In 1934 Soviet Russia liquidated the Kulaks (the businessmen who bought from the farmer and sold to the consumer) and the country experienced the worst famine in its history. Six months later Josef Stalin celebrated both the liquidation and the starvation as a triumph on the road to a Marxist utopia. In the celebration the big ﾓlieﾔ became truth; ﾓstarvationﾔ became ﾓwell-beingﾔ. There was not only a split between rhetoric and reality but reality was redefined. In the Bahamas in a less lethal and extreme situation there is a split between politics and reality in labour relations.
Income distribution.
When Prime Minister Hubert Ingraham first introduced the Labour Bills in Parliament he declared that the prosperity of the 1990s had eluded the common man and his labour bills would get the worker his fair share.
Yet Mr. Ingraham engineered the 1990s prosperity that produced stunning results. Most notably income was redistributed in favor of the ﾓworking classesﾔ. The lower 60% of the population, according to the Bahamas Department of Statistics, got a bigger slice of the bigger economic pie; the top 40% got a reduced share; and the top 20% had the largest loss of share. This record was the opposite of the prior PLP government. Then the country stagnated and the income share of top 20% of Bahamian households increased.
This reality has been over-looked. It does not fit into what Bahamians want to believe. Itﾴs as if it did not exist.
Incomes, costs and prices.
In December 2001 Prime Minister Ingraham tabled three labour bills in Parliament that were passed with no dissenting opinion.
Prior to this the Nassau Institute over several years wrote articles and held seminars on the proposed legislation. The negative experience of France, Italy, Germany, New Zealand and Argentina was reviewed. The political appeal and adverse economic impact of the Minimum Wage was thoroughly and repeatedly discussed.
The International Monetary Fund examined the Bills and stated that the bills contained undesirable ﾓstructural rigiditiesﾔ related to the increased cost of hiring and firing employees that reduce the ability of business to adapt to changing market conditions.
The Bahamas Employers Confederation (BECon) developed an electronic spreadsheet, its members used it and the data showed that the bills would produce significant labour cost increases. Then BECon argued that the legislation should not be introduced in the middle of the recession. All of this was to no avail. It appeared that the only accomplishment of these efforts was the elimination of the gross absurdities in the original bills.
A BECon survey of June 2002 shows what happened. In fact, the labour legislation did —
- Raise business operating costs (up 10.2% on average),
- Increase consumer prices, and
- Reduce the take home pay of 20% of the hourly employees.
The Bahamas is a high cost country that faces stiff competition in the Global tourist market. In economic terms it may even be described as the ﾓmarginal producerﾔ. Yet in the middle of a recession the Government did the unthinkable, it raised the cost of doing business rather than promoting measures to reduce those costs.
Mandatory trade unionism.
Overlooking this experience the new PLP Government is pressing forward with the program of mandatory trade unionism begun under the FNM. The retail trade has been non-union and the Bahamas Commercial Stores, Supermarkets and Warehouse Union (the Union) targeted City Markets as the cornerstone for its unionization drive.
A survey by the Director of Labour reports that the fringe benefits program of City Markets ﾓis the most extensive in the Bahamas.ﾔ Depending on position and tenure these include ﾓmedical, life, dental, and/or national insurance, paid holidays, sick pay, up to four weeks vacation pay, limited tuition refund plans, collegiate and career scholarships, stock purchase plans, retirement programs, Christmas bonus and compassionate leave.ﾔ
City Markets is a big employer of new entrants into the labour market. It hires young, unskilled inexperienced workers and offers training and benefits that encourage the best to remain with the company. Virtually all of its management started on the bottom rung of the ladder.
As with the rest of Bahamian business City Markets has resisted unionization, the disruptive, politically orientated trade unionism found in the Government Corporations. Particularly troublesome is the inclusion by the Minister of Labour of supervisory personnel in the collective bargaining unit. In the developed world the unionization of management is intensely resisted; but here apparently some consider it the ﾓBahamian wayﾔ.
And the most surprising development has been the Unionﾴs invitation to City Markets, despite its 34-year presence, to ﾓleave the countryﾔ. This raises two questions: ﾓIs this part of mandatory unionism?ﾔ or ﾓIs it a reckless ultimatum, unthinking verbal abuse made under the stress of collective bargaining?ﾔ
Can the country afford it?
To gain an insight into the economic consequences of such an ultimatum let us look at the balance of payments.
- Net Flows (B$ millions)ﾠﾠﾠﾠﾠﾠﾠﾠ2000ﾠﾠﾠﾠﾠﾠ2001
- Net Deficit on Current Accountﾠﾠﾠﾠ(408.2)ﾠﾠﾠﾠ(193.6)
- Net Capital & Financial Inflowsﾠﾠﾠﾠ412.9ﾠﾠﾠﾠ252.9
The ﾓCurrent Accountﾔ is made up of merchandise exports and the provision of tourist and other services less merchandise and service imports. The Bahamas is a net importer (-$408.2 million and -$193.6 million above). This deficit is paid for by net ﾓCapital & Financialﾔ inflows (+$412.9 and +$252.9 above). In fact, it was the huge capital inflows of Sun International that financed the fixed capital and related investments that triggered the prosperity of the 1990s. And this dependence on capital imports continues.
Incidentally, the sale by City Markets of its business to Bahamian investors would result in a capital drain, an outflow that countries try hard to avoid in times of crisis.
The Bahamas is not alone in its dependency on foreign capital inflows. For literally decades the U.S. current account deficit has been financed by capital imports. Against all expectations this pattern of capital dependency has not ended. The world has found the U.S. to be a good place to invest its dollar earnings.
In contrast the Bahamas has not always been perceived as a desirable place to invest. In fact, Hubert Ingrahamﾴs first task on becoming Prime Minister in 1992 was to go on a whirl-wind sales trip to the investment capitals of the world to change the image of the Bahamas. He assured foreign investors that the Bahamas was a good place to invest and he would put them on the ﾓfast trackﾔ in making those investments. He was successful in this effort.
But seemingly in recent years Hubert Ingraham, the FNM, the PLP and the country have forgotten the importance of capital inflows and the early success of the FNM.
Politics, Reality & the Jamaican Road.
In January 2002 the Nassau Institute in an 8-page newspaper supplement asked the question ﾓIs the Bahamas on the Jamaican Road to Prosperity?ﾔ Prime Minister Christie is given credit for approaching the task of governance cautiously.
In this period of economic crisis, the Government should not overlook economic reality to satisfy the organizational needs of unions and the ideological objectives of the Ministry of Labour. If politics triumphs over economic reality, then the country is most assuredly on the Jamaican Road.
