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Sunday, July 6, 2014

Mr. Browne and Mr. Greene

All The Leaves Are Brown Again

Dr. Lester Hazlewood-Simon

In 2006 The Daily Observer carried an article, All The Leaves Are Brown. You can read it on my blog, It ended with the prediction that …… “the opposing forces will one day come to see and know that the ALP will only win again when all the leaves are brown.”

Throughout the campaign of the recent general elections, there was a very arresting and counterintuitive reaction to the promise that personal income tax will be abolished. The overwhelming, positive response came from those (the majority) who do not pay personal income tax. On the other hand, many of us who pay personal income tax wondered where on earth (or in heaven, or hell) will the replacement money come from; as if we felt obliged to pay and to issue a warning. Some even wondered what was wrong with the non-paying majority greeting the promise like the best thing since bread, sliced or not.

The study of economics, like the study of all things, has an inherent logic that appeals to the common person in less sophisticated ways than it does to the experts. Despite what was done to lessen the economic burden on the common person, taxing the middle class to the extent that there was less money in circulation for the common person was the reason for the seemingly counterintuitive response to abolish personal income tax.

Money, like blood, has to be in circulation for it to have common good. It cannot stay in one place, like the unaccompanied woman who sits or stands or, worse, lies down, and refuses to jiggle, wiggle, wriggle or waggle to the dancing music of the Mighty Shadow.

The search for what will replace personal income tax and the general question of the movement of money led me to the book on economics that is taking the world by storm. It is Capital in the Twenty-First Century by French economist, Thomas Piketty. He has been hailed as the modern Karl Marx, writing the book of the season that is influencing thousands and forcing economists to think and re-think. Any book on economics that cites the novels of Jane Austen and Honore de Balzac and contains tons of carefully researched data must be good at best or provocative at least. It is both. Read it.

The central theme of the book is the evolution of economic inequality. It speaks more to advanced economies than to those of the Caribbean but it will be foolhardy not to read it to understand capital and inequality, even if the inequality we see in our emerging economies is arguably proportionally less.

When wealth accumulates in the hands of few and money does not trickle down, the economy will not grow despite the growth of private capital. In fact, the analysis of data from the past two centuries informed Piketty that capital does not naturally tend to trickle down but to remain in the hands of the wealthy. Circumstances have to force the unnatural trickle down effect. Or governments will have to tax hoarded wealth.

A direct quote from the Economist magazine will underscore the central dogma of the book. “ Other things being equal, faster economic growth will diminish the importance of wealth in a society, whereas slower growth will increase it (and demographic change that slows global growth will make capital more dominant). But there are no natural forces pushing against the steady concentration of wealth. Only a burst of rapid growth (from technological progress or rising population) or government intervention can be counted on to keep economies from returning to the “patrimonial capitalism” that worried Karl Marx.”

For Antigua and Barbuda, it means that the burst of rapid growth that the government is pursuing fits directly into the equation to balance or offset the hoarding of capital. Hoarding, here? Additionally, with the loss of money from personal income tax, it must mean that the government will collect all the other taxes with neither fear nor favour.

But can you sense there is something missing? Look again at what the Economist magazine says, “…..there are no natural forces pushing against the steady concentration of wealth”. The central question is, what forces can we muster to counteract the unbridled tendency to hoard capital and in so doing encourage spending? Over and over again we hear of the “enabling environment”. Is this simply and only an economic environment?

If the love of money is the root of all evil, surely the world of economics and our survival cannot be based solely on the movement of money, whether is moves slowly, as on a slow boat to China, or trickles down and circulates fast as prescribed by Mr. Browne. There must be something else that makes you want to live here and put your capital to work here; indeed not just live here but be human here, in Antigua and Barbuda.

The article in 2006 in the Daily Observer, addressed the question and idea of the soul of the nation. It made reference to the definition that ‘A nation is a community of mutual obligation that is based on a shared history’.

Money is undoubtedly a unifying, and dividing, force. As we seek to find ways to grow the economy of Antigua and Barbuda, the task of capturing and securing one vital underpinning of the community of mutual obligation may very well reside in how we regard, nurture and celebrate our culture. Maybe this is why we have one composite ministry of Trade, Industry, Commerce and Consumer Affairs, Sports, Culture, National Festivals and Youth Empowerment.

Indeed, for all the leaves to be “Browne”, firstly all the leaves will have to be “Greene”.

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