Managing the economy

| 14/01/2009

There has been some public criticism of our Government’s poor management of the economy, lately. It’s fair comment, but it misses the main point.

Which is that our MLAs are not put in office to “manage the economy” – or manage anything else. They’re there to monitor the economy, and to set public policy, and to ensure that free private enterprise can flourish under the laws of the land. We seem to have forgotten that.

Unfortunately, the politics of vanity takes over as soon as an MLA is elected. Having failed to manage any successful businesses in their lives (most of them), they can’t resist the temptation to try their hands at what they think of as “the management game”, with taxpayers’ money. In real life their pay-packets would depend on success, but an MLA’s is not a real life.

Candidates don’t campaign for office on their economic-management skills. They don’t have any. They (most of them) don’t have any management skills at all, except the management of their election campaigns. That’s not a criticism, just a statement of fact.

What they are elected to do is to represent the interests of the voters. Most voters are bloodline Caymanians, and their chief interest is to be protected from competition from non-Caymanians in all areas of life.

Their protectionism ranks above all other concerns and interests – even Cayman’s economic efficiency. Protectionism puts a low cap on productivity. A protected industrial sector is alow-productivity sector, everywhere in the world. That’s another statement of fact.

So by pandering to the demands of the tribal-supremacy brigade, our MLAs deserve a collective ‘A’ for political management but a collective ‘F’ for economic management.

Our government Statistics Unit produces lots of pretty meaningless information, while never daring to calculate the effect of protectionism on our cost-of-living. My personal guesstimate is that 10% of all household and business expenses are attributable to protectionism. When the US recession starts to impact us here, even those Caymanians who have benefitted from protectionism may come to question its cost.

It puts the pensions-funds losses in perspective, doesn’t it? We know that our retirement pensions will be 30-40% less than we thought they would be, but that’s a one-off. The protectionism levy adds to our expenses year in and year out.

For decades we have been able to cope with this levy in comfort, owing to the strong overseas demand for our tax-haven and tourism products. However, the global recession will reduce the demand for both, and there may soon come a time when we will wish we had been able to keep the money in our pockets, instead of handing it over to be managed by our politicians.

We think of Cayman as being a free-enterprise economy. Well it was once, back in The Good Old Days of thriftiness and prudence in government. With the fabulous growth of Public Revenues, though, our later politicians allowed their vanity free rein. They got it into their heads that they knew better than private citizens how to spend the money.

The state now influences just about all expense-items in the Profit & Loss Accounts of all privately owned businesses. In a couple of years the state will influence all the income-items as well, through price-controls and taxes on profits. Then, we will have morphed into a centrally controlled economy.

What should worry us most of all is the appointment of what are in effect “political commissars”, to enforce compliance with the Caymanian-protection laws and regulations.

We don’t call them “commissars” – that’s the term used in communist Russia. Rather, we call them the Business Staff Planning Board and the Work Permit Board and the Immigration Department. But the job description is the same – namely, to ensure private businesses know whom to hire, fire and promote.

We call ours a “mixed” economy, but it is becoming less mixed by the day as the commissars tighten the screws on the private-sector workforce.

In the outside world, a mixed economy normally means a mixture of capitalism and socialism – the aim being to redistribute a portion of rich people’s assets among the poor.

In Cayman we have a mixture of privately owned and state-owned enterprises, plus a mixture of private and state management. I don’t know the name for that: “creeping statism”, perhaps. Statism isn’t concerned with redistributing a community’s wealth, but with creating state-owned commercial businesses and controlling the affairs of privately owned ones.

Of course there are private businessmen on all the workforce-control Boards and Departments. But those businessmen are generally political cronies and stooges who have an inside track with the issuance of Work Permits. (Not all of them take advantage of their positions, but the marl road is jam-packed with stories of those who do.)

Our politicians’ determination to manage the economy has saddled us with a huge bureaucratic empire. They see themselves not as humble representatives of the voters but as hands-on masters and managers of all they survey. Their empire encompasses the promotion of both Cayman’s tourism product and its tax-haven product.

It manages a plethora of loss-making businesses: Cayman Airways,all the airports and seaports, roads, schools, hospitals, sports and entertainment facilities. All this management is done with minimal reference to true experts. Even the complex field of international borrowings is managed by the inner circle of cronies and stooges.

This recipe for disaster has been a long time cooking. One wonders how it will taste when it’s done.

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Category: Viewpoint

Comments (2)

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  1. Anonymous says:

    I agree. Gordon is like a CD single: I am sorry I read this article. It adds nothing except more pointless whining and complaining, without any constructive suggestions for improvements. As long as Gordon Barlow has been in Cayman, he has contributed nothing except to stir division and grip incessantly.

    I must have been deluded to think this was anything new from a very limited self-titled pundit. that’s 3 minutes of my life that I will never get back….

  2. Anonymous says:

    Why do Gordon’s articles, titles notwithstanding, all say essentially the same thing? Talk about a one-track mind. By the way, the "political commissars" were in place long before you arrived, Gordon, and back then they actually protected Caymanians. However, together with the change of name from the Caymanian Protection Board to the Immigration Board the function seems to have changed.  Caymanians’ employment is not protected by our laws when foreign employers terminate them or harrass them into quitting for making legitimate complaints to the Boards about disriminatory employment practices.  The "political commissars" need more teeth.