Already the governor general had played her role as the bad cop: “I would have liked to bring you some great news, some glad tidings that would set your world to right. Alas, this is not the case. The world is in turmoil, restless, uncertain. We cannot take for granted anymore the customary help even of our traditional friends and neighbors. They are grappling with their own economic challenges which are deep, pervasive and prolonged . . . This outlook will continue for as long as the sluggish global economy weakens demand for European exports . . . For the foreseeable future we are largely on our own.”
Enter the good cop on Tuesday this week with his Budget of good news: “Mr. Speaker, better days invariably require that we find better ways. The path through the desert means we must identify what oases we can maximize as we move toward unleashing the untempered waters of sustainable growth. We must provide measures in the short term to tackle unemployment, rein in on our fiscal management, and review meticulously existing modes of doing business. In the medium term, investment-promotion and facilitation must take center stage as we must induce foreign direct investment flows. We must reskill, retool and refocus our human resources as we seek to promote growth and create new jobs in existing and new sectors.”
Obviously versed in the idiosyncrasies of his targeted audience, the good cop saw no need to risk boring them with an explanation of what he meant by “the untempered waters of sustainable growth” (did he mean to say untapped waters?), let alone how he would unleash their transformational potential. Nevertheless, there was in his hyperbole the sound of good-cop hope, more than might legitimately be said of the bad cop’s throne speech.
As for his expressed intention to “reskill” our human resources, the word certainly conveyed the wonderful image of a Saint Lucian work force retrained in the skills needed by modern business, especially after a redundancy. However, I couldn’t help wondering: Who will fund the training programs? Will students be paid as they learn? How much? What particular skills does the government have in mind? Is a shortage of trained personnel responsible for the private sector’s current comatose state? Or might the “sluggish global economy” be responsible? After all, pointless prescribing headache pills for a man obviously bleeding to death from a jugular wound. None of which is to suggest there’s anything wrong with teaching our people new skills. But then it is also worth bearing in mind the road that took us to hell is paved with good intentions.
Witness: As far back as 1996, shortly before the 1997 general elections that first delivered Kenny Anthony to the office of prime minister, Vaughan Lewis had famously noted the deplorable state of the nation’s work force with its “inextricable links to our education system.”
Doubtless with only the best intentions, the one-term prime minister had in 1996 underscored the following observation in his first Budget address: “There can be little denying that the state of a country’s economy is a reflection of the quality of its labor force. A dispassionate look would reveal the labor force in Saint Lucia as bottom heavy, retail oriented, generally unskilled, with limited work ethic.”
Moreover, that the island’s work force was, as now, “dependent on others for the creation of employment opportunities.” And since the labor force that would take Saint Lucia comfortably into the 21st Century and beyond would have to be “highly skilled, adaptable, productive, creative and entrepreneurial, the question to be answered was how do we make that quantum leap?”
How indeed? Doubtless inspired by the teachings of his famous uncle Sir Arthur, a Nobel winner for developmental economics, Lewis had indicated the following routes out of our misery: continue to pursue market-based growth paths that generate rapid growth in the demand for labor; take advantage of new opportunities at the international level by opening up trade and attracting capital while managing the social dislocations that international changes sometimes bring; construct a framework of labor policy that complements informal and rural labor markets, supports collective bargaining in the formal sector, and provide safety nets for the vulnerable groups in the society.”
At the same time Lewis took the opportunity to warn Saint Lucians that “the clear message from the international donor community is that we are on our own. The new dispensation in these times is the forging of strategic alliances.” It was now “business before friendship—a necessary slogan for our development and survival.”
Of course, upon his replacement in 1997 by Kenny Anthony, Lewis would be described as “the worst Compton-made disaster” and pilloried for “mismanaging government resources” and for egregious profligacy that had left the treasury “owing individuals, businesses and overseas suppliers in excess of $20 million.”
Consider this assessment of Vaughan Lewis, taken from his successor’s magnum opus At the Rainbow’s Edge: “While many had hoped Lewis’ entry into the political arena would have signaled a higher level of public morality and a higher tenor of political discourse and debate, that he might’ve cleaned out the rot, cut out the patronage and corruption, he had instead sunk to the lowest common moral and intellectual denominator. Not even John Compton in his worst moments ever sank so low.”
Yes, indeed, the more things change . . . Now consider the following from our current prime minister’s 1998 Budget address: “In recent years it has become fashionable for governments to argue that the responsibility for generating investment, employment and growth in the economy must be shared with the private sector. Indeed, previous administrations have adopted the policy position that theirs was the responsibility for setting the enabling economic environment while the private sector should be the primary engine of growth and development. In practice, however, this has not been observed. Until May 1997, what passed for government in this country operated in exactly the opposite manner: the former government monopolized the investment agenda, undertaking ill-conceived and ill-advised projects in the private domain. Many of these projects were undertaken without appropriate dialogue and discussion, drawing down indiscriminately on financial resources which should have been available to other sectors of the economy.”
Conceivably made of better stuff, the new prime minister was “determined to encourage the private sector to venture into higher risk-higher return projects, particularly those consistent with economic diversification and employment generation.” With respect to new or pioneering projects, his government would “consider its role to be that of a joint-venture partner, bringing to the investment table concessions and considerations within its purview that can enhance the financial, economic and social returns to the economy.”
As far back as 1998 the day’s government had been “in the process of evaluating the tax system to ensure that it is efficient and that the burden of taxation is evenly spread.” Evidently the notion of VAT had for some fourteen years occupied the mind of the current prime minister—whether or not he knew it!
As for the recurring problem of government expenditure (I am still quoting from the government’s 1998 Budget, conscious of George Santayana’s famous admonition about the price to be paid by those who cannot remember the past): “Mr. Speaker it would be remiss of me not to emphasize the critical nature of these negotiations between the government and the public sector workers. Wages and salaries together make up 52 percent of the current budget; the single largest component of current expenditure. Whatever we do, development on a sustained basis must not be jeopardized. Some breathing space is still required for the fledgling green shoots of growth to take firmer root to mature.” (Coined by British finance minister Norman Lamont during the 1990s recession, the correct phrase is “green shoots of recovery,” not green shoots of growth,” but never mind!)
By the way, it was during his 1998 Budget that Kenny Anthony introduced the bounty-hunter scheme that monetarily rewards our more aggressive public servants each July and December when they have met revenue collection targets set by his ministry of finance! Which returns me to pre-Kenny Anthony times, when the nation was warned about the planned invasion of the alien monster hagfish currently devouring us alive from the inside. If only we had destroyed their vulnerable eggs back in the day!
At his wits’ end what to do about the impossible cost of maintaining the public service, not to mention outrageous union demands for higher wages despite that the government’s payroll was 45.6 of his budget, John Compton in 1992 faced the following Catch 22 choices: He could “reduce recurrent expenditure through massive retrenchment in public services, increase taxes, or increase customs duties and consumption taxes.”
Alas, there were associated risks. In the first instance: “With the economy already in recession, it is not a desirable option to create unemployment.” Secondly: “If these increases are on companies, to raise this amount of $96 million for the 3-year period as demanded, the increases must be so massive as to amount to confiscation of property. This will reduce investment and lead to business failures and still more unemployment.”
As for increasing customs duties, Compton said: “The required increases would drive the cost of living sky high, hit the poorest hardest and again create inflation that will not only make our goods and services uncompetitive but also create a spiral of wage and salary demands that will strangle the economy . . . Any increases in salaries and wages must come either from growth in the economy, which in turn must come either from public or private sector investment or both, and from the reduction of waste and unnecessary expenditure and other savings efficiency and productivity. There is no other way.”
Nevertheless, the pandering politician in Compton—an avowed advocate of the Micawber Principle—took the easy way out: he chose instead to bank on public servants abruptly becoming “less wasteful, less abusive of government property.” A miraculous conversion equal, let us say, to that of Paul on the road to Damascus!
In acknowledgement of undeniable reality, the present prime minister in his most recent Budget address delivered on Tuesday evening conceded “the last few years have been particularly difficult for the global economy which has experienced the worst crisis in over seventy years.”
But while he professed to “blame no one” for the consequent local effects, he did say the following: “We knew there was a malaise in our economy and that worldwide there were stresses affecting growth. However what compounds [sic] our strides forward are the ever-increasing discovery [sic] of mismanagement and poor decisions. Even to this day we uncover another unclear deal, another project commenced without clear lines of finance, another imprudent purchase, another reckless and undervalued disposal of state assets. All these things we must deal with openly and frankly if we are to appreciate the challenges at hand.”
Did the implied excesses come before parliament for approval? Did they come in the midst of an opposition protest walkout? (It may be worth reminding readers that the bête noir that is the Daher Building was introduced in parliament shortly after the 2006 elections by Sir John Compton, in the presence of the then leader of the opposition, now prime minister. Yet there is nothing in Hansard to suggest his disapproval on the occasion of the admittedly reckless and suspect project. Whatever have been his criticisms, they are of relatively recent vintage, delivered only after the horses had bolted!
He described as “anemic”—and not without good reason—the performance of the Saint Lucian economy while he was no longer in charge. He seemed to take pleasure in his predecessor’s 2011 growth forecast that had failed to materialize. Instead of 4.5 percent, “the growth rate was no more than 0.6 percent.”
Admittedly there had been a modest increase of 2.1 percent in construction but “driven mainly by investments in the public sector.” Alas, “the level of construction activity in the private sector declined, reflecting the completion of major projects, lower tourism-related foreign direct investment and tighter domestic credit.” All in all, the previous government had “recorded an unprecedented level of expenditure in 2011 on the construction of public infrastructure, much of which, it is said, is related to rehabilitation following the passage of Hurricane Tomas.” But of course, the current mastermind knew otherwise, because the figures told a different story: While $45 million of the $240 million total expenditure on construction projects was directly attributable to Tomas rehabilitation, “the balance was expended elsewhere.” I, for one, can hardly wait for the obligatory inquiry. Neither can Tony Astaphan, I would imagine.
To no one’s surprise, the prime minister reported that 2011 was bad news for local tourism. There had been a 3.9 reduction in the total number of visitors. The number of stay-over visitors had also declined, all of which was reflective of “the sluggish recovery in major source markets, coupled with rising oil prices and higher airfares.”
But then visitor expenditure had, surprise, surprise, “fallen disproportionally relative to the fall in arrivals.” The prime minister blamed that on visitors being “more careful and prudent in their expenditure” and on hotels “compelled to discount their rates in order to survive.” Evidently the government’s highly paid overseas consultants know not what they are talking about when they blame Saint Lucia’s loss in shares, both in stay-over arrivals and tourism receipts, on the island’s “higher prices and low quality.”
For almost every other sector, the news from the prime minister was dismal. Banana cultivation had suffered a near fatal blow from Black Sigatoka, resulting in earnings declining by 68 percent. Manufacturing had just about managed to stay above water, a feat fast becoming more and more difficult in the current global environment.
Reading from his Budget address, the prime minister conceded: “Countries worldwide are struggling to recover from the debilitating effects of the global crisis and Saint Lucia is no exception. However, our economy has demonstrated a certain level of resilience that we intend to strengthen to mitigate against any future shocks, whether man-made or natural . . . Notwithstanding the difficult external environment, the growth-enhancing policies that this government intends to implement are expected to strengthen the prospects for growth in 2012. And on this basis we are targeting a growth rate of 2.5 percent growth in 2012 which will mainly be driven by the construction sector and supported by developments in the tourism and other sectors.”
The reality was that from fiscal year 2009-10 recurrent expenditure had exceeded recurrent revenue. The rate of increase in recurrent expenditure now exceeded that of recurrent revenue on average by one percent. “Thus the government has had to borrow to meet recurrent expenditure.” Last year, the government had borrowed $33 million to meet recurrent expenditure.
With public sector wages and salaries projected at “13 percent of GDP or 48 percent of recurrent revenues,” the prime minister explained, it meant that “for every dollar the government raises from taxes, 48 cents must go toward paying salaries and wages.” (A slight digression: I am here reminded of U.S. representative Paul Ryan’s recent observation that “a government that borrows 40 cents out of every dollar it spends is a government that’s gotta go!” Just sayin’! Saint Lucia’s prime minister referred to our own related situation as “a disaster waiting to happen,” as if disaster had not already struck!)
We simply have to cure the fiscal deficit, now 7.6 percent of GDP, said the prime minister. “This can be done by implementing growth-enhancing expenditure and tax reform measures.” As if channeling the expired John Compton, he added: “The enhancement of economic growth must form the main pillar of any fiscal reform measures. For without growth, correcting our unsustainable fiscal position would be ever more difficult.”
But then, as if in direct contradiction of Sir John’s philosophy, this prime minister is counting on improved tax collection to return his government to some semblance of solvency. He acknowledged the need to curb the growth of current expenditure but then went on to say the proposition was “difficult,” 80 percent of recurrent expenditure being non-discretionary, by which he meant to say “there is very little scope to reduce these expenditures” that include “salaries and wages, retirement benefits and interest payments on debts.” To say nothing of the debt-financed programs he plans to implement.
He now considers VAT “an important step” . . . toward correcting our unsustainable fiscal position. He said he had hoped to spare the House the historical details of the attempts to establish the tax “but unfortunately the leader of the opposition will not allow me to do so, not with his recent pronouncements inviting citizens to say no to the implementation of the tax he once championed.” For several minutes the prime minister recalled the pro-VAT pronouncements of both Sir John and Stephenson King in their respective times as prime minister. Finally, and with much panache, he said: “So while we have moved to support the initiative of the then government, that same group of people has now decided to disown it. What has changed between now and then? Nothing, except the transition from the benches of the government to the benches of the opposition.”
Actually, as earlier he had acknowledged several times, much had changed. For one, the Saint Lucian economy had never been worse. Besides, when his group had occupied the opposition benches, the now prime had railed against the value added tax. He had dismissed it as anti-poor, anti-worker and unwise.
“The SLP government was never convinced that VAT was the right way to go. Never! One thing is certain,” he said in 2006, “your retail prices will jump. It is naked taxation to raise additional revenue for the government. Every country where VAT has been introduced has experienced a spiral in food prices.”
Then again, what are politicians if not adept flip-floppers? Now that he was no longer on the opposition benches, VAT was suddenly “an important step” to be taken in nation’s best interests. Then there was his survival kit of admitted short-term solutions. As “tepid” as had been tourism’s recovery, our clairvoyant prime minister confidently predicted a return to “buoyancy” and better days “in a year or two.” He was also counting on a stimulus package that would have debt-loaded Saint Lucians falling over one another in the rush to secure loans for house construction that would deliver the promised jobs, jobs, jobs. Hopefully, we will have heard more by Friday on the $100 thousand job-creating dollars that was to have been invested in the private sector “immediately upon taking office.”
You needn’t be a carrier of Einstein genes to realize the core problems now slowly strangling our nation have been with us a very long time and that we have always deluded ourselves into believing they can be solved by the same thinking that created them. In past better days, when the UK and America were less stressed—and more inclined to helping those who would not help themselves—we did whatever Uncle Sam dictated in return for Yankee-dollar aid. We spoke with pride about imagined links with the Mother Country and Helen of Troy. Hopelessly addicted to the presumed kindness of strangers we secretly despised as much as they openly despised us for our color, we forgot how to fish.
And now that the chickens have come home to roost, now that we have no other choice but to fend for ourselves, the best we can do is put our voodoo faith in talentless politicians with no track records to speak of, who have never practiced what they preach, who know only how to borrow, borrow, borrow—even as they spend like there was no tomorrow.
Jack Kruger philosophy notwithstanding, it would serve us well to keep in mind the Micawber Principle: “Annual income twenty pounds, annual expenditure nineteen pounds and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.” The obvious lesson to be learned is that there’s a limit to how long you can survive en-rouge: in the red, that is!
Next Week we will take a close look at STEP, LEAP, STOOP, RISE (or has that been copyrighted by an NGO?), SMILES, HOPE, YEP and the other joyrides by which our prime minister intends to transport us, hopefully in one piece, to the Promised Land!