Quite a few years ago when The Bahamas was rapidly moving toward an economic crisis, a friend of mine lent me a book which dealt with the financial collapse of New York City in the late ’60s and early ’70s. He thought that The Bahamas should have looked at the New York situation and take a page or two from it.
As I recall the city of New York found itself unable to meet its monthly payroll and had turned to The Chase Manhattan Bank to borrow to meet its obligations. On investigation of the city’s financial position however, the Bank didn’t see a loan in itself as a viable solution; and so the Mayor and his city government turned to the Federal Government.
The Federal Government investigated the city’s plight and found it to be a disaster. It found that some 30% of New York City ‘s workers were on some sort of welfare, while others enjoyed all sorts of financial and job security benefits that proved more generous than those in the private sector. At the same time the city was employing more than 30% of the city’s workforce.
At the time it was revealed that subway toll booth operators had enjoyed a starting salary above $200.00 per week, even though they needed only a high school diploma as a requisite for employment. At the same time rookie bank tellers, some of whom were college graduates were enjoying a starting salary of around $175.00 per week. They, along with other private sector workers and businesses, were being levied exorbitant city taxes to pay for the burden of welfare services, city workers salaries and their generous benefits. At the same time workers were also paying their fair share of state and federal taxes. The situation became so burdensome, that businesses quietly relocated to other states in America ; thus the high level of welfare payments and workmen compensation became extremely burdensome to the remaining small segment of the productive workforce.
In such circumstances the Secretary of the U.S. Treasury told the New York City government that it could not use taxes of other Americans to subsidize its extravagant and expensive lifestyle. He recommended a cutback of city workers to 10%, providing incentives and lowering corporate taxes to re-attract business, revamping the city’s school system, as well as other reforms. The City finally turned to the rich and powerful New York City teachers union, who put the city government under the heavy manners of the Treasury’s recommendations before it would grant loans.
The Bahamas , like many of its small sister states that strongly subscribe to the patronage system, finds itself in a similar situation as did New York City . Borrowing from international lending institutions sometimes follow with recommendations to reduce public spending, etc; but in order to stay in power such governments are reluctant to downsize and make their public sector more efficient and productive.
At present, the personal emolument burden of government is around the half billion-dollar mark, which represents nears half of the government’s annual budget to run the country. Democratic governments that subscribed to the free market philosophy find inflation begins to get out of control when governments employ more than 10% of the workforce. Our national government is presently directly responsible for more than 15% of the workforce; and is also partly responsible for the various corporations like Batelco, B.E.C., B.A.I.C, Water and Sewerage and Bahamasair.
In the past we have been able to stave off collapse similar to New York ‘s because of a re-invigorated tourism industry, growth of a financial sector and foreign land investment. Will we be able to weather the present and future crisis, especially now that we are faced with the many global forces of FTAA, OECD and others? It would appear that theses forces will demand government and public sector reform as well as educational reform in order to survive and thrive in a Bahamas of the future. New York City had the courage to face their problem head on and the sacrifices eventually paid off. Do we have the necessary courage to bight the bullet and meet the challenge?
We see many nations in the region failing to do so and they are suffering the consequences. Hopefully we will rise to the occasion. We owe it to our children yet unborn. οΎ
