I am not about to praise either side of the House for the content of the rather civil debate on St Lucia’s EC$1.4 billion Appropriations Bill. You see, while politicians red and yellow squabble with inert weapons of mass distraction over who placed the country in its current financial crisis, Rome continues to burn in a conflagration worse than that of 1948.
Amidst the economic ruins of Hades, the Doctor has written with flourish several prescriptions for recovery. These pills, though bitter, will, like most medications, give but temporary relief to the unmistakable third-degree burns inflicted deliberately on the people by the same politicians who now claim to have the miracle panacea. I have a strong dislike for politics and politicians, because of the dishonest way practice their craft to the ruination of people.
Economic policies do not work; radical thinking does. Politicians cannot think radically. Which is why I know Prime Minister Anthony’s alphabet soup programs like STEP, LEAP, SMILE, NICE and any of their predecessors under the King administration did, and will do, little in the long run.
When governments borrow, there has to be a lender on the other end with the deep pockets to hand over the cash. That is a given. But who are these lenders with seemingly black-holes in places on their trousers where my own hand normally comes up empty? Well not entirely, I usually get some lint if I dig deep enough. When a government borrows to “stimulate the economy”, it does so because businesses and individuals are not buying: they either see the economic writing on the wall, and correctly predict the economy is going nowhere. That, or they don’t have the means to buy anything. So the government acquires bad assets onto its balance sheet and borrows record amounts of money. The government is actually assuaging the well-founded fear of businesses and individuals by substituting its own purchases for the purchases not being made by the private sector. To make these acquisitions, they borrow.
Like governments around the world, including yes, the great United States of America ($1.3 trillion borrowed from China) both the King and Anthony administrations have borrowed and continue to borrow themselves into massive, unprecedented debt. Gone are the good old days (my eyes are rolling here) of Comptonite Budgets the meagre size of $200 million. Not only is the government borrowing us, the entire nation, taxpayer or not born and unborn, into financial slavery, but this course of action is supported by the so-called experts: economists.
Publics around the globe are made to believe by these talking heads, that this choice by our leaders is a stroke of absolute genius—a deficit-spending program that will solve all of our problems. If we listen long enough to this crap, we are apt to believe borrowing like that will have no consequences whatsoever. Never mind your little brain about that sort of thing, because when the economy is buoyant again, we can fix this little debt crisis with surpluses and that will negate the deficits. That is their argument, terribly flawed as it stands on shaky intelligence.
But there is a peculiar conundrum which this search for loans leads to: all types of wealthy entities, corporations, individuals etc, see the windfall and rush to get in on the action. We constantly hear of monies being borrowed from the World Bank, Caribbean Development Bank, International Monetary Fund etc. But who are these lenders? Who owns these banks? Their officious sounding names belie the proven fact that they are all privately owned.
It is a lot safer and secure for these deceptive lenders to have governments as clients in sluggish economies, like the ones we are operating at the moment. Economic hit men can force governments to accept unreasonable terms and conditions for the money they desperately want to borrow. These caveats are called austerity measures. Investing in a government is sound because they can and do claim ownership of public assets and the public. They are able to pledge your and future generations’ labour to pay off the massive debts. If you think Greece was a bad investment, ask the lenders who now own the country and its people—they are bookkeeping assets.
Contrary to what the government of St. Lucia would have you believe, this is not a prescription for economic growth. It is a simple matter of churning money. If our governments (around the world) wanted to stop running a deficit, they could tax large corporations and the wealthy. Relax Daddy Warbucks, that’s not going to happen any time soon. They would be able to get the money they needed to stimulate the economies of the world without borrowing a penny.
Think about: if I were a bank and the government had a choice of taxing me to realise its programs for the people as against borrowing money from me and then paying me back with interest to achieve the same thing, which would I choose? What would I not do to ensure that happens? There are not enough taxpayers in St. Lucia for the government to borrow from on a massive scale, although NIC funds are quite tempting. So, they turn to 1) other countries and 2) private banks. Not necessarily in that specific order. The classic crisis of the Capitalist system.
In our case this ties in with our still cloudy foreign policy dealings with the wily Asian Tigers: China and Taiwan. Let’s put things in a broader international perspective. All that I have already said about governmental borrowing is taking place in the United States as well. Right now, the Communist People’s Republic of China is financing the Capitalist voodoo economics being practised by the Obama presidency. This is worth more than a few moments of thought for you, but not for mainstream media in the United States. Not one media outlet in the US has grunted two words about this unusual situation.
If we are to go by the level of indebtedness of the United States to China, then in essence the US government is merely a collection agency for Zhonghua. On that US$1.3 trillion dollar loan, Americans must cough up between $50 and $60 billion annually—in interest. The question Americans should ask themselves and the Federal Government about that vast sum is: how much of it does not pay for programs and services that are sorely needed domestically?
If you think this is a bizarre way to fix a financial crisis, then good, you get A+ for using your noggin. Now, your test: should we borrow money from China or continue accepting monetary gifts from Taiwan but with a different face to Tom Chou?
In our St Lucian context, when we stimulate our economy by throwing borrowed money into it, we lose much of it because we still have that 800-pound dasheen in the room: we import practically everything we consume. You know it too; because right now you’re eating cereal from the United States, in pyjamas made in India, eventually take a shower with soap made in England and go out in your uber reliable Japanese or European luxury car, rolling on tyres originating in Malaysia. So we are in fact doing our part to help other countries create jobs in food, clothing and automobile manufacturing.
St Lucia is actually haemorrhaging money which is meant to help the local populace. Which country is doing the same for us via our vast exports? Oops, we don’t export much. So when the President of the St Lucia Manufacturers Association claims her members need protection from the Chinese who are nibbling away at their profits, please place it on record that we have all been assisting in economic self destruction for a long time. The point here is stimulus packages don’t work. It makes for great political posturing but it will not solve the unemployment and other problems we have. Borrowing to solve a problem is stupid because it creates another problem—a financial yoke that we must all drag around in unyielding mud, eventually to remove around necks to pass onto our children after we fall face down and get buried in dirt. Some solution!
So who really benefits in the end from a program like STEP? Well, to get the answer let’s look at who is not opposing it; first, the people who conceived it for obvious reasons, second, those who are employed in the program as either administrators or temporary workers and third, the private sector. The private sector is the biggest beneficiary, why? They get to keep the STEP money and lend it back to the government—with interest. When a borrowed dollar for STEP leaves the electronic accounts of the banks it is then transferred to the government’s coffers. From there it is handed over to a roadside cleaner who then takes it to a local supermarket, shoe shop, bus driver or school supplies store in exchange for desired goods or services. All of these suppliers put their monies back into the banks if they follow good business practice. The banks in turn pay very little interest on that money to their account owners, but relend it at exorbitant rates to the government or to buy foreign goods which we love to consume. It is a simple matter of churning money but it is an economic policy.
By its own account the government has already signalled that better days will not come soon or very easily. I am not convinced those balmy, summer days will be long lived; that time for the entire world is long gone. While the embarrassingly naïve, parrot local media repeat verbatim the political spiel of whichever party they support, getting the public hot under the collar once again as if an election, like Christmas, was just around the corner, the capitalist cycle continues to work its way through its normal process. What is that? Periods of prolonged unemployment until workers are willing to work for much less, because they have been out of work so long and prospects look bleak enough that a job and salary which would have been unacceptable before, now looks like manna from heaven.
Sounds like STEP? Likewise as businesses fold, the cost of secondhand equipment drops, as sellers outnumber buyers and rental per square footage goes down. When the costs associated with doing business decreases substantially, that is when St Lucia starts looking a lot sexier to investors sniffing around for a fire sale. The system then makes another upward leap for about 2, 3 or 4 years until we are back in the same unstable point of the cycle.
Unfortunately no brilliant economist far less politician has been able to figure out how to stop this cycle. We are just under different management.
Right now you’re eating cereal from the United States, in pajamas made in India, eventually take a shower with soap made in England, and go out in your uber reliable Japanese or European luxury car rolling on tyres originating in Malaysia!