Thursday, July 23, 2009

What type of Economic system does the Bahamas have?

I normally don't comment on Bahamian concerns as a matter for focus, or, for that matter, want to convey the idea that I'm a dues ex-machina of sorts, drifting down from the rafters with solutions to any of today’s problems. However, my bias to my country has gotten the better of me on this lap. While it will be from an external and totally unprejudiced concept, the issues can be related to that of the system we have today and I must ask the reader, to allow me to find the range, so to speak, to deliver a message that isn’t path breaking by any means, but needs to be reiterated in any event.

What type of economic system does the Bahamas have? To quote a statement made recently about the Bahamian society in general; we have a "buck-up" society [economic system]. To attempt to put it more diplomatically, we have an open economic system, which is not entirely economically focused on efficiency. While that sounds laissez faire at its utmost, the idea that we have more law than we need is also relevant.

For the benefit of the general public, there are several systems and many different ideologies that back that system up with intellectual arguments. The most popular of these are either or, two main types- the market economic system and the command system. The former is a system based on supply and demand and the latter, is, quite directly, a communist style system where the government has control over production.

To be fair, no single economy is or was either of the extreme. For example, many developed countries have a system where the supply and demand for, let's say, energy, is set by obvious supply and demand forces. You need energy, so you have to buy oil or oil bi-products, at least. So, an economy supplies the public with oil for energy to consume. But, with regard to the capital market structure and those ever pesky derivatives placed on commodities, the price may not be set by simple supply and demand. But, placed on whether or not the price of a good may be more or less expensive in the future. So, you are paying for the future price, which may not be set by the current demand for oil.

That is not supply and demand in the purest sense. But, this is the price of the supply being commanded by what forecasters think a good is worth in the future.

On the other hand, the former Soviet Union was a command economy in almost the strictest sense. But, the misconception of the former SU was that the government controlled, wholly and solely, the means of production. This wasn’t quite the case before Perestroika in the 1980's and certainly not after. The truth lay in the fact that the former Soviet Union, had government control, but the means of production was set between powerful oligarchs that controlled the means of production on behalf of the state. The government, in turn, had the power to- as does every country through the strictest form of eminent domain- "own" the entity, but not in control of the forces that made the goods produced valuable or needed. I guess you can imagine the corruption at the highest level.

The logic of the matter however, is that a state or entity, can only, or, will only, be able to produce the goods that people need or want. Aside from necessities like food and water, if the entity owns the means of production, there is no guarantee, unless the consumer is forced to pay for something unwanted, that anyone at anytime would purchase anything.

This leaves the case open for the second misconception about the SU; the issue that it did not have any competing industries in the same sector. The fact of the matter is, particularly with oil and gas, the SU had several competing government agencies responsible for the market share. The notion that, yes, the government owned the entities was true. However, the same entities were not operating without competition.

With both extremes, market economies and command economies, the Bahamas lies in between neither. For example, we have wholly owned state entities. They are not subject to competition, which is true. The state does not own everything, however.

The Bahamas, from all verbal intent and crude attempt, seems to be patterned after the Anglo-Saxon (AS) economic model. This is a model which proposes the capitalist version of the market economic system, which is then tethered by the Westminster System of governance from the position of parliamentary democracy from the fasciations of ethnic sameness and religion.

This is evident in the predominance of the religious cultural state of being in the Bahamas, with the back drop of US and British influence, the latter having least of which, the political system and the former, with the premium placed on the USA's free market, capitalist ideology.

This isn't to say that this is the best for the Bahamas. Or, for that matter, that we have the capacity to follow this fluid economic model to a tee. In fact, many have supported the idea of drastic measures- most important of which is the defenestration of the AS model and all institutions that subscribe to it. However, the argument that it speaks directly to our cultural experience, from premise that it relates to the origin on our Commonwealth's existence and that of its indigenous people, is something that is obviously incongruent to what the experience is on the ground.

One large fact is that the common law protection for property rights, which underpins the AS model, when we are now in the era of increasing formality of a purposefully pervasive opaque legal structure, on top of the issue that less and less Bahamians have access to real property due to sky-rocketing prices triple to what they were 20 years ago under this current ideological system--in addition to the exposure to what the complexities of intellectual property-which global economy has placed a significant premium- means to Bahamian entrepreneurial ideas and the weak institutional protection for those ideas, signifies to this author, as I assume that it does for allot of Bahamian people, that this system is way beyond inefficient. In fact, it is, perhaps, regressive and at worst, oppressive.

One important point I wish to impart in the idea of fairness, is that the AS model is fluid. But, it has not been maximized by former colonies. For what ever reason, changes still rests on the progenitor and their acknowledgement of what changes former colonies wish to work within that geographical framework. From this aspect, the salience of what is deemed as important macro-economic principles are very strong.

The AS model isn't the only working game or variant in town. While my preference for a Coordinated Market Economy (CME) style is up for another discussion, the extent to which reality of economic adjustment will be continuous, planned or not, whether it is led by a new social order, a new political pecking order or the new economic order, itself, is not.
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