Submitted by Due Diligence
Detroit, Michigan, was once the premier automobile manufacturing centre of the United States, indeed some would say of the world’s greatest industrial city. Barbados was once the premier tourism destination in the Caribbean, indeed some would say in the world.
It strikes the author that, while Detroit’s fall from prominence has gone to greater depths, some parallels can be drawn between the two. This is not intended to demean the financial minds in Barbados; BUT, at this stage of their “Consultations” (How many will there be?) the PM and MOF would be well advised to engage consultants/advisors with an international perspective who could help them see from a global view
There is an interesting article in the June 28 edition of the National Post with observations and recommendations as to how to deal with the Detroit financial mess. While Barbados is (apparently) not at the door of bankruptcy/insolvency or IMF rescue the PM and the MOF would be well advised to read the article before Barbados’ fortunes descend to the level of Detroit’s
From the article.
Many point to race riots, to crime, to municipal corruption and to competition from Japanese car makers for Detroit’s downfall and all doubtless played a role. But the mother of all causes has been union power. Had GM, Ford and the other great car makers not been straight-jacketed by union rules and union wages, Detroit’s industries would not have fled to Right-To-Work states and they would have retained the flexibility needed to compete with foreigners. Had municipal workers not squeezed and controlled the city government, saddling its residents with poor services, crushing taxation, and corrupt politicians, Detroit homeowners would have had no reason to abandon their magnificent communities in flight to the suburbs and beyond.
Step One … Let the private sector run the municipal water works, the nation’s third-largest, as it did in Detroit’s early days – the private sector will do a better job of repairing Detroit’s crumbling water infrastructure while freeing the new city council of needless employees.
Step Two would be to not only sell the city’s extensive meter and other parking facilities, as it is considering, but also street parking – most businesses and many home owners would prize control over the street lane abutting their property.
Step Three involves the Detroit museum, which boasts some of the world’s most famous works of art and is ranked America’s sixth best. But rather than merely selling several masterpieces piecemeal, Detroit should sell its entire museum – complete with incomparable works by the likes of Matisse, van Gogh, and Rembrandt – lock stock and barrel, to the highest bidder. If the derelict city of Detroit today didn’t own this museum, it would never consider establishing it at the expense of the pensions of its public servants, policing, and other public needs. There is no moral case for keeping these lavish works in city hands at a mostly poor citizenry’s cost.
The solution for Detroit, in short, is to privatize everything possible and become a low-tax, business friendly jurisdiction. This would end a decades-long governance that has overseen what may be, aside from war, the greatest destruction of wealth in human history. The now sleepy city of Detroit – whose strategic location made it a thriving metropolis even before the advent of the automobile – would start motoring again as money and people poured in, particularly since Michigan itself just decided to become a Right-to-Work state.
Privatizing all of the city’s assets and making Detroit a low-tax city would see almost everyone’s assets soar. Instead, almost surely, the powers that be will privatize as little as possible, and then see the city sink.
When the author talks about “low-tax city” he is talking about low taxes for everybody; not just the IBC’s and off-shore entities, and expats who live in their million dollar houses.
Extreme? Perhaps, but food for thought. As the PM says, they are not playing Snakes and Ladders, they are playing with the financial and social viability of Barbados and its 270,000 citizens; and they better get it right.