REPORT #267 May 2000

Produced by the Belize Development Trust


Usually, when the savings of the population of a country get wiped out, it is directly attributable to political incompetence and mismanagement. The politicians blame outside sources and point fingers at other political parties and so forth. Such a calamity that brings in the Intenational Monetary Fund to a country, usually builds up over several different terms of office by different political parties. The situation grows unmanageable.

Such events can devastate a country greater than a WAR.

The warning signs in Latin American countries, and Belize is a Latin American country, using only a slightly different model of government than our Spanish neighbors, but in overall function working much the same as an autocratic centralized government, are pretty much all the same.

First you get a restriction and shortage of foreign exchange currency. This is usually followed by government propoganda for people to save more. Eventually comes new legislation, doing different things like forbidding foreign exchange ownership, or bank accounts abroad. Usually, the incompetent politicians are by this time, using maxed out Treasury credit cards and borrowing from anyone abroad, to run the government. Borrowed money not only is used to run day to day government affairs, but also to pay off interest payments on various foreign loan debts. The cycle is usually too far along by then and disaster is somewhere down the road. These events can happen both quickly and also over a long period of time. Depending a lot on who is in office.

A country that collapses economically from political mismanagement, needs citizens who are patriotic, solvent, wise and have taken adequate preparations to weather the coming economic storm. Sometimes recovery can take years, even with the IMF bonebreakers controlling things.

There are a lot of different things that cause such political mismanagement. The major ones are 'growth of government'. This is because it is human nature to build fiefdoms in both the civil service and in the political oversight machinery. People are not spending their own money. They are people getting a salary and spending someone else's money. Someone else's money has no value to them at a root psychological level. It is not real, only numbers and statistics on paper, for they did not sweat and work hard and sacrifice for such money. The money of course is your money, your tax money.

Federated, multiple layered governments have been found best to tackle such psychological problems in government. While you still get the fiefdom building phenomena by human nature; with multiple layers of localized governments the controls are better. While one village government for instance may overspend and go broke, it does not effect the many hundreds of other village governments, or multiple district governments. Local people also control employment in government and spending more accurately. Money is usually distributed through various formulas around the nation in the form of GRANTS. Additional formulas give extra financial assistance according to specific need and criteria. In an autocratic centralized model such as in most of Latin America, with only one controlling layer of government and the same layer in charge of hiring and spending, when you get a batch of incompetent politicians, things can go downhill very fast. Unfortunately, they take the whole country with them.

It takes local management politically to work within a set budget, when grants are received from a larger national government. The local government, say at village level can often stretch money further. They pay cheaper, they hire as needed, or seasonally, or part time. When money is short, everybody understands and services are cut back, people laid off and there is little quibble with the situation. When you have an autocratic centralized model like in Latin American countries, government keeps growing. Downsizing and controlling expenditures is almost impossible to achieve. People at village level, are less understanding, for they do not see, participate, or feel the problems. They just cry for more and more and more money and services from a paternalistic government that is absentee.

The other major problem and there are other problems with governing by an autocratic centralized model, but the next in line, is the growth of government by borrowing foreign loans. Eventually, the situation gets out of control. If you have had experience with credit cards, you know what happens when you have two or three credit cards maxed out, but your operating costs do not stop and your income is insufficient. You open more credit cards. Some of which go to pay interest payments on those credit cards maxed out and some of the borrowing goes to current operations. Eventually, you can borrow no more, to pay the increasing demand for interest on more and more credit cards that become maxed out. Substitute foreign loan lenders for credit card and you have the situation in many Latin American countries including Belize. Again, Federated multiple layers of governments control the excesses that make such a system vulnerable. There will always be corruption and there will always be political mismanagement, but the situations will be smaller, more easily managed. Instead of a disappearing $3.75 million from Social Security rip-off, you probably will see a localized corruption scandal of only $1800 by some local politician, or bureaucratic clerk.

Because the signs of disaster are on the horizon economically in Belize, it is wise for citizens to prepare for it. The country in order to recover from such economic disasters requires citizens to have at least six months savings in foreign currency. Either buried in a tin can under the house, or banked abroad in another country. Despite whatever rhetoric and laws panic ridden politicians are pushing at the time, as the crisis approaches; the country can only recover quickly if the economy is kept running by solvent citizens. It is the patriotic duty of citizens and taxpayers to have the six months means of foreign exchange savings, to keep their house and business running, when all collapses around them. When local money becomes worthless, you need money that has some consistant value. The current politicians will be crying for that foreign exchange money, as the lenders pressure for more and more of their payments and it becomes harder and harder to pay them off. Eventually, inflation, devaluation, or default occurs. By international agreements, foreign lenders then call in the IMF to squeeze the country devastated by incompetent political mismanagement for their payments, in foreign exchange. Savings can be seized, money is changed for different money, devaluation is used, and so forth. Usually, thousands of businesses disappear for lack of foreign exchange to buy imported materials to keep going and the government printed money becomes worthless, to pay anyone for their labor.

So if you haven't started saving a nest egg of foreign exchange to carry you for six months, you should start now. It is only wise as the Boy Scouts say, to be prepared for the worst. When you are prepared, the worst never happens! Only SOLVENT patriotic citizens can bring back a country fast from an economic disaster.

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