The Tribune

EDITOR, The Tribune

I have followed the letters of Abraham Moss for some time, and find them to be well-informed and to demonstrate a good grasp of some of the most exasperating issues facing our country – often the same ones that provoke me to write.

However, Mr Moss’ letter of the 17th June contains the oft-repeated fallacy that The Bahamas’ high per capita GDP is not genuine in that it results from the presence here of wealthy foreigners. Most often, this canard is repeated by politicians, who find it a convenient excuse for not collecting revenues or providing services in line with the country’s income status.

This fallacy derives from a misapprehension about of what GDP (and consequently Per Capita GDP) actually means. GDP is the value of goods and services produced in a country’s “domestic” economy (hence Gross “Domestic” Product). In the case of The Bahamas, the mere presence of many wealthy foreigners here has little relation to our GDP, since by definition their earnings and wealth are produced abroad. Of course there are exceptions (those expatriates who bring investments which generate local business activity). But the nature of Bahamian economic policy, which ‘ring-fences’ local from offshore economic activity, minimises the extent to which the wealth of foreign residents can be included in our calculation of GDP. The sources of their wealth are calculated in the GDP of their home countries.

So The Bahamas’ GDP per capita (of around $32,000) is not artificially inflated by wealthy foreigners living here. In fact, if anything it is probably significantly understated, as the lack of a more comprehensive tax regime leaves much of the economy unmeasured.

By contrast, the GDP per capita of the United States is relatively over-stated vis-à-vis the actual reality of the average American, as it includes the corporate earnings of such multinationals as Google and Microsoft, whose revenues accrue worldwide, but are reported in their home US state, where they pay taxes. So, for instance, New York City, home to countless billionaires and multinationals, reports a GDP per capita of over $100,000. Needless to say the millions of office workers, teachers, fast food workers and policemen in New York earn a fraction of that figure. By contrast, the upstate city of Buffalo, New York, with a population similar to Nassau (and no multinational headquarters) is far more representative. It has a per capita income of $14,991, less than half of ours. Few mid-sized American cities exceed $30,000.

Even at the worst of times, The Bahamas has a large, robust and highly resilient domestic economy by any international standard. This is evident from such anecdotal evidence as the flow of remittances (Western Union, MoneyGram etc.), which send vastly more money from the Bahamas than to it (even to ‘developed’ countries like the USA).

There is no illusion or conjuring trick about it: this is a genuinely wealthy country, with advantages of geography, climate and resources that make it hard not to stay that way. All of which makes it so maddening that we continue to fail to make use of that wealth for the maximum benefit of the population.

For where we fail to act or feel like a genuinely wealthy country is in areas that are, sadly, all self-inflicted by governments that lack a basic grasp of the issues facing us.

Firstly, we continue to operate a regressive tax regime that constricts the growth of the middle class and hammers the poor with consumption taxes, while failing to tax corporate or personal income, even on the wealthiest people and corporations. This policy is an outrage and, if placed in the US context, is something that not even the most rightwing Republican wing nut in congress would advocate or justify. It increases the gap between rich and poor and needlessly exacerbates poverty, by basically transferring wealth from the poor to the rich.

A second (and related) failure is our government’s basic policy on wages, public spending and revenues. Government’s fiscal policy thrust is exclusively on the expenditure side (i.e. how to make do with the pitiful revenues it collects - at 18 percent of GDP, probably the lowest on earth), rather than on the revenue side (i.e. how to expand revenues fairly, spreading some of the burden to the rich). This results in constant increases in fees and taxes on the poor (as explained in the previous paragraph), while bolstering a resistant mindset to expanding public services or to paying public servants in line with the country’s wealth.

The result is the constant powder keg that is now once again rumbling in virtually every sector of the industrial front. Labour is the first and most obvious victim of a governing mindset that leads to virtually every cost factor in this country (property, rent, electricity, communication, food and transport) being higher than on the adjacent mainland, while public sector wages remain lower. All of this is a matter of choice.

The Bahamas is in every important respect a wealthy country and it is indeed ludicrous that we continue to pretend to be otherwise, either to the world at large or to ourselves. But until we are governed by people who have a clue about their role in transforming economic activity into real benefits for the broad population, we will never seem as wealthy as we are.

ANDREW ALLEN

Nassau

June 17, 2019