(This essay was originally published in November, 2013. After listening to what I thought was a misleading news item about the state of our tourism industry, I decided to share it again. I hope it adds some perspective to those news reports.)

Over the past week, I have asked a number of persons what they think is wrong with the economy and what we need to do to fix it. Almost without exception, their answer did not answer my question.

“We need better leadership.”

“It’s the recession”.

“Government too wasteful”.

“Too many lawyers runnin’ the country.”

“ We don’t have no National Plan.”

 

None of these answers the question. They are the equivalent of asking your mechanic what’s wrong with your car, and having him answer, “The engine’s not working.” It would be difficult – no, impossible -to go out and buy the right part based upon that answer.

Granted, I may not be the person they expect to ask a technical question about financial health, but you would have thought that at least someone would risk boring me with the facts, if they in fact had the answer. The sad truth is, I believe, that none of them had ever been asked the question, and therefore they did not have an answer.

With the hope of having those more knowledgeable than me help us understand what is in fact wrong with our economy, I will suggest here what I think is wrong, and what to do about it. It is not important to me whether you agree with me or not. What is important is that the word “citizen” carries with it the requirement for taking personal responsibility for the life of your country, and we should no longer be comfortable talking about how “they” are messing up. We must be able to refer to specific solutions, markers and indicators as evidence of “their” stewardship. As their employers, we are responsible for their performance, and cannot exempt ourselves by expecting that “they” will find the answers.

A vibrant economy is one in which consumers feel free to spend, because they perceive multiple opportunities to recover. Whether their optimism is a result of a preponderance of job opportunities or of successful entrepreneurial opportunities is a matter of political strategy. What is important is the perception that spending will not leave them vulnerable.

Concurrently, of course, there must be consumer confidence in the administration of public funds, so that fear of over-taxation is minimized.

First, then, if income potential is important, the major source of income in the economy must be the first concern addressed.

To address the income producing performance of the economy, I accept what I have been told about what makes it tick – Tourism and Banking. I am told that Tourism provides two thirds of every dollar we spend on roads, hospitals or social services. Banking provides another quarter. So if Tourism is the primary engine for the economy, its health or its performance is central to our economic vitality.

Here are some Tourism facts:

  1. Since the mid-1980’s, the growth of tourism revenue, measured in 1980 (uninflated) dollars, has declined, despite the phenomenal growth in tourism numbers.
  2. In the ten years between 1991 and 2000, stopover visitors to the Bahamas grew 11.9%, from 1.43M to 1.59M (second lowest in the region). Jamaica grew 31.4%, from 1M to 1.32M, the Dominican Republic grew 109%, from 1.42M to 2.97M, and Cuba grew 318%, from .4M to 1.77M.
  3. There were 1.9 million stopover visitors to the Bahamas in 2005. In 2012 it was down to 1.35 million. That is a 30% decline in our primary income over a seven year period!
  4. As noted above, our main source of income has been in crisis for decades, yet successive Governments have told us how well we were doing. In 2008, Cuba had more real tourists (that is, stopover visitors) than we did (2.2 million), and the Dominican Republic (which really only started their thrust in 1990) are way ahead of us. What is more alarming, though, is that there is no agency responsible for the integrity of the maintenance of the Tourism Business Model in the Bahamas. The Ministry of Tourism considers itself primarily a marketing vehicle and it is a good one. But there is no one charged with concern for real product integrity, development or quality (in fact, I have found that very few Government officials know what tourism product is). The Central Bank and the Monetary Authority monitor the production of 20% of our economy, but no one monitors the production of the source of 60+% of our income (the assumption that hotel occupancy is the primary business objective of the business of tourism is a feature of a time past). Again, rather than addressing the need for the development of successful businessmen in the Tourism sector, Governments have focused on promising jobs in resorts that fail because the product being offered is not competitive.

An objective observer would probably conclude that our tourism anchor is dragging, and that as our major source of income, we should be in panic mode. Further, they would note the dates mentioned, and not try to attribute the decline to “the recession”. If there is a recession, it is self-imposed.

The second area of concern in assessing the economic health of the Bahamas would be the management of public funds. A brief look at the way we budget our funds shows the following:

  1. We borrow to pay the interest on loans, something I’m told is a sign of a business in crisis. In the current Budget, more than $300M is allotted to interest payments. Of this, more than half is for loans from the Bahamian public through Treasury Bills or Government Registered Stock. That means the Bahamian public is being taxed to pay themselves over $160M a year.
  2. We borrow to show off or to respond to threats or to avoid embarrassment. While the $400M airport is a feather in our cap, it is significant that it is the most costly in the whole Caribbean. Our competitors have spent less than half that amount on their facilities, yet several of them have been able to threaten our tourism business. The project is largely the result of a threat by the former owner of Atlantis to leave if we did not build a new airport (he left anyway). Similarly, a threat by cruise lines led to our $60M deepening of our harbor, yet only one country in the region (Trinidad) spent more to deepen theirs, a home port for several cruise lines (which generates a major set of business opportunities) and a major commercial port. We passed on home porting, with its multitude of business opportunities 20-odd years ago.

Finally, we live beyond our means and make it up by taxation.

Successive Governments have created a socialist expectation in the populace, with no concurrent system for paying for the services promised. Today, Governments routinely accept responsibility for repairing private housing, for providing school lunches, trade skills training and anything else that convinces the Bahamian citizen that Government is there to take care of them. This, of course, has destroyed the independent spirit that brought us to majority rule, and has created a culture of dependence, entitlement and the “right” to have what others have. The cost of this benevolence is, of course, recurrent commitment to spending more than we have, and the need to borrow to keep up. We have become our own Joneses!

The most obvious evidence of this malady is the constant demands by Unions that assume that anyone showing a profit is “exploiting the people” and the apparent belief that it is better to have everybody broke than to allow risk-takers to benefit from their courage. While Unions may be beneficial in some instances, in our environment, they have had the unfortunate effect of creating a workforce that believes it is entitled to a job, but not responsible for the success of the business in which they are employed. In this, the unions are supported –no, encouraged -by successive Governments, anxious to display their social conscience.

To “fix” the economy we must address these three issues, and urgently. At the moment, there is little evidence that we are prepared to do so. The size of the population is too small, regardless of the kind of taxation system, to buy anything we want without developing stronger income from our primary and secondary income-earning businesses and a more responsible workforce.

  • We must “fix” the Tourism Model. Our commitment to the large numbers of the cruise industry needs to be re-thought, as the generator of both jobs and entrepreneurial opportunities in a Tourist Destination is the stopover visitor whose spending is driven by the increasing availability of competitive attractions.
  • We must find ways to curtail borrowing. Government must simply decide that the level of borrowing is ridiculous, and reduce it consciously.
  • We must return to a level of self-reliance, for the sake of our children. If we choose to continue the socialist politics (and I, for one, support that philosophy), we must choose programs based upon a system of priorities, and limit services offered to those we know how to pay for and those that do not hinder the development of an independent, competitive, creative spirit in our people. Governments should also be upfront with the public, and let them know that they are paying for those services offered by increased taxes.

 

Build our number one business, curtail borrowing and live within our means. That is how I suggest we “fix” the economy.

 

Pat Rahming.

November 18, 2013

 

 

 

 

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