Barbados – Detroit

Submitted by Due Diligence
To avoid bankruptcy Detroit is looking to sell its precious assets.

To avoid bankruptcy Detroit is looking to sell its precious assets.

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.

9 thoughts on “Barbados – Detroit

  1. It saddens me that one can submit such hogwash without any idea of the politics that has brought Detroit to its current state. Are you a member of the Tea Party ? These recommendation were all made my Gov. Snyder and his Republican Tea Party State House to negate the vote of the primarily Democratic city of Detroit voters

    I am a Barbadian who has lived in Detroit for the past 50 years and can tell you that you need to research the UAW (United Auto Workers etc) to learn the real history going back to the Hon. Mayor Coleman Young.

    I was not a member of the Union but as a management employee we knew that our great salaries and benefits were always boosted by,the gains our employees made at the bargaining table.

    Because of Unions the gap between the Haves and the Havenots shrunk tremendously.

    Unions have been the gateway to success for workers to get a fair piece of the pie, whether it is starting pay, pay raises, vacations, sick leave, working conditions etc. Especially in a country with such favoritism, nepotism and a court system that takes ten years our more to hear a case, (de can fin de file). What recourse would a disenfranchise employee have ??

  2. Wilma Stroud

    You call this piece hogwash. I wish to correct you: hogs wouldn’t eat this crap. A hog’s stomach can take almost anything but there is a limit.

    Barbados’ current predicament can be traced to corrupt and incompetent politicians. Incompetent because most of them do not have the skills necessary to successfully run a government; corrupt because it is an open secret that politicians over the years have been on the take, and their colleagues have done everything to cover it up and protect them. Additionally, they do everything, including buying votes, to ensure that they get a second term in order to get a pension.

    The unions in Barbados, except Unity, have been taken over by political operatives and are working hand in glove with the corrupt politicians, and are therefore not making any demands for the workers, unreasonable or otherwise.

  3. @Mr. Franklin

    Have not heard ur views on the article that was in Barbados Today about pending promotion in the pblic service. I heard the other union;s views. Perhaps david should place the article on the blog for discusiion point, as promotion and corruption have some correlation.

  4. @Wilma Stroud et al
    Undoubtedly Unions were critical to evening the playing field. However, the flattening of the Auto Companies in the last few years was also the result of over zealous Union demands and very questionable management.
    Back in the early 1990s Stempel @GM gave away the store when negotiating the contract and since the US was already in recession and GM had high inventory levels he should have put a stop to Union demands then by telling them to Strike as long as they wanted to.

    The resulting Win for the Unions BANKRUPTED GM and the other Auto Corps 5 years ago. Total cost per worker per hour was $80 approx versus $55 in Japan, which obviously cant work. The Government stepped in to save GM BUT it WILL FAIL because the Retirement Liability is far too high at $450BN. Chrysler should NOT have been saved that money might as well have been burnt, the Corp is walikng Dead in every respect. The really sad detail is that the Govt broke the Law when they screwed over the Bond holders, who should have received a major portion of the new entity under the Law. Instead, Fiat was given a piece and the Unions. No wander investors like myself are very keen to create jobs through investing outside of the USA! Thank the Govt and Unions for forcing us to say goodbye!

  5. Detroit like Barbados is ill, extremely. Barbados sad to say is terminal, Detroit is not. Ohhhhhhh, this, this is important to know, Detroit produces automobiles, Barbados only sugar and rum.

    Detroit is home of the American Auto Industry (General Motors, Ford and Chrysler). The American Auto Industry like Barbados and the City of Detroit was ill, extremely. The government stepped in to save its auto industry in Detroit. The state of Michigan, since March 2013 stepped in to save the City of Detroit. Who will step in to save Barbados?

  6. Senate Bill 865, a revision of the controversial Public Act 4 became law on March 27, 2013 allowing the State of Michigan legal right to intervene in troubles cities and school districts. So, the state of Michigan since March 27, 2013 exercised legal right to intervene in the city of detroit’s internal financial affairs with appointment of an emergency manager whom is given all of the following:

    1). Power to reduce Salaries (mayor, city council, etc.)

    2). Power to hire and fire local government employees

    3). Power to renegotiate, terminate, modify labor contracts with state treasury approval

    4). Power to sell, lease or privatize local assets with state treasury approval.

    The city of Detroit is financially stressed but has on its hand some very precious assets. One, it is owner of a multi-billion dollar art collection housed at the Detroit Institute of Arts (Detroit, MI), parking garages, lots and metered parking spaces – thousands of them. The City of Detroit is also owner of the Belle Isle Park, the only island park in the world and its Water and Sewer Department serves Detroit and 127 surrounding communities; all are at risk. If the City of Detroit would have just solve its problems (past years), it would not be in its NOW predicament and would not need intervention of Senate Bill 865 or an emergency manager in its midst. The same must be said about Barbados. If Barbados would have just solved its problems (past years) BEFORE 2008, it would not be in its NOW predicament. Detroit I think will fully recover, Barbados, probably not.

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