By Jerry Roker
for Bahamas Press
Despite the almost daily mumbo jumbo of the preachers of doom, usually those who are politically opposed to the PLP-led Christie government, there are signs that our economy has stabilized and is poised for meaningful growth. This is an amazing happening considering the state the PLP government met the country in May 2012 and the subsequent demise of the huge Baha Mar project.
What happened with Baha Mar, should be a wake up call to the policy makers, with respect to our relying almost exclusively on foreign investment to boost The Bahamas’ finances. It is a “grossly unbalanced” strategy and I will like to see more encouragement to be given to smaller, local investors.
The economic cycle, unlike the lunar or seasonal cycles, is far from predictable: it doesn’t move in any pattern that one can detect. My sense is that the economic pendulum has changed direction and is now firmly heading in the direction of recovery, albeit an anaemic one. But this is to be expected given that the boom that gave way to the recession in the United States, was debt-fuelled. Historically, recoveries that follow a credit crunch are long, slow and have a higher-than-normal probability of bumps along the way.
Most of the main indicators — gross domestic product, planning and work-permit approvals, visitor spending — are improving and the Government’s debt reduction plan is proceeding, more or less, on schedule. The financial services sector, however, is failing to help in the recovery effort: non-performing loans remain stubbornly high, the money supply continues to shrink along with bank lending and bank deposits. Lack of lending, whether in the form of debt or equity, to small and medium-sized businesses is arguably the largest single barrier to sustaining a meaningful recovery.
The traditional approach to stimulating the economy through private spending is grossly unbalanced in favour of foreign direct investment. But it is difficult to get shovels in the ground for large projects — whether private or public.
Five small projects of, say, $20 million each are likely to have a greater impact on the recovery effort than reliance on one $100 million project because all one’s eggs aren’t in one basket — it’s a sensible way to manage uncertainty.
We must learn to walk and chew gum at the same time. The overreliance on foreign direct investment diminishes the potential impact of small-scale local investment spending — fast nickels are better than slow dollars. The same reduction in red tape afforded foreign investors should be extended to local entrepreneurs. At the very least, a concierge service that makes it easier to get a local business up and running is needed for local entrepreneurs.
There are tremendous opportunities available to Bahamians who are willing to wade into the asset market in general and the real estate and equity markets in particular. It would be absolutely wonderful if the state could become more of an aggressive enabler, if only in the area of making it easier for entrepreneurs to do business. To the extent that certain categories of business could be incentivize at birth and for reasonable periods thereafter, it will augur well for our national development.
Contrary to the ranting of the preachers of doom, Bahamians are privileged to enjoy a standard of living that is the envy of the region and on par with that of some in the more developed world. We earn relatively and absolutely more income than most working-class people elsewhere do. And, on the face of it, are as well-fed, well-clothed and well-entertained. This argument fails to acknowledge the fact that being a part of the Bahamian community requires an individual to take part in the life of the community. That may require one to own a smart phone or to take an annual overseas vacation. The latter activity will appear luxurious to most living outside of The Bahamas.
Moving forward, managing the local economy’s interface with the global economy is fraught with difficulties largely because of the disruptive effects of creative destruction. The changes associated with creative destruction are imposed not negotiated. Book-keepers were summarily displaced by electronic spreadsheets; backyard mechanics need the latest computer software and equipment to make simple repairs; and high-speed data is making the outsourcing of accounting, customer service, information technology and other business functions a serious option for both international and local businesses.
The next wave of disruption will likely come from corporations like Uber and Airbnb. (I urge all progressive Bahamians to familiarize themselves with these new phenomenon). Uber, a transportation company, could make traditional ways — taxi — of moving visitors and locals around the Island redundant. Similarly, Airbnb poses a serious threat to traditional ways — hotels and guesthouses — of accommodating visitors. The way in which workers organise themselves through unions and the power they are used to wielding will change dramatically.
When looking at economic performance over a decade or more, three factors drive growth: more capital — plant and equipment, better technology, and a growing and better-trained workforce. There are hundreds of highly qualified Bahamians working in academic, business, medical and technical fields around the world, who could be persuaded to contribute to our development effort. And, given the state of information technology, it isn’t necessary for all of them to have a full- or part-time physical presence.
We are on the way. You can join those who ain’t going nowhere and are consumed with attempting to enlist believers for their message of doom and gloom, or you can embrace the forward hand of hope, as we, together, seek to build a better Bahamas for our children and grandchildren.