Preparing for the Coming Storm
It is all too easy to get caught up in what is happening in our relatively small economy and forget the bigger context. By a bigger context, I mean the global economy, which is still relatively unhealthy. Mid-June saw a G20 summit in Las Cabos in Mexico to discuss Europe's uncertain fate and the global economy. Away from the cameras and behind the scenes, it must have been an incredibly tense conference with a fair bit of finger-pointing.
I read that the European President Jose Manuel Barroso told reporters that ‘This crisis did not originate in Europe…this crisis originated in America”. It is hard to forget where each of us was back in 2008 when the news channels were spewing out back to back horror stories that appear to have started with the U.S. subprime crisis. Reports have suggested that the United States came under considerable pressure in Los Cabos to reassure impending economic uncertainties. The U.S. is facing the expiration of the Bush-era tax cuts, together with the mandatory spending cuts that will occur early in 2013 should Congress not take definitive action. Unfortunately for those of us more concerned with economics than politics, it is an American election year, which means that it is unlikely that the debt ceiling and taxes will be tackled well in advance of automatic triggers. Regardless, the U.S. pledged in the communiqué to avoid any major shocks to its own (and by extension the world) economy. Of course, this communiqué was not signed off by Congress, so there is still no real guarantee that these shocks will be avoided.
I am not defending American inaction, but if the Europeans were to stop America bashing for 5 seconds, they would remember America’s property boom was a joke compared to the boom in Spain and Ireland. The property bubble in parts of Europe began before the one in the States, and it was a bubble fuelled by European lenders, not American ones. For years there was relative silence while Greece spent itself into its present mess while being poor at collecting taxes. So the clock is ticking, and there is still no real sense that the decision-makers at the global level have any idea of what to do to stop the global economy's slide towards who-knows-where.
So that is the big picture. Returning to the Caribbean region, I remember a ‘successful’ businessman telling me that Jamaicans are much better businessmen than Trinidadians. I felt confused when he told me this. After all, I thought of the dominance of companies like Neal and Massy, Guardian Life, and other Trinidad based financial institutions in the region. He explained that because the Jamaican economy is so tough, entrepreneurs there have had to be more resourceful to survive and thrive. Once these entrepreneurs made it within the difficult market that is Jamaica, it was easier for them to expand regionally. Perhaps my acquaintance did have a point.
In Trinidad, too often, we point fingers at the ‘small-man.’ By this, I mean the groups of people who appear to be dependent on the welfare state. We say that they are lazy and unwilling to get up and find their own way. Academics pontificate as to the reasons and offer the usual list of textbook solutions. Politicians are torn because allowing continued dependency ensures votes despite its drain on the public purse. Too little is said about the commercial laziness that comes from operating in an economy that is cash-rich thanks to the accident of its ‘offshore’ energy economy. Let us be honest and admit that typical business ‘success’ is not so much due to entrepreneurial savvy than a product of purchased political connections, insider trading, state subsidies, and easier access to capital than neighboring economies.
I watched a historical documentary that spoke of how excited the rulers of Spain were when they first started receiving the shipments of gold and silver they looted from the so-called New World in the 1500s. Their economy did not enjoy sustained growth because the wealth that comes too easy does not last. As the narrator spoke of the resulting Spanish inflation, and my mind reflected on the Trinidad economy, I listened attentively. Judging by the storm clouds around the global economy, a storm is coming, and energy reserves alone may not be enough. All joke aside, if it takes a 38 member Cabinet to try to figure out a way to weather the coming economic storm – so be it. I wish them all luck.
American Tax Singapore
My name is Derren Joseph, and I love my country. Despite its challenges, I continue to have the audacity of hope that we will enjoy a brighter tomorrow.
Read more on derrenjoseph.blogspot.com.
Note: The blog that used to be here is now at https://www.mooresrowland.tax/.