6 October, 2014

Dear Sir,

Income inequality has become a very fashionable topic recently, especially since the socialist French economist Thomas Picketty published his book, Capital in the Twenty-First Century, earlier this year. His supporters, who seem to include our own Craig Simmons, believe that inequality is a negative feature of capitalism that can be reversed only through government intervention.

Those who listened to Mr Simmons’s lecture, or read the article about it in The Royal Gazette last week, need to know two things.

First, although the idea is a new one, and the verdict is not yet in, many economists think the idea is flawed — they feel that income inequality is essentially meaningless as a way of measuring the success of an economy. I’d suggest that nowhere is its meaninglessness more obvious than in Bermuda, where we deliberately invite some of the highest-earning executives in the world to set up shop here as part of the international business leg of our economy.

What is the point of saying they earn x dollars, our lowest-earning citizens only earn a fraction of that and therefore the Government ought to intervene to narrow the gap?

That’s like saying Bill Gates’s maid ought to earn more because of the disparity between what she earns and what he earns. It’s a concept that makes no sense, except to the left wing, whose proponents as a general principle would have Mr Gates and his maid earn the same.

The second thing is that Mr Simmons’s championing of this idea at this time threatens to do damage to efforts to fix Bermuda’s economy. Running Bermuda this year cost $267 million million more than the Government took in. That’s the stuff of an economic crisis. Mr Simmons knows that — he has spoken about it many times.

Government’s efforts to repair the damage rely on growing Bermuda’s economic pie. They rely also on being able to reform the way the Government does business, so that it costs Bermuda less.

Mr Simmons is telling Bermudians that government plans to implement reform of the civil service will cause people pain and suffering, particularly among lower income earners. The Government has acknowledged that change is going to be difficult for some to cope with, and is focused on being able to provide help for those people to adjust.

But there is no other sensible way of proceeding. Bermuda cannot stay the way it is now. As a community, we have to try to look for reform that is effective, but that will disrupt our lives as little as possible.

Focusing on income disparity, as Mr Simmons is doing, increases the fear the community feels about change. It increases resentment against those at the top end of the scale. Those are the people upon whom we heavily rely for the health of our economy, and whose numbers we are trying to increase to grow our economy, so it strikes right at the heart of our efforts.

Who is it that Craig Simmons is trying to help with this odd digression from his normally quite fair-minded analyses — the country or the Opposition?

Joe

St George’s