev is the kind of mentality that is helpingbtto keep the economy staganant. the private sector keeps pulling at the taxpayers purse strings and wanting control and the MOF and govt trying to hold restraint in an effort to combat and prevent further bleeding. all in all it is about control of the public purse and how and where the moneyshould be funneled the private sector mad as hell and couldn.t care less .no wonder one hear the calls for chris head. nobody fooling ac.


    • @Bushie

      Agreed!

      Getting things done defines what leadership is all about. One day these politicos will learn even if Sandy did not.


  15. The last laugh?
    ************
    That is the REAL JOKE…
    …it will be the Trickidadians, Canadians and others who control all the real assets bout here… to have the last laugh.
    Those jokers who are depending on a few hundred thousand stashed in the bank or even in offshore accounts will actually be the biggest losers..

    The last laugh will belong to the Rasta and bushman communities who don’t give two hoots about wunna money anyhow….


  16. Bottom line, the island is NOW terminally ill. Government authorities, politicians in both parties, and some of its elite residents there distended its problems to the point of its current sad condition.


  17. The hilarity of it is when they realize all the millions that were stolen through whatever thiefing scheme that was devised will be of absolutely no use to them, appears they are so caught up in the one track way of thinking and processing information they are not aware and cannot appreciate that money (paper) is being phased out. HAH!!


  18. First word , Audit, 2nd Truth, 3rd , Action .
    working to fix , unless their Names are in this mess looking to hide it with long big word talk that just digs the hole bigger for us all.


  19. @ac. The private sector can, and will help the Barbadian economy, BUT, they are very cautious because the island is run by incompetent people like, fumble stuart, stinkliar,, jada that get all the work ’bout here, michael lasley and the others. Why would they be optimistic?


  20. Bushie,”but he is far too tactless to be effective on a program like brass tacks”
    David”This bashing of the private sector will not do.”

    Please tell the Minister that the private sector is the key to economic recovery in Barbados and he needs to play nice.

    Some of these egomaniacal Ministers should stay off the talk shows.

    If they want to pompaset come on BU.


  21. oh ac, forget Cost-You Less with 15 years of tax exemption while the others in the private sector must live up to their social and corporate responsibilities.


  22. See what i mean the more u juice talk the more u exposed uh greedy selfish ass. that.s what it is all about.wunna fughet the many loans and unpaid debt sponsored and supported by govts to help wunna in good times. if i was in control i would tell wunna get lost and do like africa invite the chinese in to take care wunna selfish ugly asses even though i don.t trust them either but something gotta give. what nerve. the country saddled in debt and wunna only thinking about wunna selve stuepse….


  23. Hants | June 30, 2013 at 2:38 PM |
    Some of these egomaniacal Ministers should stay off the talk shows.
    If they want to pompaset come on BU.
    YOU WANT THEM TO GET BRUISE HANTS?
    DO YOU REMEMBER BRUISING ON THE SMALL FIELD?


  24. Yes GP I remember “bruising on the small field” but it would be better to get “bruise” anonymously on BU than to go on Brass Tacks and talk shiite.

    Nobody knew that a Prime Minister told COW not to buy more land because it was causing “problems”, until COW said so in an interview with Trevor McDonald of the BBC.

    Most Bajans never saw that BBC interview.

    The private sector should be encouraged not lambasted publicly. You cannot dictate to anyone unless you are a Castro.


  25. David
    Can anyone get a copy of the paper prepared by Dr David Estwick in 2009 (the then Minister of Economic Affairs) advising the Thompson administration of the need to refinance the national debt immediately while the Sovereign Credit Rating of Barbados was good?


  26. The S&P, Moody’s and Fitch is now likely looking into the Barbados direction and likely will offer it gloom. They will see nothing else but gloom.


  27. Hants@ well who’s land and what land was COW buying ,we hope the seller is the true CLEAR TITLE OWNER.
    3 SO CALLED BIGGEST LAND OWNERS IN BARBADOS
    BARBADOS GOVERNMENT ?
    THE SO CALL CHURCH ?
    COW ?

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