Wednesday, September 15, 2021
The idea of economic diversification has for too long become near taboo and is often misunderstood by many. The normal impulse it to react by saying: “Move to what?” Such a mindset needs urgent rehabilitation. There are many who recognise diversification’s potential to be disruptive and, given their level of comfort with what currently exists, actively resist any such discussions. Here lies a case of good being an active enemy of great. There is a level of being satisfied with what prevails while failing to see it is not sustainable. To understand this clearly, if we eliminate the fiscal deficits for the current and past years, treating them as outliers and thus changing nothing, based on previous averages the national debt would increase by $5bn over the following ten years. With increased population growth, greater demands for services and new infrastructure, and the need to replace old and crumbling infrastructure, this cannot be a good position. Unless we eliminate these artificial limitations, brought about largely because of how we think about growth opportunities, The Bahamas will suffer over the long-term. Failing to look down the road and accept the realities as they exist, Bahamians will believe the country is better off than it actually is and become complacent. This creates a lack of urgency in the fight for change to secure the social and economic future of the country. Consider for a moment the statement made by James Smith in rationalising why the political parties may have not been fully forthcoming on certain issues: He said: “It is not surprising that the political parties have not been totally forthcoming with the voters about the realities all will likely face moving forward as you obviously don’t want to scare the voting public.” What exactly is there to be scared about if the state of affairs in The Bahamas is perfect? Why would an individual, who has a unique view and appreciation of the inner workings of The Bahamas and the economy, even consider that there is something from which fear can be generated? The one thing which The Bahamas cannot afford to do is to face reality. Courage is displaying bravery and boldness while still being scared; it is not an absence of fear. We must, in this moment, act with great courage or pay the price for timidity.
The Bahamas has an economic structure with a weak facilitative environment where production is difficult to scale-up, and therefore the potential for surplus production and foreign exchange earnings is limited. There must be a push to secure more effective and efficient government machinery to support the work of the private sector, thus helping to drive national productivity to unprecedented levels. The current tax regime is under pressure from both internal and external forces, and there are significant unacknowledged aspects of taxation that The Bahamas has not openly discussed and seems reluctant to do so. Unless there are bigger internal markets or production targeted at external markets, industries such as agriculture will always remain limited. The Bahamas often appears to be solving a mathematical problem while desiring to hold too many of the factors constant. For example, if growth is a function of labour, then Immigration policy must change. If maintaining the fixed exchange rate peg is a function of foreign exchange inflows that have dried up, then borrowing must increase. If the survival and success of the financial services sector is a function of some form of corporation tax, then holding rates at zero is futile. These are just examples that I believe aptly capture the national sentiments on these matters. I am not here advocating for any particular changes. The main point is we are consistently setting out our arguments in ways that make the outcomes pre-determined, resulting in little or no real change. As an example, if I want to make a growth-based policy change but the current players in a particular sector desire to have no competition, we can simply solve the level of growth possible with zero competition, change everything and enjoy the sub-optimal expansion. This is limiting, and policy positions being advocated for this current election must go beyond that. We have to open up the conversations and the thinking in order to innovate and grow.
So, are we ready for the next ten years? My questions here are by no means suggesting that The Bahamas is incapable of securing the economic growth it needs if it makes the necessary changes. In fact, I strongly believe that great things are possible. I believe that The Bahamas remains poised for growth because of its untapped resources and capacity. I believe that with the right focus, and a true national thrust built on consensus and guided by a national vision, articulated broadly in a National Development Plan, The Bahamas has the ability to really flex its muscles in the region, in the Americas, and gain greater status on the global stage. However, I also believe that without confronting the things that have currently prevented that from happening, none of this will occur - at least not to the extent that would be ideal.
It’s all about leadership
Some of what I will say here I have written before, but it remains acutely relevant and worthy of repetition. On the eve of an election, every discussion is almost by default centred on leadership. The changes desired, the benefits hoped for, and the value to be accrued rests squarely in the lap of leadership. Though elections draw the mind in a particular direction, it is not only political leadership that is being called into play but all levels of leadership that impact national life. Many of the discussed challenges are deeply rooted in the leadership decisions that should have been made, were made and are yet to be made. In my opinion, The Bahamas has yet to come to grips with the need for the shifts necessary to steer a growth path. Success over the years, primarily in tourism and financial services, has in a general sense caused a delay in the reforms that were, and are, still needed. There have been many instances of discomfort, such as we are experiencing now, but they never lasted long enough to demand constant, riveting attention.
There are clearly some hard decisions to be made, and attendant to those decisions are potentially painful realities for many. The trees that need to be planted now will likely see none of the major players today sitting in their shade. That is really a significant part of the dilemma faced. How does one get actively engaged in works for which they might realise no benefit and, in fact, may even reduce their current level of well-being. Leadership must tackle this important tension head-on, refusing to sacrifice real, long-term sustainability at the altar of expediency. Will the victors who will form the Government do what is necessary to create long-term value for the country by making the hardest of decisions at all relevant levels and areas? The current leaders and captains of industries, government and civil society must see themselves as guardians of the future for future generations. That guardianship demands sacrifice, and it demands taking risks. This in my mind is the only way to navigate the future by being bold, open, inclusive, honest, courageous and always “for country”.
“Sometimes you have to be open and transparent and treat the people as intelligent and articulate. It’s a challenge that many of us are prepared to meet, and there is no point in sugar coating it because it will reveal itself in short order,” said James Smith, ex-minister of state for finance. This is akin to a pregnancy. You may wish to hide it, not talk about it and ignore it, but the process never stops. It will keep on announcing itself, acknowledged or not. The scene as set is not 1967-1968, and neither is it 1992. Those were both critical turning points in the history of the country. And while rich with their own set of drama and expectation, both lack the dynamics of today such as the high debt-to-GDP levels. If The Bahamas we desire is to be a reality over the next ten to 20 years and beyond, then the work must start now. The work must start and continue in earnest. The effort must be broad-based, empowering and inclusive. The standards must be high, the accountability and transparency unimpeachable, and the vision clear.