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Inaction this day

David Burt, left, and Jason Hayward are failing to get the economy moving (File photograph by Akil Simmons)

When Russia invaded Ukraine and fuel prices shot up around the world, many feared that Europe, in particular, would be faced with a stark choice this winter — stop supporting Ukraine or see millions of people suffer in unheated homes.

Thanks to an unexpectedly mild winter, quick responses by most governments to cushion the shock of price increases and the rapid development of alternative sources of energy, including gas, that choice has not had to be made.

Leaving the mild weather aside, this shows what can happen when governments and the private sector work in pursuit of the same goal.

The role of the private sector was especially important. By rapidly expanding sources of alternative energy, securing gas suppliers other than Russia and expediting the construction of facilities to receive gas and other fuel shipments, free markets did what they are supposed to do — identify and meet a need using innovation and enterprise to find a long-term solution.

For many years, this model worked in Bermuda. Governments provided a basic level of support for those who needed it and businesses in turn were relatively free to grow the economy, which in turn reduced dependency on public aid.

This was not a perfect system, but most people, regardless of ethnicity, grew wealthier and more secure between the 1960s and the 1990s.

Then things began to go wrong. This was not initially a result of the Progressive Labour Party coming to power in 1998. Under the prudent leadership of Dame Jennifer Smith and the late Eugene Cox as finance minister, the economy continued to do well.

But over time, public spending rose, as did debt, bureaucracy grew and the private sector came under increasing pressure to follow government dictates.

When the pro-business One Bermuda Alliance came to power in 2012, the economy slowly began to recover, peaking in 2017 with the America’s Cup — the only year of real economic growth since 2007.

The OBA, owing in large part to its own missteps, was tossed out the same year. And since then, the economy has returned to the inertia it has been in for much of the last two decades.

Covid-19 did not help and the Government’s handling of the first year of the crisis deserved praise. But since then, Bermuda has once again lost its way.

More and more bright young Bermudians are either leaving or are never returning after university.

The tourism industry remains adrift. The Government seems to be unable to agree the loan guarantee the Fairmont Southampton’s owner needs in order to get it reopened, and without that hotel, tourism will remain in the doldrums.

Casinos have been on hold for years. The Government and the regulator set up to oversee the sector cannot create a regulatory structure that would enable them to bank their takings. Millions of dollars have been spent and hotels are giving up on the very idea of gaming.

David Burt, the Premier, rightly committed his government to diversifying the economy. But he rolled the dice on fintech to be the driver of this change. It has been anything but a panacea. Fewer than 100 jobs have been created since 2017.

The Government has attempted to pick other business winners as it increasingly intervened in the economy. None, to date, have succeeded. Arbitration centres, fish processing plants, vertical farms, recording studios, cannabis farms and hotels have all been floated as ways to grow the economy. Where are they now?

The one real success story in recent years has been international long-term reinsurance, while Bermuda has continued to build its reputation as a centre for insurance-linked securities. The Government indeed has been involved with this, passing legislation and regulations on the advice of the sector to help it to grow.

That model is exactly how Bermuda succeeded in the past and it should be the blueprint for the future. But the Government has been quiet about this, presumably because it must share the credit and because it does not fit the political narrative of “Two Bermudas” that the PLP used to return to power.

Indeed, in Mr Burt’s Pre-Budget Report late last year, he floated the idea of raising taxes on the most successful people in the economy and on the only sector that is growing — a classic example of punishing success instead of encouraging it.

But instead of taxing the people who are actually driving growth and thus making them question whether they need to be in Bermuda at all, Mr Burt should consider finding ways of allowing the economy to expand, starting with getting out of the way.

The Government needs to listen to business leaders to help bring growth back to the economy. It needs to create a framework by which the private sector can grow — and then get out of the way!

The alternative is drift, unemployment, suffering and emigration. Government by inaction is no government at all.

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Published January 25, 2023 at 8:00 am (Updated January 25, 2023 at 8:26 am)

Inaction this day

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