The Bahamas and its neighbours in the Caribbean are currently engaged in a conference on tourism which speaks grandly and eloquently to the theme “Reinventing Caribbean Tourism”. While many of these speeches given have been rhetorically invigorating, they do not answer the question which is ultimately the one which matters most: Who will pay for this urgently needed project?
Jean Holder, Secretary-General of the Caribbean Tourism Organization hit the nail on the head when he remarked that “Reinventing Caribbean tourism is about putting all this right and now we have a regional strategic plan, which seeks to guide us as we take appropriate action. We need to use it. We need to finance its implementation.”
He said if Heads of Government were going to meet, then this was a worthy matter for these eminent persons. And, if they were going to discuss what putting right was going to cost and why they should mortgage their future and “buck” any opposition to their plans to create a Sustainable Tourism Development Fund in order to finance a revolution in tourism development, then their time would be well spent.”
This is the point at which the talk stops and when fiscal reality sets in. Caribbean governments can only afford what they can buy. What they can purchase is ultimately contingent on how their economies perform in an environment over which they have no control.
At this juncture, then, they must, if they are to be realistic look closely at what is happening in the United States , the dynamo of the world economy. Information coming our way suggests that the bloom is gone from the U.S. economy.
In this regard, Joseph E. Stiglitz, winner of the 2001 Nobel Prize in Economics, and Professor of Economics and Finance at Columbia University poses and answers a question which is on the minds of people around the world. The question is: Can the U.S. economy get worse? His answer is direct and to the point: Yes.
He explains that “as America debates whether or not to invade Iraq, fears that the countryﾴs economic recovery will stall are beginning to creep into the discussion; with that, worries about the health of the economy are growing, too. A consensus is emerging that the gap between the U.S. economyﾴs growth potential and its actual performance will remain large for some time to come. Can the situation get worse? Yes, it can – much worse.
A number of worrying factors about the U.S. economy have been around for a long time:
* Huge trade deficits have persisted since Ronald Reaganﾴs misguided tax cuts of 1981 converted America from the worldﾴs largest creditors into the worldﾴs largest debtor. Today, these deficits set new records by the month;
* America ﾴs appallingly low wealth seemed to be growing year after year as the stock market boomed, this was understandable; individual Americans were becoming richer without savings, so why bother? Todayﾴs savings rate, while it has increased slightly, still finds America at the bottom of the worldﾴs saving league tables;
* Lax accounting standards. The Arthur Anderson, Enron and WorldCom scandals didnﾴt emerge out of thin air, but had their origin in the mid-1990s, when the U.S. Treasury actually intervened to stop attempts by the supposedly independent accounting standards board to improve matters. Bad accounting contributed to the recent stock market bubble; bad information led to stock prices that did not reflect underlying realities; and these in turn provided incentives for the excess investment in telecoms that caused todayﾴs excess capacity.
To this old brew, new ingredients have been added, notably the most rapid change in a nationﾴs fiscal posture the world has probably ever seen. In a ﾑnow you see it, now you donﾴtﾴ move that only a magician should love, the $3 trillion, 10-year (non-Social Security) U.S. budget surplus was – in a matter of months – converted into a gaping deficit of $2 trillion.”
With reality setting in, efforts are now being made to figure out how so many of the rosier prognostications about the health of the U.S. economy could be so wrong.
As Stiglitz elaborates and cautions, “of course, excuses are at hand: the magnitude of the economic downturn was not anticipated, and the increased expenditures to fight terrorism could not be foretold. Excuses, excuses. As the saying goes: Donﾴt count your chicken before they hatch. The Bush administration not only counted its chicken, it sold them forward!
To anyone with decent eyesight, it was clear that the rosy budget projections of two years ago were nonsense. Clear, too, was the fact that, in promoting its tax cuts, the Bush administration was engaging (on a multi-billion-dollar scale) in dishonest, Enron-like accounting. So if things are so bad now, how can they get worse? Hereﾴs a plausible scenario.
To finance its trade deficit, America must borrow from abroad over a billion dollars a day. When American was the only safe haven for global investors, this was easy. But American today appears less safe. The combination of local of confidence in America ﾴs economic policy management (compounded by the mounting deficits) and America ﾴs soft underlying economic fundamental, has dented the U.S. economyﾴs global reputation.
As foreigners start pulling their money out of a country that they suspect, the dollar weakens. As the dollar weakens, America looks less safe. So a rush to the door begins.”
This frightening scenario portends distress for small island developing states like The Bahamas an its sister nations in the Caribbean . Dependent as they are on the United States for their economic life blood, they have little or no room for manoeuvre in a world where even the most powerful are being challenged by forces beyond their control.
So, even as tourism officials meet and talk bravely about reinventing tourism, no one should pretend that it will be achieved.
The Bahama Journal, editorial
