REPORT #28 1998
COMMON SENSE ECONOMICS FOR BELIZE!


Produced by the Belize Development Trust
One of the fallacies in Belize is the idea of low wage production. There is no such thing anymore. Certainly on an industrial scale. It may be in Xaibe you can get someone to work for $20 per day, but at Caye Caulker it is $200 per day and in Placentia around $100 per day.

The idea that we can attract large scale industrial plants for a low wage populaton is no longer valid, if it has ever been valid since independence. The NAFTA agreement with Mexico makes it simply out of the question now-a-days.

Belize and the rest of the Caribbean face chronic shortages of productive capital. Most of the capital acquired is used to offset the interest payments of foreign debt load, that most Caribbean countries have incurred. In fact, it is doubtful nowadays, if a place like Jamaica, or Barbados will ever be free of debt. Very unlikely. Guaranteed markets for agricultural exports are weakening and the World Trade Organization is making it worse. Nor is there any future in reliance on primary products, minerals and commodities. Manufacturing attempts have for the most part been neglibile and met with failure in the last thirty years.

Tourism has shown steady growth, but Belize is going to get devastated by a Hurricane soon and that industry will disappear for anywhere from two to five years. Belize also has a level of hard core so-called unemployed in the towns. Caribbean intellectuals continually raise the idea of Caribbean intergration, conveniently ignoring the practical aspects of costs of transportation and similarities of products. This is a dead horse, though still favored by ivory tower intellectuals. Caribbean regional cooperation in trade policies versus outside organizations is a good idea and military policies for protection and intervention within British speaking Caribbean countries under certain circumstances is also a good idea.

There is nothing though that any sort of federalism, or regional intergration can do to help Belize in any sort of development sense. In that respect Belize is on it's own and must forge new ideas and paths, independently of the Caribbean, or Central America.

Current economic theories in the Eastern and Central Caribbean are basically re-runs of the last thirty years and also of absolutely no use to Belize out here on the western Caribbean rim. Our circumstances are independent. Technology changes are making all such old theories of economics simply obsolete anyway.

In fact, in studying the changes in the other parts of the British Caribbean one can only come to the conclusion that they do not have a clue in what they are doing and the elected political leaders are a bunch of dunderheads. In fact, we just voted out our own such leader who is guilty of holding back technological development for the last three years and political reformation. This is going to be a heavy price for Belize to pay in the race for equality in the world. The so called looked for economic growth in the British Caribbean, the rest of which are about 20 years ahead on the learning curve than Belize, has failed to materialize under scatter brained policies.

Most of these changes and needs were basically self evident to the use of common sense economics, but the intelligentsia of these countries have misled their laymen political lifetime leaders astray with wild brained academic economic theories. It costs in Jamaica under their current system about $3000 USA per person to create a job from foreign investment. The argument has always been for greater government controls and regulation of the economy. Belize has followed this route also, much to it's historical loss in progress. For example, in Jamaice the foreign debt was $1.7 billion USA currency in 1980. Ten years ago, in 1988 the foreign debt had climbed to $4.5 billion USA currency. Fifty percent of it's cash flow was servicing the debt. Saddled by service costs, and the basic cash requirements of maintaining the infra structure, there is no money left for development in any real common sense economics. What the debt is now I do not know. But it is not any better.

Belize is going along this same path. The problem is maintaining a level of infra structure and in Belize expanding it, versus cash flow and borrowing. Jamaica and Barbados may never ever be able to pay their external debt. It is getting doubtful if Belize will either.

The structural adjustments demanded by rescue packages for debt heavy British Caribbean countries, usually penalize those countries and they end up for a decade or more in much worsening straights than they were before. This is what is so worrisome about Musa and Fonseca borrowing a $100 million more debt to create a housing boom. Fisherman's common sense economics says if you borrow money for an outboard motor that will increase production, this is good. If you borrow to build more lobster traps this is also good. Your $100 million of debt has to go into production and earn back $250 million in a few short years. In finance this is usually calculated in a two or three year period maximum. Otherwise other debt requirements increase the debt load and make it all unwieldy. Borrowing to buy or build a house on a shaky seasonal cash flow is usually going to end in foreclosure and loss of your real estate assets and put the borrower in the poverty bracket.

If the $100 million new debt on top of the old $550 million ( over half a billion) were going into productive sectors, then this would be a valid use of debt. But the housing boom is non productive and turns the loan from Growth Economics into a typical Caribbean regional Keynisian boom and bust loan economic policy. How much debt can Belize stand and grow economically. We do not know. But the study of large corporations hundreds of times larger than the country of Belize, says about 18% debt is manageable. After the 20% of income flow and asset worth, you are heading eventually for bankruptcy.

The Eastern Caribbean, notably Jamaica has tried various devaluations attempting to solve the political engineered crisises of economic disaster. To no avail. Always the situtation has gotten worse.

From the concept of striking out on our own and requiring a leap into the unknown future. I think the Musa and Fonseca team with their plan of GROWTH ECONOMICS are definitely on the right track. But the danger always lies in maintaining the status quo in political organization structure as it does not lead itself to democracy and the advantages and quick response times and efficiencies of de-centralization and political power sharing autonomy and new looser structures.

As it stands right now, I would forecast that the national debt of Belize at the end of the PUP 5 year term will be over a billion dollars and only a few material things to show for it, but little change in economic development. That is the way we are heading traditionally. How then can the PUP gain the advantages of their GROWTH ECONOMICS and at the same time reduce the national debt?

The answer is in the re-structuring of political administration into District governments and municipal governments. Rather than continue to borrow foreign debt. Which Barbados and Jamaica aptly demonstrate is a failed bankrupt policy. By going to local governments and just handing them the cash, cost efficiencies arise, through the use of part time labor, seasonal contractors and volunteer workers at the municipal level. You end up, as places like the State of Massachusetss and the State of South Dakota show, with a more cost effective, lean mean infra structure machine. Giving these smaller localities the right to tax, also relieves the central government of a lot of need to borrow and increase the foreign debt. Rather than borrow, the central government can put a halt on debt, pay down the old debt and gain self sufficiency with little loss of administration and infra structure services. A ceiling on the national debt at 20% of the average of the last two years national cash flow revenues would force the country to face it's problems and learn to live within it's budgets and capabilities, finding different social solutions to problems.

But heck, what is obvious to an old fisherman like me, is probably not obvious to people living off the government bureaucratic salary game, with a steady cash flow covering the lean mean times; which teach the rest of us to learn to save and do without, some seasonal parts of the year. Postponing desired toys is part of that learning process.

As old Mr. Valentine Alamina of Caye Caulker used to say about the politicians and bureaucrats in Belmopan. "The young bloody fools! Why don't they use common sense?" Of course, the sneaky part, is that common sense is not so common! Then what do I know? I'm only a fisherman applying common sense economics from hard knocks experience. That has no weight in the world of politics and academia who recognize only economic theories backed by the requisite paper diplomas and degrees.

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