REPORT #486 May 2002

Produced by the Belize Development Trust

by Ray Auxillou

The online version of the morning show interview with the Prime Minister, on economic growth and social programs was limited in description.

Basically, Belizean economic growth can be measured by the annual revenue and debt of government. I think it was around $372 million for last year as revenue. And historically, if memory serves me, the low range is around $280 million and the high was around $460 million annual revenues. So that basically puts last years economic growth in more of a holding pattern. We are holding our own economically with population growth, but not actually gaining anything as far as economic growth is concerned. But then again, we are not losing any ground in economics, which is a story of itself and nothing to sneeze at as an achievment. Except some would argue that it was done with printing more money and increasing the debt, which is negative, or will be down the line as a result? How this plays out remains to be seen?

The Prime Minister however, was talking about youth training programs on Radio Station Love FM and the marginilized poor and one has to believe he is probably talking to and about the population of one town, Belize City. The seat and core of political party power. He needs the poor votes in the port town. With elections coming, the hard sell is on!

Social programs and endeavors to help the marginalized poor of any society is an intriguing subject. But before we get into even the basics, we probably should consider that last years statistics of the United Nations, show that despite a consistant level of unemployment and a more or less fixed ratio of marginalized poor, or unemployed uneducated persons in successful nations. The ones who spend the most and succeed the greatest with social programs are the capitalist run countries. Much to the chagrin of those socialists, or socialist governments who so strongly profess to be dealing with their social services for equality for all of their population.

It brings to mind, my debate with a couple of Political Scientists in a group at the Costa Rican Bak Pak Hostel last week in San Jose, the capital. They had some European misconceptions. After a recent vacation in Cuba, they were convinced by Cuban propoganda that the poverty of Cuba was the fault of the USA embargo. The historical reason for the USA embargo to Cuba has reasons of it's own. But basically the Communist Party of Cuba stole all the private assets of business and private owners in 1959 and never paid any financial recompense as is done in a democracy. It is all right to take property for the greater public good, but general democratic principals say the government that does so, should pay market value for it, to the previous owners, to make such a process ethically correct. Castro and his Communist Party however, just stole everything in the country and never paid anything to anybody. Hence the embargo!

Does the Embargo create poverty in Cuba? That is a nonsense argument of course, but the two Danish political scientists did not seem to understand that. Anything Cuba wants to buy that is made in the USA, they can equally buy from USA branch foreign companies in Europe, or elsewhere if they so desire. So the embargo punishes only USA manufactures at home in the USA. It hinders not anybody in Cuba. In Belize for instance, imports of manufactured goods has shifted from European countries and the UK; to Hong Kong, Taiwan, Japan and India for manufactured goods and machinery. The next Danish argument was about meat. Apparently, the Cuban citizen, or family gets a few ounces of meat alloted by coupons, as a food ration, once a week. I fail to see how the US Embargo effects the supply of meat in Cuba? Denmark produces a lot of meat exports for foreign trade, so why do not Cubans buy from Denmark instead of the USA? That they do not produce all the meat that Cubans can eat and export some, is a fault of a Communist Party bureaucratic state planning process; that did not work in the Soviet Empire and does not work in Cuba either. Anybody who understand economics, instinctively knows bureaucratic state planning cannot make a successful economy. Even under old capitalist Cuban style dictatorships, the grocery shops in Cuba were full of meat and the majority of the people ate all they could afford in the old days pre-Castro. Some could not of course, the very poor, but nowadays EVERYBODY in Cuba is poor and cannot eat meat. Only the Communist Party hacks get all the meat they want. In Costa Rica last week, the average peasant farmer with his own land was gobbling meat meals in restaurants where I watched, in fantastic proportions compared to my own plate of food.

Different political managing system, capitalism versus state bureaucratic political planning. The results are different for very good established pyschological reasons.

The argument of the socialists is; that resources are better spent on education and medical treatment for the population of Cuba, than spent on producing meat. This is no answer of course to anything! It does not even begin to address the problems and differences in political action cause and effect. Economic growth, meat on the store shelves and meat on a Cuban citizen's plate, three times a day if they want it, depends on one thing only. That thing is called SELF INTEREST! Self interest translates into the word PROFIT.

To some, PROFIT is an ugly word. But then they are ignorant of the power of profit. In the goal to supply the maximum social services to the greatest number of people in any country, PROFIT systems are the only ones that do the best. This, the United Nations reports show quite well. In the seeking of profit, for self interest ( material goods and toys ) the controlling mechanisms to simplify things are SUPPLY and DEMAND. These two things, regulate the amount of profit, not state controlledl prices, or state controlled production.

Now if the political bureaucratic planning system of Cuba would allow a Cuban entrepreneur to own some 100 acres of land, now currently under sugar cane production and sell him some cattle; then in ten years time, there would be more meat available for the table of individual Cubans. Since currently DEMAND is greater than a politically controlled bureaucratic SUPPLY, there would be excellent PROFIT, due to high prices the farmer would be able to charge. With his profit he would build a bigger house, buy a bigger car and cause jealousy with his neighbors. In five years time more, other farmers would seek to enter the cattle production field and copy his success. MEAT SUPPLY would increase so all Cubans could eat meat three times a week, instead of once and the DEMAND would start to decline. With the decline of DEMAND, the competition would force prices to fall and the PROFIT to be reduced. Eventually an uneasy equilibrium would be reached. This is called market place economics and is the basis of national wealth and standard of living, which translates into social programs for the disenfranchised, through taxation of PROFIT.

The problem in Cuba is not the USA Embargo causing poverty, or lack of meat, which it does not. It is political party bureaucratic run planning systems that create the poverty. PROFIT and SELF INTEREST are the only processes that work to create economic wealth. For well known emotional and pyschological reasons.

In Belize, economic growth is reliant on PROFIT also. We must sell something to others. We sell our recreational attractiveness and services to tourism and we must sell our products abroad to get foreign exchange. Only by selling something can we create a profit making entrepreneurial class, that can pay taxes and thus pay for social programs. While the Prime Minister speaks of social programs for the poor, mostly of the vote catching rhetoric needed in the major political power seat of Belize City for the coming election. Without a profit making entrepreneurial class, there will be no social services safety net possible. You need money to do that and money for government programs comes from taxes. Printing more money, or borrowing it, is a losing proposition longer term. Taxes come from ENTREPRENEURIAL PROFIT. To do social services you need money. To create money and economic wealth in Belize, you need to service rapidly the needs of Belizean entrepreneurs. The more money they bring in to Belize as PROFIT, the more taxes and success the nation will achieve for a rising standard of living for all. SUPPLY AND DEMAND, the regulators of PROFIT are based on competition. COMPETITION in Belize where there is a small uncontrolled environment, is usually small family operational scale. State planning tendencies of Belizean bureaucrats and the greed of political parties in an elected one party dictatorial system such as ours, tend to slant toward monopolies, that can enrich coffers of the controlling political parties. This was well explained in last week's Amandala newspaper article. Monopolies prevent competition and thus PROFIT driven competition and efficiencies disappear from the nation of Belize, when in an EVER CHANGING COMPETITIVE environment, necessary to adjust SUPPLY AND DEMAND, this gets replaced by obsolescence and stagnation caused by a monopoly.

STATE PLANNING and POLITICAL interference are the problems of CUBAN AND BELIZEAN economic growth, or the ability to fight poverty. Politics and bureaucrats need to stick to infra-structure construction and maintainance and the leveling of the playing field for entrepreneurial competition to create PROFIT. Their only function is to expedite and service the population requirements. Not control them.

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