Everyone with a rudimentary understanding of economics would appreciate that this is a bad idea.
In a recent interview with the Governor of the Central Bank, Julian Francis, not only did he agree that it was a bad idea, he believed it was “fiscally irresponsible”. Since the Central Bank is called upon to provide guidance to the government on fiscal matters, it seems clear that successive governments have not been heeding the advice coming from that institution. The agreement to give what is considered the “lump sum” increases to teachers and public servants was made by the defeated Free National Movement government and adopted by the Christie government. To its credit the current government made the decision to postpone the increase until December 19th. However at that time it will still not be in a position to prudently offer the increase.
With the “gun to its head”, the Christie government has been unable to convince the militant Teachers Union and the irresponsible Public Services Union that the government can ill-afford to borrow the money to pay. The refrain from the workers is: the government has borrowed for everything else, so why not borrow for this. In the meantime, the International Monetary Fund, monitoring the country’s fiscal performance tells the government of its inability to pay and the risks involved.
So in addition to a promise to be kept, the present government’s last wish is to have a labour unrest and mal-contented civil servants, particularly at Christmas time.
Although governments retain power to interfere in the economy, they can do serious damage to that economy by making decisions which are politically expedient and which are not fiscally sound. If a government imposes conditions that are unfavorable to capital and must increase taxes for bad decisions, then capital will go elsewhere.
It is not only the IMF which is watching the move to increase civil servants salaries in a stagnant economy which has not grown in the last three years, the local and international investor must also be taking note.
The global capitalist system consists of many sovereign states, each with its own policies, but each subject to international competition not only for trade but also for capital. Development requires the accumulation of capital, which in turn requires wages which a country can afford and high savings rates.
What is needed at this time in the Bahamas is a regime with strong leadership which is able to stand by unpopular but proper decisions to hold the line on salary increases in the bloated public service in the national interest. Perhaps such a regime will be called autocratic, but it must be able to impose its will upon the people in its service for the general good of the nation.
Take Asia, home to the most successful recent cases of economic development. Under the Asian model, the state has allied itself with local business interests and helped them to accumulate capital. The strategy required government leadership in industrial planning, a high degree of financial leverage, and some degree of protection for the domestic economy, as well as the ability to control wages. This strategy was pioneered by Japan, which had the benefit of democratic institutions, introduced with postwar U.S. occupation. Korea tried to imitate Japan quite slavishly but without democratic institutions. In Singapore, with reasonable wages, the state itself became a capitalist by setting up well-managed and highly successful investment funds. In Malaysia, the ruling party was able to show the workers the wisdom of maintaining austere measures until there was real economic growth.
Any understanding of the global capitalist system and a sound economy has to start with the role that money plays in it. Money is a means to an end, not an end in itself; it represents exchange value, not intrinsic value. That is to say, the value of money depends on the value of the goods and services for which it can be exchanged. Through reckless or irresponsible fiscal policies the Bahamas runs the risk of having a devalued currency or money with less value.
Trade unionists who continue to press the government for more money now must begin to realize that in the real world values are not given. In a market economy, people are free to choose, but they must know what they want and the consequences of their choices.
Wendall K. Jones, The Bahama Journal
