Bruce to Portia: 'Faget it!'

Ian Boyne, Contributor

"The Government that governs best is the government that governs least." - Thomas Paine

In case you missed it, Prime Minister Bruce Golding's Budget presentation last week drew the sharpest and clearest line yet between his economic philosophy and that of the People's National Party (PNP). While the PNP has been calling on the Government to spend more and do more, the prime minister believes that "Government was the problem".

In a highly reasoned, rationally engaging, sober and statesman-like presentation, the prime minister went to the intellectual jugular of the PNP to snuff out any life left to the notion that Government can continue to satisfy insistent calls for higher public-sector wages and social demands in light of our reality. That was "fantasy", the prime minister shot back, inversing Opposition Leader Portia Simpson Miller's words.

Fantasy

"The suggestion that if we cared for the poor more, we would do more - that is fantasy," he continued, frontally assaulting the gravamen of the critique in the PNP presentations in the Budget Debate. Referring to developed countries which had to drastically cut public-sector jobs, the workweek, as well as public-sector salaries, Mr Golding said, "We have not gone there." But he said that "insisting that the Government must spend more on this and spend more on that in order to do more for the poor will drag us there! Insisting that we must pay wage increases that we simply cannot afford ... will drag us there! Clamouring for a rollback in taxes when revenues cannot cover what we are already sending will drag us there. That is our reality!" In other words, Mr Golding was saying to Mrs Simpson Miller, "Faget it!":

The PNP should welcome Mr Golding's drawing the line in the sand to now launch its much-touted progressive agenda, showing why its more European social-democratic capitalist model is superior to what seems like Golding's laissez-faire American model of capitalism. The PNP, if it is serious about ideas and its own intellectual tradition, rather than simplistic propaganda about who has more compassion and love for the poor, should engage the prime minister and the nation in a serious dialogue about options for our future. I have some serious concerns about the prime minister's economic philosophy, but you will have to read on.

It makes absolutely no sense to gainsay the game-changing strategies which this Golding administration has initiated. That kind of cheap propaganda will definitely resonate on the streets where the trade in ignorance is buoyant. As Golding said, "It is not easy for people to understand these complexities, and when they don't understand, they form judgements and get angry." That is not insulting the people's intelligence. It is simply reality.

Not business as usual

Golding was dead right to call attention to the fact that having lost US$2.7 billion in export earnings, J$16.5 billion in bauxite revenue and J$5.7 billion in GCT payments, it could not be business as usual in terms of expenditures. Knocking the Government for its extensive borrowing while being ready to shoot (figuratively) if they raise taxes is intellectually irresponsible, if politically expedient.

If we continue to boost spending, on even important areas, while our earnings are drastically reduced, that is economic madness - and it eventually hurts the poor. We suffer today because some of the bold decisions that we should have taken in the past we deferred because of populist demands and a failure of political nerve. We are paying a heavy price today.

That this Golding administration has presided over a debt exchange which has given us some breathing space from our debt albatross, and which has resulted in lower interest rates, greater foreign-exchange stability and market confidence; that it has maintained low inflation, high net international reserves and a reduced fiscal deficit and debt-to-GDP ratio, while making more credit available to the private sector; that the administration has been able to borrow at low interest rates in the international capital markets (and lower than other nations, 'Teacher' Hyman ); that it is reforming our tax structure to make it more competitive and business-friendly - and that it is engaging stakeholders - is all laudable.

Why don't we acknowledge these as unquestionably good for the nation as a whole? In another capacity, I have interviewed some seasoned financial analysts and businessmen who have spelled out quite cogently just how significant are the measures which have been announced in this Budget; how much of a difference this will make to business, consumers and profitability. This is why private-sector spokespersons and others have been so bullish about this Budget. And the canard that it's just because this Budget favours the rich and privileged vulgarises the issue.

In a market economy, we need to give incentives to those how own capital - the rich - if the poor are to benefit. It's as simple as that. So cut out this foolish and useless argument about, well, the rich are benefiting, so this must necessarily be a soak-the-poor Budget. Nonsense! I definitely believe this Government is moving in the right direction. Its economic strategies have, indeed, been game-changing, as the PM has said. That's really more than a cliché. That is no fantasy.

But I have some serious concerns. I am not convinced that the strategies which have been announced in the Budget are sufficient to move from stabilisation to sustainable and respectable growth. Where are the ideas representing the PIOJ's Growth-Inducement Strategy, which this Government has endorsed? Has it abandoned that document so soon?

Where are those countercyclical initiatives and policies advocated in that strategy document? Cutting taxes is not a panacea, Prime Minister! I said on Nationwide last week that Golding sounded so much like Newt Gingrich when he launched his Republican Revolution with his Contract with America. Republicans believe cutting taxes is everything. Now Golding seems to have bought hook, line and sinker this dogma that tax reform is everything - or almost everything. He went as far as to quote, admiringly, the Panamanian president who, when asked how Panama had done so well, said, "Simple. We reduced taxes." Well, Prime Minster, that is not just simple. It is simplistic - if you think Panama is exemplary.

I love to supply quotes, too, Prime Minister. Let me quote a former finance minister of Sweden who, when asked why Sweden was so successful, said, "We had high tax rates." I remind you, Prime Minister, that Sweden has one of the highest per capita incomes in the world and in terms of the Human Development Report's index of development, Sweden outranks the United States by far. Life expectancy, for example, is 80.5 years, compared to 77 in the US. PM, I am concerned that you have bought into this theological myth that there is some 'magic' in the market. I am afraid that your strategies for growth lean too excessively on the so-called 'invisible hand' of market fundamentalism. Market mechanisms are necessary, but not sufficient. Government does not have to fix the problem, PM. Don't take us down another blind ideological alley.

There are two books which I recommend strongly, PM, for your deconversion from this fundamentalism. One is by Joseph Stiglitz, the renowned Nobel Prize winner in economics, Freefall: America, Free Markets and the Sinking of the World Economy (2010). The other is by that other distinguished economist, Dani Rodrik, The Globalization Paradox: Democracy and the Future of the World Economy (2011). I know you are a reader. Says Stiglitz in his book: "One of the reasons for the success of the Scandinavian countries is that they have not been bogged down by certain ideological presumptions such as that markets are always efficient and government is always inefficient."

We have just come out of a global crisis which should have totally shattered the fantasy that markets will always take care of themselves and that they have a mind of their own which is infallible. No, markets need activist states - strong states. As Rodrik says in his just-released book: "Markets and governments are complements, not substitutes. Markets work best not when states are weakest, but where they are strong. Second, capitalism does not come with a unique model."

The PM is opening up space for the PNP to exploit, for the PNP can harness both private-sector support, as well as that of the other social classes by showing that its social-democratic model of capitalism is better than Golding's and produces better overall results. This is where the PNP must go.

It was the government which saved capitalism around the world during this recent global recession. The problem is not government per se, but how efficient government is and how it syncronises with the market. Marxism is dead as a viable economic model, and so is non-market socialism. The market initiatives of this Budget are necessary. But they are not sufficient.

We need true development banking, not the same sort of so-called venture-capital funding which has failed to reward enough entrepreneurs with creative, innovative ideas. Announcing huge amounts of money where the collateral and other requirements are so forbidding as to be inaccessible to many gets us nowhere. That is why these funds are always under-utilised.

This Budget should have provided more direct stimulus to the productive sector. Yes, I know the fiscal space is limited but a way has to be found to get the IMF to see that without some counter-cyclical polices, there will be no sustainable growth. But, if you, Prime Minister, are such a born-again free marketer, maybe you won't have the will to really push them for any concessions, convinced as you are that Government is the problem, and unshakeable in your faith in the "magic of the market".

Ian Boyne is a veteran media practitioner. Email feedback to columns@gleanerjm.com and ianboyne1@yahoo.com.