November 25, 2020

The race to the bottom in the Caribbean

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By John Peters From The Voice St Lucia

How long will it take for our leaders to learn a simple lesson that has been so eloquently put by Albert Einstein: “We cannot solve our problems with the same thinking we used when we created them.’’ In fact, maybe Einstein’s other quote may be more relevant to the political environment in which we have existed in the last twenty years. Einstein also said: “The true sign of intelligence is not knowledge but imagination.”

was absolutely correct in summing up our problems as a crisis of leadership, but we must move further and state that it is leadership without imagination. It is sad to say that we have been on the treadmill of imaginative approaches to governance since the departure of Sir John, and have not moved since 1996.

The Managing Director of the IMF, speaking at a recent High Level Caribbean Forum in Jamaica, was very blunt in presenting the effects of the crisis of leadership without imagination. Christine Lagarde stated: “This is something that is prevalent in the Caribbean — not only in the Caribbean — but there are also other places that, essentially, race to the bottom…The problem with the race to the bottom — offering the best possible tax deal, at the lowest possible rate, over the longest possible time — is that everybody ends up at the bottom, and the capacity to generate revenues and growth is impeded for all of them.”

When Sir Arthur Lewis posited his “Industrialization by Invitation”, it was intended to invite investors to set up shop to manufacture for export, provide a platform for new employment and the transfer of knowledge to the local population, who will ultimately take control of these new industries. The many factory shells in Bisee, Union, Odsan, Dennery, and Vieux Fort are edifices of a failed economic policy. This is because it must be tied to the transformation of your education system.

We have used the same system with the same failures. We have looked at tourism as an export and splashed concessions to “manufacturers” to set up shop for export. We have seen the same failures of hotels, the same under-employment, and the same minimal impact on the economy. Again, it must be tied to the transformation of your education system.

If an analysis is done on the value of concessions given to the tourism sector in St. Lucia, that sum may reach over $1 billion. Yet, with that investment by the Government of St. Lucia, we are still in a poor economic state. We cannot solve our problems with the same thinking that created them.

In his response, host Prime Minister Andrew Holness is reported to have said in a report in the that it was policy that Jamaica could not grow through offering incentives, pointing out that the Government needed stable and predictable revenues to function. It was a position that the IMF Head pronounced as “very brave” for a government in the Caribbean to eliminate most of the generous concessions given to attract investors.

We are at the point where we also have to become “very brave” and get out of this race to the bottom. Whether it is tax concessions or CIP fees, we have this proclivity to plunge into the bottomless pit. We must believe in our product, that St. Lucia is an attractive location and that we can turn the heads of investors to come to our shores. This economic prostitution has left our islands with the diseases of poverty, economic stagnation and high unemployment.

The Deputy Prime Minister of The Bahamas also shared similar views, that tax incentives have not brought the desired results, and that his Government is also looking at a review of these concessions. Ironically, Trinidad and Tobago’s Minster of Finance has also spoken about changes in the tax regime for the oil sector.

It is said that Helen was described by as “She was beautiful, ingenuous, and charming. Her legs were the best; her mouth the cutest. There was a beauty-mark between her eyebrows.” If we profess to be the Helen of the West, rightly or wrongly, it reflects how we view ourselves. Our approach to investment must also be clothed with that same concept.

For more on this story go to: http://thevoiceslu.com/2017/11/race-bottom-caribbean/

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