Cayman’s economic conundrum
As an independent candidate in the 1984 elections I had a vision that Cayman was heading for great prosperity and proposed the following: reduce the size and cost of government; work hard to create a vibrant private sector and establish by law a “lock box fund”, which would be funded with 10% of the total government revenue on an annual basis.
This fund would only be used for serious emergencies and if not needed would simply be carried forward as a savings account for the next generation.
At the time, many of the other candidates in the race denounced the idea as infeasible and instead criticized me for not knowing what I was talking about. I never once had a moment of disappointment about not getting elected and treated it as simply a good lesson in the learning curve of life. However, what has saddened me over the years is the inability of some of those whom we did elect (and appoint) to even recognize good ideas and do something with them. And the more things change the more they remain the same.
Today, it is estimated the fund would have somewhere in the range of $400-$700 million or more through the magic of compound interest over 28 years. (The actual financial data was not available from either the statistics dept or the financial secretary’s offices.)
Cayman’s financial dilemma did not start this year, last year or five years ago; it started 25-30 years ago when we failed to realize the opportunities this country was starting to enjoy and to heed the advice of the older generation: “Save for the rainy day.” Respective governments failed to plan, which in reality is planning to fail.
Once again we find ourselves scrambling to prepare and balance abudget, while our liabilities keep increasing and the sources of revenue are drying up because the private sector and middle class are shrinking. It does not matter from what angle you examine this; we have serious financial challenges ahead.
In 2007 the world’s economy started on a downward spiral with very few in government, commerce or economics having the foresight to see it coming. Five years later there are many in leadership positions who do not fully understand the causes, effects or implications of this crash. The failure to understand the big picture while focusing on the smaller parts will probably not result in viable solutions.
What we have experienced over the past 5 years is not a normal “down market cycle”, followed by an “up cycle”; instead it is a shift in economic fundamentals, which are evolving and taking us to a new place. But policy makers and many experts are treating this as the former and not the latter, assuming that we are soon on the verge of a recovery.
Cayman is no exception; many believe that all we have to do is wait and hope and things will return to the good old days like 2005-6 when we were rebuilding after Ivan. But this time is different and the sooner we realize this better off we will be.
In the USA there were six interconnected economic bubbles – stocks, housing, private equity, discretionary spending and, more fundamentally, the government debt and the dollar bubbles.
While these bubbles were expanding they created much wealth, opportunities and jobs to millions in the USA and around the world. Since 2008 these bubbles have been bursting one after the next, bringing the overall economy down. The two last big ones, the dollar and debt, have yet to burst.
The US government has injected billions into their economy in an attempt to prevent the latter two major bubbles from bursting; however, it has delayed but will not prevent it. The American annual deficit has increased from $250 billion in 2007 to $1.6 trillion, with a corresponding increase of 200% in the money supply (from $800 billion in 2008 to $2.4 trillion) and a total debt of $16 trillion, the largest in history by any nation; not to mention the record high unemployment across all sectors. There will be no equilibrium until the two final bubbles burst, causing even more turmoil in the world’s economic order. In addition, inflation in commodities (food) and other products along with higher interestrates are on the horizon.
Why is all this important to Cayman? Simple — we are part of the global economy.
The next time you go to the grocery store take note of where our food comes from; look around to see where our tourists come from along with much of our investments. The Cayman Islands financial umbilical cord is tied to the USA and always will be as long as we are located 500 miles from Miami.
There is another very important event taking place in less than 3 months time which will affect the Cayman Islands, perhaps more so than any previous; i.e., the Presidential elections. When was the last time we saw an advert by a sitting president criticizing his opponent with references to the Cayman Islands? In 2013 Caymanians with US citizenships will have start filing and paying the US taxes. If someone had told us this 10 years ago we would have thought they were smoking something.
There is little doubt that the re-election of President Obama will result in a tougher stance towards the Cayman Islands, particularly in relationship to our financial services industry. While on the other hand, a win by Mr Romney could re-energize the free market system on which America was founded and ultimately create better times ahead. While these are events over which we have no control, we should be aware of all external conditions and factor them into our plans.
Cayman has been living in denial for too long. Because things have been so good in recent years, it’s hard for many people to accept that they would not continue to be good.
But the world has changed and now it’s past time for us to change — our thinking, attitudes, behavior, expectations, and the way we have been managing our affairs and stop squandering our scarce resources. Our mantra now should be “do more with less” and work smarter not just harder, while demanding greater efficiencies and accountability.
Government must be reformed from top to bottom; our debt must be brought under control; privatization and joint ventures should have been embarked on long ago; solicitation of the best ideas should be a way of doing business; instead of panic rescue missions by a few (while they may be helpful).The measures announced so far to remedy our budget deficit are only temporary and we will face this situation again next year, if not earlier, unless the tough decisions are made now. One cannot expect a band aid to cure cancer.
When speaking to businessmen and folks in this country, one gets the feeling that there is finally a realization that this is no ordinary recession and that new thinking and actions are overdue in order to help us position ourselves into a sustainable mode and hopefully chart a better future. Now, if only our government would realize this and make the tough decisions necessary to secure some hope and opportunity for the next generation, instead of hedging their bets for the next election.
I believe there is nothing wrong with Cayman that the people who live on Cayman cannot solve, but a new vision and approach is needed for that to happen. Unfortunately, the scarce ingredient is “time”; we are running out of it. For us to leave a better life for our children and grandchildren we have to become less selfish and be prepared to sacrifice, as our parents and grandparents did for us.
We are running out of options, Cayman.
Category: Viewpoint
Very intelligent, articulate and insightful economic perspective. Good job in identifying the major problems, Bo. One has to understand the problems before proper solutions can be offered. The US situation is the best example. The current global economic crisis had its genesis in the US housing and derivatives market many years ago, and the signs were ignored then too because many people were getting rich as a result.
I agree there is a shift in the whole global economic infrastructure. I don’t even think the worlds great economic minds have gotten their heads around the real solutions yet. Caymans economic model has been serviced based to this point in time. Should we be looking at radically new economic models? I think CEC is a move in the right direction.
Thank you Mr. Miller for an insightful and well written article, so much so that I was compelled to do some research on the events that lead up to the great depression. Caymanians should realise that if the major players in the world economies do not change their current trends we are more than half way to the next great depression. In the event of a depression our leaders and people had better begin the preparation now by creating some form of savings that will cushion us during those times. Caymanians andour leaders had better change their way of thinking and doing business stop the political pandering and do what is in the best interest of these islands and for its people. There must be a cut in expenses whether we like it or not, choose not to will be the financial suicide of this country.
Hi,
being a Canadian that briefly worked on Grand Cayman, I'm seeing the viewpoints of Bo Miller as being valid except ……. here's what happened in Canada:
A Goods and Services Tax (GST) was implemented with the intent that the fees collected would be used to pay down our debt. Well, no Government has done that and it's simply a cash cow. I recall reading in the comments above that if such a fund was created in Cayman, that in most likelihood the fund would be used for pet projects – well guess what happened here in Canada.
We are all part of the global economy – unfortunately, we're all recovering from the 2007 meltdown.
Keep in mind too, that once the "old" regime is gone in Cuba, the Americans will be using it as their playground again …. at the expense of all the other Caribbean nations in the region.
I don't know what Cayman could do to get out of this financial mess and also question the long-term economy for Canada as more and more of our services get out-sourced to other countries.
Cheers,
Stephen Shaw
The motherland has a habit of getting rid of colonies when they are down and out, so take note Tru Tru in your prophecies about other Caribbean countries.
"Some say that the main reason that Jamaica has not achieved economic "independence" is that our politics has created an economic environment that drives the best minds and the most trained and creative and innovative of us towards other shores like the USA, Canada, and Britain."
Read more: http://www.jamaicaobserver.com/columns/If-Red-Stripe-can-do-it–why-can-t-Digicel-_12300760#ixzz23jKYAg8z
Here we are running out of time, yet we all appear to be waiting for the next election.
Re your "lock box fund" idea – all very well in hindsight but let me as you this: If it had been started, how long would have such a fund have survived before it was plundered for some pet project? A year ? Three? There is no way on earth Caymanian politicos of any persuasion would have sat and looked at a big fund of money and left it alone for any meaningful length of time.
Sorry, a nice idea but I'm afraid it was indeed always completely unfeasible.
Bo you use the united states way too often in examples. but I do agree with your general points made. Hope you do better in the next election.
Hi Bo,
It is very hard for people many like yourself to get elected in Cayman unless they
have demonstrated to be some kind of a bandit!
If you're honest and really mean the country well, with a burning desire to help
our people and our country, they will spend millons of dollars to make sure
you do not get elected. God has to be on your side and you trusting him all the way.
Our people keep biting the bait that switches on them as they bite into this
poisonous venom from the serpent that has wrapped himself around our society
deceiving many, sucking the life out of our families and small businesses.
We can not allow a Cayman Mafia nor an imported Mafiosa claiming Cayman status to control all of the economy. We must fight.
Its time for a revolution and take our country back
Ok points bo. But a little too much waffle and not enough solutions. Please dont take this as too critical but can you not offer any?
The problem is. Cayman has many educated, degreed, skilled and unskilled people applying for any job they choose to apply for BUT ARE DENIED when they are identified as a 'CAYMANIAN
This is not about our people being unqualified because they are duly QUALIFIED as they have always been. It is all about isolating a people and separating them from the country's wealth.
articulate and intelligent…no wonder he wasnt elected!
The most articulate and sensible comments of the last several weeks. Change or die a slow death. In ten years’ time Cayman risks being like Greece. The only difference is there will be no one to bail us out.
In ten years' time Cayman risks being like Greece. Sorry to burst your bubble but I give it less than 6 months. How are we going to survive when we cannot even present a proper budget to the UK for their review and approval? Cayman is a service based economy, financial and tourism both of which are not performing well globally compounded with the fact that we are spending more than we make. The Cayman "Debt Crisis", when it comes, would have been predicted and could have been avoided.
Much of what you say here is true Bo.
However i don't agree that Romney is the solution for USA…much less Cayman. As a bit of research will show that he (and other Big Business Interest…like his)have contributed to the financial troubles in the USA and by extension, globally. This by outsourcing much of the job opportunities for the middle class in the USA to "less expensive" locales, all to increase Big Business's bottom line. Resulting in the middle class having less money to spend…and much of said middle class shrinking more and more…many becoming bankrupt/poor.
Meanwhile the richest 2% hide their money away and avoid paying their fair share of taxes….which of course results in more strain on the middle class….and more bankruptcy.
The "shift" in global economics that you speak of includes a global shift in "how" money is made….this includes many now frowning on those facilitating the elite few to "avoid" paying their fair share.
Romney may look better than Obama NOW, if we want to attempt to "get back to pre 2007", however i beleive that model is now failing fast….as a part of the shift you speak of.
I do agree we should have been saving for a rainy day (that "should" take place without saying). But we should have also been serving/treating our tourists/expat residents in a better and more welcoming manner….that many of them would have returned and/or retired here, felt more safe to "invest" here for the long term, told their family and friends of our hospitality and also allowed them more say in our Politics, so as to assist with our evolvement as a first class locale.
Instead we have kept the choice of lawmakers (MLA's) so small, that it's resulted in "the same old, same old….career politicians, who are really only concerned with the next election!
The cultural reality that votes cost money was ignored. Building and spending is the governmental raison d'etre. The contribution spoke of the past and of the American election but what does Cayman do?
How do you change the cultural attitude of entitlement and get Caymanians to enter the service industry and the trades?
How do you deal with the country's sacred cows?
More answers and less teaching would have been appreciated.
If Mr. Bo would have gave solutions many may not have liked the jagged pill that must be swallowed.
So let pray that Bo is not right but we should prepare as if he is…
Thank you Bo..
You know I disagree with your Obama paranoia. But you are right on with the rest of this post. Cayman is in control of her own future.
Well written and to the point. I agree with your summary of our problems. Now, is there anyone or any way we can form a group or organization to come up with a workable plan to reform the systems in government in order to never allow the gross and blatant mis-use of power ever seen here.
We need to discuss:
1. Making all matters and business of government transparent and available to the public without having ot file for FOI requests.
2. Stiff penalties should be placed on those responsible for financial reporting who neglect their duties or otherwise keep any and all books of account from the people. Accounting must be done in a timely and accurate manner.
3. Secret negotiations involving the expenditure of public funds for projects or other spending shout not be allowed. All meetings in government (even cabinet) should be properly minuted and made available for all to see.
4. No MLA shall be responsible for more than one portfolio and the Office of Premier should either be dispensed with or made independent of political interests. No elected politician can properly serve his constituents and act as Premier simultaneously. This is a contradiction and large area of conflicting responsibility. The Premier's primary function is to oversee the business of governing and to keep the interest of the governemt and its' finances first and foremost. Perhaps the Premier should be elected by all Caymanians on a national level. Every ballot in every disctrict would have a box for Premier.
5. Checks and balances need to be added to our system which allow us to stop abuses of office and of power by our elected officials.
This is just a start, ther are many more things which need to be addressed. This is why it would be good for a group of citizens to form a committee and come up with recommendations for the needed changes.
Good History lesson, and good current assessment, but again, I hear no specifics solutions forward. I wish Politicains would mantra future expectations by current designed and detailed plans instead of just good intentions.
Bo,
Very well put.
It is time for Cayman to change the fundamental way that government is run. This change can only happen if we, electors, change the individuals we elect to lead us. We can not expect to elect politicians cut from the same cloth as the ones who got us into this problem, and expect any meaningful improvements.
It is time we choose those who lead us from people who truly put the long term well being of the of the Caymanian people first, above all else!.
Len, you really think by changing the soldier, the protocol will chage?
In the real world where you came from, the people lobby their Government that is in power. They lobby for changes and amendments for policies and laws.
Why is it that in Cayman, we must be different, and ask for our politicians head!
I wish you would run as a candidate again sir. We need people like you in our government, not what we got right now.
Lots of flowery and descriptive talk but no solutions and no vision. Just talking to talk. What are your solutions Mr Bo Miller?
"Cayman’s financial dilemma did not start this year, last year or five years ago; it started 25-30 years ago when we failed to realize the opportunities this country was starting to enjoy"
Never said better. Also, just curious, wouldn't McKeeva been part of the LA in 1984? That is what gets me, he is blaming the last several years, but this man has had a few decades to make a positive contribution to Caymanian society and for some reason fools keep electing him thinking they will get different results.
Great insight to our problems and lack of political will to resolve them other than to tax us beyond our means to pay. Thanks Mr. Miller! I've sent this on to many of my friends to insure they read it. Very well done!
Bo. This is an excellent article, with good insight into the overall economic issues, and with very valid points.
Thank You!
Too late. The electionis just a popularity contest with the civil service. They will not cut spending and will not elect anyone who will. The businessmen will go down with the ship. there are not enough of you to matter.
Sad, but true…….. but that is the way a democracy works.
Therein lies the problem.