FRIDAY, OCTOBER 14: In 1997 I wrote a book entitled Bermuda — An Economy Which Works — a title which back then was totally non-controversial because self-evidently Bermuda was a spectacular financial success.
In the introduction I wrote:
“I can think of no other country which has enjoyed such economic prosperity during the past fifty years. Singapore and Hong Kong come close, but the quality of life in those countries is considerably lower than that enjoyed by the people who are fortunate enough to live in Bermuda. Bermuda has also enjoyed full employment for 50 years, an achievement particularly significant in the late 1980s and 1990s in which no other country has been as successful. Prosperity, full employment, a pleasant business environment, political stability and social harmony are no mean achievements these days and Bermuda’s record is difficult to beat.”
Some reviewers panned my book, which is fair enough, mainly on the grounds that I attributed Bermuda’s economic success to financial prudence, nil debt, limited government, low taxation, the absence of stupid regulation and a host of other free market attributes. Laissez-faire, as such attributes are called, was described by critics not as foolish but heartless and discriminatory.
Laissez-faire, or economic freedom, was hated because of the misguided belief that the average working person was penalised by a bunch of selfish flint-hearted capitalists, all of whom were determined to make money at the expense of labour. An added ingredient to this witches’ brew was that the capitalists tended to be white whilst the majority those exploited were black.
A year or so later Bermuda elected a new government eager to correct the flaws of a free market economy and expose the evil capitalists.
The new Bermuda would be a model of social justice in which there was an inexhaustible horn of plenty, wages would be increased without additional work, and a benevolent government would bring in improved education, more tourists, and there would be smorgasbord of freebies such as affordable housing, subsidised medical care, and subsidies for cricket and football.
None of this would cost the taxpayer anything as it all would be paid for by ....well that was never made clear but it would be free.
The deadly sin of envy was unleashed, the 4 principles of which are; (1) we want everything, (2) we want it now, (3) we want it for free; and (4) if it is not free we want someone else to pay for it, hopefully some rich non-Bermudian.
Fourteen years later — what happened? Anyone reading the above quotation today would think that in 1997 I was hallucinating or smoking something stronger than tobacco. The new government always made it clear, and rarely missed an opportunity to let the Bermuda public know, that their sympathies lay with the poor black disadvantaged individual who, allegedly, had suffered injustices under the hugely successful free market policies of the previous government.
There was nothing wrong about being concerned for the poor. The great mystery was, ‘why did the government pursue policies based on the politics of envy when it was predictable from well-established economic principles that the main victims of such policies would be the poor, mainly black population and the disadvantaged?’
Why make the lives of the disadvantaged even more disadvantaged and miserable when they were elected largely for the purpose of doing something to make the lives of poor better? Much of answer lies with the world envy.
The underlying philosophy of Bermuda prior to 1998 was future-oriented. Save before spending, welcome foreigners who work here, give the same welcome to foreign companies, encourage tourists to come back again.
The reason for this philosophy was simple. Bermuda earns its living from being a gracious host to foreigners, and without foreign exchange Bermuda is a speck of nothing in the Atlantic.
Put crudely, we have now developed the time perspective of a 15-year-old: “Let’s party and let’s stick it to foreigners who are taking away our jobs. It’s going to be sunshine forever in Bermuda, and we are wonderful because we are Bermudians.”
We are now learning the hard way that the old and maligned future-oriented philosophy works, and the financial mentality of a 15 year old does not. Like 15 year olds we blame our parents — or its modern equivalent — the recession abroad.
Government has been like a drunk at the bar during happy hour. He keeps telling the bartender to put the drinks on me, but when it is time to pay he makes the excuse that he has forgotten his wallet and put the bill on his tab. This works only for a few weeks (in the case of government for a few years) but sooner rather than later the bartender will refuse to let him buy drinks for the rest of the happy hour participants. We are now at that stage.
The future is here and we are up to our eyes in debt, and stuck with unhappy customers.
Bermuda has turned the old Aesop’s fable on its head. The grasshopper who borrows and overextends now can laugh at the ant who seeks to save and provide for the winter. We are like a middle-aged individual who has spent his inheritance on booze, and now needs to find a high paying job in the real world.
The result of mismanagement is that at the end of 2011 our economy is characterised by the following:
Jobs are hard to come by. There is unemployment and pay increases are history. During the last week of September about 151 jobs were lost at Willowbank and Citibank. This is the equivalent of 750,000 jobs being lost in the United States.
Tourists no longer come in the numbers they used to, and foreign guest workers are also conspicuously fewer than they were.
Bermuda is up to its eyes in debt. The frequently mentioned figure of $1,000 million (1 billion) is in reality $5,000 million (5 billion) -or roughly $100,000 for every Bermudian when one takes into account the missing millions from government pension funds.
Government has run out of other people’s money.
I could mention other things such as children going hungry, the scandal surrounding Faith-based Tourism, the inability of people to pay utility bills, falling real estate values, and reduced economic activity — but let me not complicate things.
What led us to this state of affairs in such a short period of time? Let me pause here and next week I will seek to explain in detail what were the causes of this financial catastrophe for ordinary people.