The 1988 recession myth

Myths, especially modern myths, are useful for distracting people. One such myth is starting. The latest myth enunciation was by the Junior Minister for Finance, Senator David Burt, who said in Senate that Bermuda had undergone a recession that lasted from 1988 to 1993.

Just because he said it and it was regurgitated in the print media, the statement starts its journey towards becoming an accepted ‘fact’.

Was the Senator correct? No. He had twisted facts into the beginning of a myth. What did happen between 1988 and 1993?

In 1988, there were 6,709 people employed in the hospitality industry and 6,798 in what we now call ‘International Business’[IB]. By 1993, there were 5,995 — down 714 — in hospitality and 6,957 — up 159 — in IB. By 2006, IB had reached 12,000 and hospitality was down to 4,901.

Truth? Between 1988 and 1993, Bermuda’s national economy was starting its changeover from tourism to international business. Jobs in the hospitality industry, retail, and wholesale were disappearing.

But those disappearing jobs were being replaced by new jobs in financial services and international business. By 1997, that changeover was complete and tourism had been surpassed by international business.

Truth? Commencing 1987, many people holding lower paid jobs began going. Fewer people, but each person holding a higher paid job, began coming. Essentially, low-paid dormitory workers were being replaced by higher paid, apartment, house, and condominium renters and their families. These were the years when private school enrolment began rising.

Truth? There was a reduction in the overall national workforce. From 1988 to 1993, Bermuda’s total workforce fell from 36,420 (1988) to 33,427 (1993) — a loss of 2,993 jobs. But this loss of jobs was caused by the shift in Bermuda’s economic model. The fall in the workforce did not result in negative GDP growth. Just the opposite. The fundamental shift from low-paid to high-paid workers made the difference.

Truth? Those people who were in the construction industry recall that the period 1988 — 1993 was a period when their industry was not in the kind of recession that exists today. Instead, construction was healthy and rising — and an even bigger construction ‘boom’ was still ahead.

Truth? There was no ‘recession’ in the five years between 1988 and 1993. Instead, there was a major change in the kind of jobs that were being performed. Change from kitchen porter to underwriter, bartender to insurance broker, doorman to actuary… from low paid to high-paid and very high-paid.

When the Junior Minister referred to the ‘recession’ of 1988 - 1993, he was playing with words and ignoring facts.  He was trying to create a useful, political myth. The clincher? Government’s own figures (Department of Statistics) show this GDP progression:

• 1987/88           $1,170.3m

• 1988/89           $1,234.4m

• 1989/90           $1,325.9m

• 1990/91           $1,338.2m

• 1991/92           $1,401.7m

• 1992/93           $1,416.4m

• 1993/94           $1,516.3m

From 1988 to 1993, GDP grew 15 per cent. In 1990/91, 1991/92 there was a short term US ‘recession’. However, even in those slowdown years, Bermuda’s GDP still grew around 1.0 per cent per year, each year.

In this very real ‘recession’ [2008 to 2011], since 2008, Bermuda’s GDP has dropped eight per cent. It is still dropping. As well, Bermuda is suffering a real population loss as well as a real job loss. Loss, not change over.

Singly and as a whole, those 1988-1993 figures do not show or tell a story of a Bermuda recession that lasted for those five years. Senator Burt’s description of a recession between 1988 and 1993 is misleading. It is a myth. Lately, there’s been a lot of myth-building. Debt to GDP… debt is an investment… Government can create jobs… and so on.

Where and when I can, I’ll smoke out the myth-makers and give you the facts.