The Tribune

EDITOR, The Tribune

My Grandmother used to tell the story of bumping into one of the leading Bay Street merchants in his store in about 1970, not too long after the defeat of the UBP. Miraculously, the merchant recognized her from her childhood in the 1920s, when she would come from Long Island on her grandfather’s sailing vessel, which docked at the market range, not far from his store.

Being half-mischievous, she asked the merchant how things were going, with the new government and all. To her surprise, the old man broke into a broad smile. From when she last saw him, he explained, and for many years thereafter he had only that one store on Bay Street. But now, thanks to the little man coming up, he had a total of five, including one out on Lyford Cay, one on Harold Road and one in Palmdale. Things were great.

It is an enduring irony of Bahamian history that those who benefit most from the growth of incomes at the lower end have been most resistant to policies that support it. A generation earlier, the antecedents of that wise old merchant were busy trying to stop the US contractors of the Windsor Field airport from paying their Bahamian workers too much – the same workers who had nowhere to spend those earnings but in the stores of those very merchants.

Sound stupid? Before you laugh, consider that a variant of such thinking is very much alive in The Bahamas today, and often espoused by smart-seeming people. It is on exhibit every time a government minister or economist questions whether we can “afford” a rise in the pitiful minimum wage or when a government gives closed-door concessions to a foreign investor which effectively concede away the whole benefit of permitting foreign investment in the first place.

And unfortunately all governments since independence have, to a greater or lesser extent, been taken in by the neo-liberal hoax that proposes an inverse relationship between wage growth and economic competitiveness.

Basically everyone agrees that money comes into the Bahamian economy through foreign direct investment. But once it gets here, the hoax proposes that it magically enhances living standards through some invisible hand. Hence just getting it here is the goal. In reality, foreign investment is only a net benefit to The Bahamas insofar as it is leveraged to enhance wages, thus boosting consumption, which is the real driver of the domestic economy.

For the last few decades, rising prices have meant that wages have not kept up with consumption. This explains the growth of consumer credit, which simply shifts the burden of consumption onto future employees and employers. Wisely, no government questions the role of consumption in the domestic economy. Unwisely, no government has countered the troubling shift to credit by pursuing a robust wage growth policy.

The present crew seem to view the relationship between Foreign Direct Investment and economic growth in absolutist terms, as if all you have to do is attract investment projects and this will somehow magically turn into enhanced living standards. It won’t – especially when you factor in the vast concessions in public income (taxes) and government’s tolerance of labour-unfriendly practices among investors.

Unable to explain how the historically very high levels of foreign investment in The Bahamas have failed to produce commensurate economic growth in the last two decades, the FNM simply assumes that too much is never enough and gets ever more desperate (and less discriminating) in its pursuit of more investment. Hence Oban, the Lighthouse Beach project in Eleuthera, GIBC in Grand Bahama and presumably many more embarrassments to come.

This will inevitably lead to a cyclical race to the bottom, as government pursues policies that extract less benefit from foreign-owned projects, then uses the resultant disappointing growth as evidence that we need to concede even more benefits to keep the investments coming in. This kind of desperate and muddled thinking is codified in the Commercial Enterprises Act, which undermines the very protections (like Bahamians-only restrictions on the professionals that service investment projects) that render foreign ownership not just palatable to the population but worthwhile to the economy. Until it is repealed, this truly idiotic piece of legislation will only reduce the margin of benefit to the Bahamian economy of whatever investment it supposedly brings.

While the PLP has clearly had a better record of raising wages, supporting trade unions and investing in things like universal healthcare, it has done so on the narrow basis of social justice, without apparently recognizing that all these measures are a more effective means of growing the economy than simply bagging more investment projects. According to independent analysts, NHI with a single payer, public provider system would have added more percentage points to the Bahamian economy than Baha Mar (of course both together would have been ideal). A minimum wage boost to $350 a week would also boost growth, by causing a knock on effect across the wage spectrum.

Wage-driven consumption is the engine of the domestic Bahamian economy. Enhancing consumer confidence and spending power by reducing taxes on consumption, reducing costs of utilities, implementing free-at-the-point-of-access healthcare and increasing the minimum wage are among the most obvious means of converting our already very high levels of foreign investment into fuel for that engine. Without such fuel, foreign investment is a waste of time.

ANDREW ALLEN

Nassau,

December 22, 2019