Wake-up My Bahamian People!

The Bahamas: A Perfect Financial Storm Brewing in Tourism Paradise

By Norman Trabulsy Jr.

The Bahamas is entering a period for which I see a Perfect Storm gathering, and this is unfortunate. A Perfect Storm comes about when a number of factors synergize to exacerbate what would otherwise be a mildly disruptive event. Although a number of other supporting realities strongly buttress my view, for the sake of brevity I will base my analysis and prediction of a Perfect Storm on the following.

Implementation of a value-added tax (VAT)

It does not take a Sherlock Holmes to figure out who owes hundreds of millions of dollars to the Bahamian government in uncollected property taxes. Value-added tax is being implemented because the government has failed in its job and been unable, or unwilling, to collect even half of the taxes it is owed. The VAT is a consumer-based and regressive tax, meaning that it hits the poorest the hardest.

The estimated revenue from the VAT assumes that the economy will remain roughly at its current level. I strongly suggest that the Bahamian economy will take a very hard hit for several years due to the high cost of VAT compliance, higher prices, fraud, and the overestimate of the tax revenues to be collected, causing the government to further tighten its belt, all contributing to a dangerous shrinking of the economy. This: before the risk of any hiccup in the tourism sector, which accounts for 80 percent of The Bahamas’ gross domestic product (GDP). It is rather naive to suggest that the tourism sector is immune to rising prices, when survey after survey show that the No. 1 complaint of tourists is high prices. Sun, sea and sand have a value, but there is a limit, and we are pushing it.

Legalization and proliferation of gambling web shops

In The Bahamas, a social epidemic of gambling appears to be a symptom of the larger desperation of being unable to make a decent living and provide for one’s family by holding an average job. But more on that later. I predict that the net effect of a proliferation gambling web shops will be a continued drain on the real economy and an increasing transfer of monies into the hands of web shop owners. The health of an economy is based on the amount of money that freely circulates within it. As more money leaves the real economy via the web shops, the net result is unarguable: a rapid and decisive transfer of wealth into the pockets of those who produce nothing.

A software designer for some of the web shops told me that, for every winner, there are 8,000 losers. Ponder these odds for a moment. I live on a small family island, and I have paid attention to this matter for nearly a decade. I cannot count the times Bahamians who do not gamble have said to me, “These web shops are going to take this country down.” Perhaps they say this because, like me, they have seen the dashed hopes, the unfinished houses, the children whose lunch moneys were squandered by their parents’ spinning, and the money leaving this small island on a weekly basis that could have gone to so many worthy causes and needs. The language should be more honest: gambling is not an industry, it is a Ponzi scheme, and it should be called what it is.

Downgrading of the credit worthiness of The Bahamas by Moody’s

Moody’s recently downgraded the credit worthiness of the Bahamas due to the unlikely probability that it will reduce its 50 percent debt-to-GDP ratio. We are unlikely to do this because for the past 10 years our country has only grown by six percent, and we continue to borrow more money. Moody’s rightfully wonders where the government will find the money to pay off its increasing debt. The prospects are bleak. I liken this situation to the following conversation. A friend comes to me and says, “You owe me $500 today.” I ask, “Why is that?” He answers, “Because 50 years ago your grandfather borrowed $500 from my grandfather and he said you would pay me the $500 your grandfather owed him.” Who doesn’t think this is absurd? Yet, what do the Progressive Liberal Party (PLP) and Free National Movement (FNM) do each year to the citizens of The Bahamas? How is this any less absurd than what our well-educated economists, politicians and lawyers are proposing to us today? When politicians take out these big loans, with interest, who winds up paying for them?

State of the global economy

Not enough honest people have spoken out about the implications of what the major players in the financial sector and government officials have been doing. Since the global financial crisis in 2008, the United States in particular, has pumped trillions of taxpayers dollars into the banks and financial institutions there and around the world, in an attempt to “save” the economy that was put in danger by, you guessed it, the banks and financial institutions. Soon the consequences of this policy will become yet more apparent in rising inflation, increasing inequality, and a greater impoverishment for most of humanity. Any prudent government would have, after assessing the crisis and its causes, broken up the largest of banks and nationalized those that had done the most harm to society.

The largest banks, financial institutions, and here in The Bahamas even the web shops, have completely captured our politicians and the political process. Consider the phrases: Too Big To Fail and Too Big to Jail. Justice has become lopsided and no longer applies to the rich and powerful. This is the reality today throughout the world, and it is contrary to any concept of democracy. The people of The Bahamas said “No” on the referendum regarding web shops. Yet, what did our Prime Minister do? Who do the politicians really work for? Does democracy exist in The Bahamas, or anywhere? Answer honestly. Now, what are you going to do about it?

Increasing poverty rate in The Bahamas

The realities about poverty in The Bahamas are probably worse than the government statistics suggest. For an indicator of the real state of our economy and the hurdles that must be overcome to change our course, speak to any social service worker. They will tell you that they are seeing an increasingly depressed, despondent and hopeless people who come for assistance. Yet the government is cutting back on social services to balance the budget, so that there will be even less resources to help the rising numbers of people who need them. The economic considerations are in themselves sufficient cause for concern, but it is also reasonable to expect that, as the poverty rate increases, the crime rate will increase, and public safety, the quality of life and tourism will decline.

Increasing emphasis on the “financial services industry”

The so-called financial services industry is the second largest contributor to the GDP of The Bahamas, after tourism. It is not an industry but a scheme to attract people who don’t want to pay taxes in their own countries and need a place to hide their money. The Bahamas levies no income tax, no corporate tax, no inheritance tax, no capital gains tax, and it seems that property taxes are very low and not collectable. The money to run the government comes, for the most part, from the working people of The Bahamas. The rich pay a minuscule percentage of their incomes to live in paradise: sort of like going to Disney World for free.

If the tax policies here in The Bahamas actually created an incentive for investment, an improvement in the job market, and a healthy economy, wouldn’t there be better results after all these decades of such policies? Instead, our politicians, lawyers, bankers, the financial services representatives, all of them, have become beholden to big money. Who, in their right mind, can possibly say that things here and around the world are going well and that the future looks bright for most of the world’s people? The “financial services industry” produces little to improve the lives of ordinary people. There is no reason to give the rich a free ride in this country; the benefits of living here are too great to be given away for free. I say: make them pay their fair share. The Bahamian people need to stand up and call for these changes, because not one person in the government has the guts to tell it like it is.

Aspiration to join free-trade organizations

Generally speaking, free trade in today’s world is a way for transnational companies to subvert a county’s legal system and destroy its sovereignty. The result of almost every modern free-trade agreement has been the destruction of a country’s agricultural and manufacturing base and its replacement by highly subsidized foreign corporate ownership, gutting of environmental laws and crushing of organized labor. Any complaints and lawsuits must now be handled by an extra-judicial group of corporate lawyers with loyalties to big business. This idea of The Bahamas joining these free-trade agreements will only further the interests of those businessmen, lawyers and politicians who are pushing them. They will not help the tourist economy or manufacturing economy of The Bahamas or create more and better jobs for Bahamians. These issues must be known to the Bahamian people before our politicians sell this country out from under our feet.

Lack of leadership

Anyone old enough to remember, or who has gone to YouTube to hear, the words of Martin Luther King Jr. understands that we have no statesmen in this world today. Do not be duped by the words of the first African-American US President. He is not even worthy to stand in the shadows of MLK Jr. Listen to the words of our own politicians in The Bahamas: mere words, poisonous words, for they are meant to trick us into believing that they have our interests in mind. Nowhere in the world is there a leader with the integrity, honesty, courage and fortitude required to govern. Each and every one is beholden to the moneyed interests in the world today. I have heard the expression, “We get the government we deserve.” If this is true, I am saddened by where we are as a people. If we can rise up, and create a better society, it is time to do so. Let us get rid of the charlatans, the spineless, the greedy, the dishonest and egotistical excuses for public servants that we now have. This isn’t about one political party or another. Wake up people! I believe we are staring a Perfect Storm in the face. It is up to us to do something for ourselves to avoid the impending crisis.

Editor’s Notes: Norman Trabulsy Jr. is an expecting father, restauranteur, sailor, captain, carpenter and naturalist living in The Bahamas. His writing generally focuses on environmental issues concerning tropical marine ecosystems and economics.

Photographs one, four and nine by Thomas Hawk; two, five and fourteen by Albyan Toniazzi; three and ten by Susan; seven and thirteen by Bruce Tuten; eleven and twelve by Shutter Runner; six by Jordon Cooper, and eight from the IMF archives.

Oct 13, 2014

News Junkie Post

Create a Bahamas for Bahamians ...and then watch them care more for themselves, their people, their environment and their future

A country with no plan, pt. 1

Of late, when I hear any of our political leaders speak about the need for a national development or economic plan I am baffled.

The prime minister and his deputy, along with the minister of the environment and a number of others in Parliament, have spoken of this on recent occasions and it is instantly disconcerting. If it were intended to display intelligence or passion, it missed the mark on both counts, and it is really not something that any member of a governing party should ever utter.

We have been a sovereign nation for almost 41 years. I know that there are all sorts of growing pains attached to that sovereignty, and, really, we are just an infant country. But, some issues, in particular, keep us stuck in our infancy: the lack of a national and/or economic development plan is the most significant of them.

Why, after all this time has passed since our autonomy are we just now saying that we need national and economic plans for development? As the country’s leaders, how is it that you’re only now asking for these plans, which should have been the crux of your existence and previous governance? Moreover, how do you win an entire government without having had such plans, be it the most recent win in 2012, or the very first win in 1967? What government can govern at all – never mind effectively – without first having a comprehensive plan to govern? As it appears, have we really been on autopilot for all these decades?

As a ruling government, the fact that you have no such plans, by your own admission or public comments, does nothing to inspire confidence amongst the citizenry. What are the 300,000 or more of us – less the ones sitting in Parliament apparently unaware of how significant an issue this is – supposed to think about where it is you intend to take this country and how you intend to do it?

A guest on a local radio show recently suggested that such development plans have not existed prior to now, yet there exists an Economic Development Unit in the Office of the Prime Minister? How is that even possible? What is it that they do there year after year? I am certain I know the answer – maintain the status quo. We are a status quo-maintaining society, and it shows from the top down.

Our direction

Going forward, in the best interests of the country, every man or woman who offers himself or herself as a servant of the people, for elected or appointed public office, should be required to submit a serious analysis of economy and government, in support of an overall plan of how to (sustainably) grow our nation. In the absence of this, and without demonstrating coherent and sustained thought on the question of growth, for what reason will I give you my vote?

With the exception of none, all of the issues we have as a country point to: 1) our (obvious) lack of direction; and, 2) the fact that so much has changed in our economy and society in four decades, yet so much is unchanged with respect to laws and regulations, structures, people and processes that govern their enforcement.

Is it at all realistic to expect to move forward when the framework of your country is so rusty and fragile that you can’t build anything new on it without predicting that it will collapse?

The current government while in opposition campaigned on a Bahamas for Bahamians first. But here’s something to think on: The Bahamas was never for Bahamians. It was a vacation home; a paradise for visitors. And out of that grew a tourism industry, which I suppose seemed the easiest thing to follow through with at the time. But we are surely paying for that easy decision now. To create a Bahamas for Bahamians would have required much more effort than simply leaning on tourism.

That said, the benefits of open trade and foreign direct investment are well known, but we should have developed, be developing, from the inside out, not the outside in. As long as we aren’t, we will always be either stagnant or backward moving because there is no real value being added to human capital and productivity. Employers and employees have hit a ceiling of achievement and most will stop there. Additionally, they have no vested interest in what they achieve internally, but will continually look to the outside for the answers and the reward.

Had we developed instead from the inside out, meeting and securing our primary needs first and steadily growing and expanding real industry, something like value-added tax, or the (threat of) implementation of any method of taxation, would be a far less likely bone of contention, as the desperate scramble for revenue would have been avoided, de facto.

External input into our economy, by way of tourism, foreign banking and other foreign direct investment should never occur without attached domestic investment opportunities for the people these investments are meant to benefit. And if we are to assume those people are the citizens of our country, then why is it that they are the very people who repeatedly end up with the minimum wage or no benefit?

Give the people whose country it is the opportunities to directly invest in the development of their own country, in whatever small portions they can afford. And then watch them care more for themselves, their people, their environment and their future.

• Nicole Burrows is an academically trained economist and a self-trained writer: nicole.burrows@outlook.com.

April 16, 2014

thenassauguardian

- A country with no plan, pt. 2

- A country with no plan, pt. 3