Wednesday, September 29, 2010
THAT CLICO HOLE ...AGAIN!
There was something very interesting about Finance Minister Dookeran's latest statements regarding (what I suppose can loosely be termed) "the CLICO Affair", and that was about his reference to the existance of "ghost accounts". What the heck could he be referring to? What is a "ghost account" exactly?
Now the following is pure conjecture on my part and I don't know that any of it is true. I put it forward as pure speculation. But then, in the absence of full disclosure we are all going to speculate about what is going on:
What if these "ghost accounts" are in fact accounts that were established for certain persons where no money had actually been deposited? In other words, what if, for example, John Smith was holding a certificate of deposit for, say, $10 million with interest at 10 per cent for, say, five years, but this fictional John Smith had never actually deposited $10 million with Clico in the first place? well, this could be classified as an arch-typical "ghost account". You realise, of course, that in such a case John Smith would not only have the capital of $10 million, but be being paid interest of $1 million a year! Is this why the Government does not want to pay interest on those accounts which apparently include the "ghost accounts"? Because they know that a lot of these holders ... or some of them ... are not really entitled to the money in the first place?
So, the next question would have to be why would CLICO (or CL Financial or any CLICO subsidiary) issue such a certificate? Why indeed? A possible and probable answer could be was that it was issued to John Smith for some sort of "services" that he rendered. But what kind of services? Could it be some sort of pay off? Obviously if this was so then it would have to be some sort of pay off. But for what? A bribe? The question is asked open ended, but you can see how it makes sense to ask such a question. Then, if so who was being bribed? And for what?
Now, if John Smith was some sort of public servant or some sort of politician then the whole thing would begin to make a little more sense. So, the next logical question is obviously whose names are on these "ghost accounts"? And if these "ghost accounts" do exist, why has it taken approximately 21 months for this information to come out?
Because make no bones about it, if there are "ghost accounts" this suggests a massive fraud that goes beyond the CLICO executives and could possibly involve certain politicians. But who?
We need to know why CLICO failed. We need to know when CLICO started to fail. We need to know why no red flags went up immediately, or, if they did go up why was nothing done. Who was responsible? Where were the auditors? Why did they apparently say nothing? Why did the Manning Administration decide to bail out CLICO with taxpayers money but not bail out the Hindu Credit Union? What was the difference? Did it have anything to do with the possible fraud inside CLICO? What? Why hasn't any action been taken to freeze the accounts of the CLICO executives while the investigation takes place? This is done all the time in places like the United States where executives find their assets frozen before any charges are brought in order to safeguard their possible dissipation. Why did Dr. Eurich Bob and Claude Mussaib-Ali resign from the CLICO board last year? Did they see certain things that made them very unhappy? We never got a satisfactory explanation for the resignations of these honourable men. Why not?
There are too many unanswered questions that affect too many honest people. But more and more it is beginning to look like there has been a massive cover-up and the present Administration is not being as open and as forthright as they promised that they would be. And we are left with the obvious question: Why? One thing is clear: People are hurting badly!
Thursday, September 23, 2010
LOOKING AT S.A.U.T.T
The summary firing of Brigadier Joseph, the (until recently) head of the Strategic Anti-Crime Unit of Trinidad & Tobago, known to all and sundry by its acronym SAUTT, has drawn criticism in some quarters. The editorial in one daily newspaper this week complained that this firing as well as the rather curt and summary dismissal of the former Commissioner of Police James Philbert was not right and that these men should not have been put out to pasture the way that they were.
It is difficult to comment on the Philbert sacking without knowing all of the facts. My personal bet is that there must have been something that happened to have caused the abrupt dismissal, and that something is probably of a national security nature. That is the only explanation that makes sense. But I will readily admit to the possibilty that there is another (nonsensical?) reason.
But Brigadier Joseph is clearly a horse of a very different colour. Frankly, I am surprised that he wasn't dealt with before. Let me explain: First of all, SAUTT has spent millions of dollars with no discernible results. We have the infamous "eye in the sky", also known as the blimp which has cost "a pound and a crown" but which has not made a dent in the crime situation. Indeed, over the years that Peter Joseph presided over SAUTT the crime situation got steadily worse. So, from a value for money point of view, what did we get?
Then there is the question of the wiretapping of telephones. Almost everybody who was opposed to the Manning regime believed that his or her phones were tapped at some time or the other. I can't prove it, but I too believe that my phones were tapped from time to time. Indeed, right at the beginning when ANR Robinson had (wrongly) installed Manning as Prime Minister I set up with a friend of mine a little "sting" to see if my phones were being tapped. At that time Manning and Panday were meeting to discuss a possible way out of the 18/18 impasse and were supposed to meet at the Hilton to discuss same. I called my friend (by pre-arrangement) the day before the meeting was supposed to take place and told him that we had a "bomb" to drop at the meeting. I said that we had been meeting secretly with Keith Rowley and that we were going to go to the Hilton meeting and demand that Manning step down and that Rowley be made the Prime Minister. If he refused we were going to go to the President and tell him that Rowley had our support. I said that we had done a deal with Rowley for the Cabinet posts. None of this, of course, was true. And, this was a private conversation between two UNC activists - me and one other.
Well, what happened next was most interesting. Manning cancelled the meeting and the talks broke down. Coincidence? Or was my phone tapped and the conversation reported to Manning? Because make no bones about it, if what I had said was true (and I repeat, it was a complete fiction) then Manning was in serious danger of losing his Premiership and it was definitely not in his interest to have that Hilton meeting.
Now, does this little story prove that there was wiretapping? No. But it certainly does suggest it, doesn't it?
Put another way, speaking personally, my personal opinion is that there was wiretapping of political opponents by SAUTT and there would have to be really conclusive evidence to prove to me that there wasn't. I believe that Kamla's phone was tapped. Can I prove it? No. Do I know that for a fact? No. But you know the old saying about if it walks like a duck ...?
The summary firing of Brigadier Joseph, the (until recently) head of the Strategic Anti-Crime Unit of Trinidad & Tobago, known to all and sundry by its acronym SAUTT, has drawn criticism in some quarters. The editorial in one daily newspaper this week complained that this firing as well as the rather curt and summary dismissal of the former Commissioner of Police James Philbert was not right and that these men should not have been put out to pasture the way that they were.
It is difficult to comment on the Philbert sacking without knowing all of the facts. My personal bet is that there must have been something that happened to have caused the abrupt dismissal, and that something is probably of a national security nature. That is the only explanation that makes sense. But I will readily admit to the possibilty that there is another (nonsensical?) reason.
But Brigadier Joseph is clearly a horse of a very different colour. Frankly, I am surprised that he wasn't dealt with before. Let me explain: First of all, SAUTT has spent millions of dollars with no discernible results. We have the infamous "eye in the sky", also known as the blimp which has cost "a pound and a crown" but which has not made a dent in the crime situation. Indeed, over the years that Peter Joseph presided over SAUTT the crime situation got steadily worse. So, from a value for money point of view, what did we get?
Then there is the question of the wiretapping of telephones. Almost everybody who was opposed to the Manning regime believed that his or her phones were tapped at some time or the other. I can't prove it, but I too believe that my phones were tapped from time to time. Indeed, right at the beginning when ANR Robinson had (wrongly) installed Manning as Prime Minister I set up with a friend of mine a little "sting" to see if my phones were being tapped. At that time Manning and Panday were meeting to discuss a possible way out of the 18/18 impasse and were supposed to meet at the Hilton to discuss same. I called my friend (by pre-arrangement) the day before the meeting was supposed to take place and told him that we had a "bomb" to drop at the meeting. I said that we had been meeting secretly with Keith Rowley and that we were going to go to the Hilton meeting and demand that Manning step down and that Rowley be made the Prime Minister. If he refused we were going to go to the President and tell him that Rowley had our support. I said that we had done a deal with Rowley for the Cabinet posts. None of this, of course, was true. And, this was a private conversation between two UNC activists - me and one other.
Well, what happened next was most interesting. Manning cancelled the meeting and the talks broke down. Coincidence? Or was my phone tapped and the conversation reported to Manning? Because make no bones about it, if what I had said was true (and I repeat, it was a complete fiction) then Manning was in serious danger of losing his Premiership and it was definitely not in his interest to have that Hilton meeting.
Now, does this little story prove that there was wiretapping? No. But it certainly does suggest it, doesn't it?
Put another way, speaking personally, my personal opinion is that there was wiretapping of political opponents by SAUTT and there would have to be really conclusive evidence to prove to me that there wasn't. I believe that Kamla's phone was tapped. Can I prove it? No. Do I know that for a fact? No. But you know the old saying about if it walks like a duck ...?
Tuesday, September 21, 2010
THAT BIG CLICO HOLE
There are several problems associated with the Finance Minister's proposal for dealing with that huge CLICO hole. But probably the biggest one is the absolute lack of transparency and information surrounding this terrible mess. Nobody (outside of, I suppose, the directors, the Minister and certain Central Bank and Finance Ministry officials) seems yo have any idea of exactly what the state of affairs is in that troubled conglomerate, nor does anybody really seem to know exactly what happened.
And this is a very important question. What the @#$%^& happened? How did this huge financial monolith fall so hard and so far? Was there fraud, as some people have suggested? If so, why haven't there been any charges laid? It's been almost two years for crying out loud! But if there was just bad management, where were the regulators? What was the Central Bank doing? Is it true that for several years before the collapse that warning signals were being sent out? What were the auditors saying? Were they giving the group a clean bill of health right up to the end? If so, what is being done about that? And, if they (the auditors) were sounding warning bells, then where were the regulatory authorities?
With the dearth of proper information there are millions of ugly rumours and even more ugly speculations swirling around ... the sum total of which is that absolutely nothing is going to be done to deal with the men and women responsible for this disaster and depositors are just going to have to "suck salt".
But the Minister cannot continue to treat the depositors with what appears to be scant courtesy and great contempt. It's simply not good enough. In a first world country he could never get away with this. But he is getting away with it here. Tells you something, doesn't it? Why can't we be told the whole truth? Is somebody being protected?
And what about the rumours that the prime assets (like the Express and Republic Bank shares, etc.) being quietly sold to "the boys"? Is there any truth in these rumours? Are deals being quietly done? Is this why the Government has come out with this $75,000 cash offer plus a 20 year no interest bond? To clean up the balance sheet and allow the assets to be sold off to "the boys"?
No. there is something smelling here. What it is, I don't know. But everything that has happened with the CLICO affair points to something going on under the surface that we aren't supposed to know about. And the question has to be asked: Why?
There are several problems associated with the Finance Minister's proposal for dealing with that huge CLICO hole. But probably the biggest one is the absolute lack of transparency and information surrounding this terrible mess. Nobody (outside of, I suppose, the directors, the Minister and certain Central Bank and Finance Ministry officials) seems yo have any idea of exactly what the state of affairs is in that troubled conglomerate, nor does anybody really seem to know exactly what happened.
And this is a very important question. What the @#$%^& happened? How did this huge financial monolith fall so hard and so far? Was there fraud, as some people have suggested? If so, why haven't there been any charges laid? It's been almost two years for crying out loud! But if there was just bad management, where were the regulators? What was the Central Bank doing? Is it true that for several years before the collapse that warning signals were being sent out? What were the auditors saying? Were they giving the group a clean bill of health right up to the end? If so, what is being done about that? And, if they (the auditors) were sounding warning bells, then where were the regulatory authorities?
With the dearth of proper information there are millions of ugly rumours and even more ugly speculations swirling around ... the sum total of which is that absolutely nothing is going to be done to deal with the men and women responsible for this disaster and depositors are just going to have to "suck salt".
But the Minister cannot continue to treat the depositors with what appears to be scant courtesy and great contempt. It's simply not good enough. In a first world country he could never get away with this. But he is getting away with it here. Tells you something, doesn't it? Why can't we be told the whole truth? Is somebody being protected?
And what about the rumours that the prime assets (like the Express and Republic Bank shares, etc.) being quietly sold to "the boys"? Is there any truth in these rumours? Are deals being quietly done? Is this why the Government has come out with this $75,000 cash offer plus a 20 year no interest bond? To clean up the balance sheet and allow the assets to be sold off to "the boys"?
No. there is something smelling here. What it is, I don't know. But everything that has happened with the CLICO affair points to something going on under the surface that we aren't supposed to know about. And the question has to be asked: Why?
Monday, September 20, 2010
JUSTICE VOLNEY'S BLUNDER
Justice Herbert Volney's diatribe against the Chief Justice (CJ) last week was wrong on so many levels that it is difficult to know where to start. Perhaps the best starting place would be the question of whether or not the Chief Justice was wasting tax payers money by renting a supergrade house in Goodwood Park. The answer to this is simple: he is entitled to it. If Mr. Volney wants to debate whether or not a Chief Justice should be entitled to a luxury house at State expense, that is another matter. I, for one, would argue that the Chief Justice of Trinidad and Tobago should have a supergrade house. He is, after all, the Chief Justice, and his office should carry with it a certain social status for reasons that hopefully are obvious.
Mr. Volney spoke about the two former Chief Justices living in their own homes, and questioned why the present Chief Justice wasn't doing that. The implication was that somehow this was wrong of Chief Justice Archie not to do as his predeccessors had done. Again, this should not need defending. The present CJ has decided not to live in his house but to live in a State house. He has decided not to collect the tax free housing allowance but to occupy a State house instead. If his predeccessors had done this (i.e., occupy a State house) and Mr. Archie had decided that he was not going to do that but collect the money instead, one rather gets the impression that the former Judge would say that this was wrong. In other words, its heads Mr. Archie loses, and tails he loses again.
And while the reasons that the last two CJ's did this (lived in their own homes) do not need to be discussed at this time, the fact is that they both had very good and legitimate reasons for doing so. Put another way, it was to their personal advantage to do so ... and nothing is wrong with that!
Of probably greater interest though is what will the Prime Minister do about this imbroglio. Mr. Volney has obviously deeply offended the sitting Chief Justice. Mr. Archie has shown commendable restraint so far, but he must be highly annoyed. And Mr. Volney is the Minister whose mandate requires that he deal with the Judiciary on a plethora of matters. How is that going to work? You are going to have two men, who clearly do not like each other, having to deal with each other on a regular basis. The Prime Minister has sought to put a band aid on the problem by saying that the views expressed ny the former Judge were his own personal views and not those of her Government. But surely this cannot be good enough? Mr. Volney has seriously defamed the present Chief Justice and is refusing to apologise. Mr. Volney has also breached the rules relating to Parliamentary privilege. Frankly, the PNM Opposition (if they were on the ball ... which they are not) should report the former Judge to the Privileges Committee of Parliament. Unfortunately, that Committee is always stacked with Government M.P.'s so it is most unlikely that Mr. Volney will be dealt with in a proper manner.In other words, he will probably get off. But the report should be made, for the attack was most certainly a breach of Parliamentary privilege.
The Prime Minister is on the horns of a very obvious dilemma: What Mr. Volney did should result in the very least of his being moved from that Ministry. But the firing of a senior Cabinet Minister, or even a Cabinet re-shuffle so early in the game could result in all sorts of political trouble for the Prime Minister, not the least beimg having to deal with the accusation that her team is not a good one. It would be an admission that her judgement in appointing Mr.Volney to that post was flawed. In other words, Mr. Volney has put his Prime Minister in a very bad political position. I would strongly recommend to the former Judge that he start taking lessons in politics and how to behave as a senior Minister. What you can say in opposition is not always acceptable when you hold the reins of power. And finally, I will also give the Minister a piece of good advice: Be aware that the true opposition in the country will not come from the Opposition inside the Parliament; it will come from the people! And the people are not stupid. You have got a lot of goodwill ... still! But a few more unforced errors like this and you will blow it, not only for yourself, but for your entire team!!
Friday, September 17, 2010
THAT 2010 BUDGET
Now that the Budget debate is over I must confess to a certain disappointment with both the quality as well as the content of the contributions from M.P.'s on both sides of the House. Starting with the Government side first, I am a little concerned over the apparent death of information that has emerged over the Government's plans, hopes and aspirations. Let me give you an example of what I mean: Let's take the deficit of approximately $7 billion. Is it unreasonable to presume that this is going to be used for the CLICO/Hindu Credit Union bailout? If so, how much of this is going to be used for the bailout? What exactly is that bailout going to cost and how exactly does the Government intend to make good on that debt (i.e., the cost of the bailout)?
The question assumes great importance as there are some very "heavy" rumours circulating around the City that the Government intends to put many of the CLICO assets up for sale. The rumours also say that the sale of the various assets have all but been concluded already and thatthe deals have been struck with certain "big players" who have been literally salivating at the thought of gaining control of various plum assets like the Republic Bank shares and the shares in the Express newspaper's holding company (to name but two). Is there any truth to any of these rumours? If so, what is the truth? All of them? Some of them? If only some of them, which "some" are true? Are these "done deals" of the sort being rumoured, in the national interest? If so, why? If not, and assuming (though not accepting) that there is truth in the rumours (either whole or in part) then why are the deals going ahead?
You get the picture. The budget debate was an ideal place to deal with these rather serious rumours and put them to bed one way or the other, either, for example, by denying them outright or by confirming the truth (whatever that might be) and explaining it to our (the citizenry's) satisfaction.
There are other questions for the Government. For example, in the PNM budgets they used to have a line item showing what particular energy projects were slated for the ensuing budgetary year. For example, so many billions for an aluminium smelter. There are no such line items in this year's budget. Does this mean that there will be no big energy projects in the next 12 months?
I also felt that the Finance Minister missed an opportunity in his presentation in that as this was his Government's first budget that he might have set out not just his plans for the next year, but his Government's vision for the next 5 years. Maybe he did do this, but if he did it wasn't clear to me. Was it to you?
But my biggest disappointment in the debate was in the quality of the PNM's response. Dr. Rowley did not come across as a man who really understood what was needed, nor even that he was aware of the history of the recent past. He sounded like a pot hound barking at another pot hound that is a mile away at 3 o'clock in the morning. He also came with downright peurile vague accusations of corruption for which he clearly had no real or any evidence. The country and his Party are ill-served by this sort of leadership. as for members of his team like Donna Cox and Marlene Macdonald ... well, perhaps somebody should tell them that the strength of their arguments is not increased by the strength of their voices. The PNM for the first time in its long history was unable to present itself to the nation in this debate as a real alternative government that can be taken seriously.
On balance the budget gets a passing grade from me. I will be the first to admit that it is always easier to snipe from the sidelines than to be the actual decision maker and there will always be things that will require further explanation. My hope is that the matters that are raised in this post will be expained ... and soon ... together with other matters that haven't been raised as yet. That is what I meant when I said that I was disappointed. I had hoped for more details and better explanations. Will we get them? Stay tuned.
Now that the Budget debate is over I must confess to a certain disappointment with both the quality as well as the content of the contributions from M.P.'s on both sides of the House. Starting with the Government side first, I am a little concerned over the apparent death of information that has emerged over the Government's plans, hopes and aspirations. Let me give you an example of what I mean: Let's take the deficit of approximately $7 billion. Is it unreasonable to presume that this is going to be used for the CLICO/Hindu Credit Union bailout? If so, how much of this is going to be used for the bailout? What exactly is that bailout going to cost and how exactly does the Government intend to make good on that debt (i.e., the cost of the bailout)?
The question assumes great importance as there are some very "heavy" rumours circulating around the City that the Government intends to put many of the CLICO assets up for sale. The rumours also say that the sale of the various assets have all but been concluded already and thatthe deals have been struck with certain "big players" who have been literally salivating at the thought of gaining control of various plum assets like the Republic Bank shares and the shares in the Express newspaper's holding company (to name but two). Is there any truth to any of these rumours? If so, what is the truth? All of them? Some of them? If only some of them, which "some" are true? Are these "done deals" of the sort being rumoured, in the national interest? If so, why? If not, and assuming (though not accepting) that there is truth in the rumours (either whole or in part) then why are the deals going ahead?
You get the picture. The budget debate was an ideal place to deal with these rather serious rumours and put them to bed one way or the other, either, for example, by denying them outright or by confirming the truth (whatever that might be) and explaining it to our (the citizenry's) satisfaction.
There are other questions for the Government. For example, in the PNM budgets they used to have a line item showing what particular energy projects were slated for the ensuing budgetary year. For example, so many billions for an aluminium smelter. There are no such line items in this year's budget. Does this mean that there will be no big energy projects in the next 12 months?
I also felt that the Finance Minister missed an opportunity in his presentation in that as this was his Government's first budget that he might have set out not just his plans for the next year, but his Government's vision for the next 5 years. Maybe he did do this, but if he did it wasn't clear to me. Was it to you?
But my biggest disappointment in the debate was in the quality of the PNM's response. Dr. Rowley did not come across as a man who really understood what was needed, nor even that he was aware of the history of the recent past. He sounded like a pot hound barking at another pot hound that is a mile away at 3 o'clock in the morning. He also came with downright peurile vague accusations of corruption for which he clearly had no real or any evidence. The country and his Party are ill-served by this sort of leadership. as for members of his team like Donna Cox and Marlene Macdonald ... well, perhaps somebody should tell them that the strength of their arguments is not increased by the strength of their voices. The PNM for the first time in its long history was unable to present itself to the nation in this debate as a real alternative government that can be taken seriously.
On balance the budget gets a passing grade from me. I will be the first to admit that it is always easier to snipe from the sidelines than to be the actual decision maker and there will always be things that will require further explanation. My hope is that the matters that are raised in this post will be expained ... and soon ... together with other matters that haven't been raised as yet. That is what I meant when I said that I was disappointed. I had hoped for more details and better explanations. Will we get them? Stay tuned.
Tuesday, September 14, 2010
EXPOSING THE MYTH OF MINIMUM WAGE
Finance Minister Dookeran has managed to keep the new People's Partnership (PP) Government on an even keel. While the budget cannot be described as breaking new ground or as being brimful with new and innovative ideas, most responsible commentators have given the budget a more than passing grade and say that they expect that the economy will right itself in a relatively short period of time. At the moment there seems to be no reason why we ahould not accept the general consensus and congaratulate the Finance Minister. he certainly seems to have created a much needed confidence in the business sector. And without confidence no Government can succeed. Just look at Patrick Manning's regime for a classic example of how to fail and you will understand what I mean.
But what has me more than a little agitated is the nonsense that spews from the mouths of certain politicians and trade union leaders concerning minimum wage. 'The minimum wage must be raised to at least $20' more than one of these so-called leaders have spouted during the recent general elections and afterwards. I even read a report where Ancil Roget, the head of the powerful OWTU, has expressed his disapointment over the fact that the PP Government has failed to raise minimum wage.
These politicians and trade unionists are either being fundamentally dishonest or are really more stupid than they look (or both) when they call for a raising of the minimum wage. Let me state quite categorically a fundamental fact of economics and life: Minimum wage has nothing to do with helping poor people or low wage earners make a better living. Minimum wage has every thing to do with raising a country's productivity! You can test this in several different ways, but for the sake of keeping this short (and hopefully readable) I will use only two different examples:
Example One: The countries in the world which have the highest productivity are the ones with the highest minimum wage. The countries in the world with the lowest productivity have the lowest (or no) minimum wage.
Example Two: Let's say that you have a small mechanics shop where you employ two young boys to sweep out the garage and help with minor repairs every day. You pay them each teh minimum wage ... $9 per hour for 8 hours a day at 5 days a week. In other words, your wage bill is $720 per week ($9 x 8 hours per day x 5 days a week x 2 boys). If minimum wage were to be doubled to, say, $18 per hour, your wage bill would go up to $1,440 per week. The problem is that you aren't making enough to pay those wages. The only way you can survive is to keep one boy and lay off the other. The one that you keep now has to do the work of two ... in other words, his productivity now has to be twice what it was. The one who has been laid off either has to go and re-train in order to get a better job, or has to understand that when he does get another job he is going to be required to work harder than he did before. In other words, for both boys their productivity is forced to increase.
I am sure that you get the point. And politicians, despite what they may say on the campaign trail, understand this fundamental fact that minimum wage is always about productivity and nothing else. And you can see from the two examples above that too great an increase in the minimum wage can and will result in serious ditortions in the labour market as marginally unproductive and/or unproductive workers are laid off.
The new Government has started well ... with a few hiccups, that is true ... but they have started well. One of the things that they must do is to remain honest and true with the people. At this time there is no reason to doubt that they will do just that!
Finance Minister Dookeran has managed to keep the new People's Partnership (PP) Government on an even keel. While the budget cannot be described as breaking new ground or as being brimful with new and innovative ideas, most responsible commentators have given the budget a more than passing grade and say that they expect that the economy will right itself in a relatively short period of time. At the moment there seems to be no reason why we ahould not accept the general consensus and congaratulate the Finance Minister. he certainly seems to have created a much needed confidence in the business sector. And without confidence no Government can succeed. Just look at Patrick Manning's regime for a classic example of how to fail and you will understand what I mean.
But what has me more than a little agitated is the nonsense that spews from the mouths of certain politicians and trade union leaders concerning minimum wage. 'The minimum wage must be raised to at least $20' more than one of these so-called leaders have spouted during the recent general elections and afterwards. I even read a report where Ancil Roget, the head of the powerful OWTU, has expressed his disapointment over the fact that the PP Government has failed to raise minimum wage.
These politicians and trade unionists are either being fundamentally dishonest or are really more stupid than they look (or both) when they call for a raising of the minimum wage. Let me state quite categorically a fundamental fact of economics and life: Minimum wage has nothing to do with helping poor people or low wage earners make a better living. Minimum wage has every thing to do with raising a country's productivity! You can test this in several different ways, but for the sake of keeping this short (and hopefully readable) I will use only two different examples:
Example One: The countries in the world which have the highest productivity are the ones with the highest minimum wage. The countries in the world with the lowest productivity have the lowest (or no) minimum wage.
Example Two: Let's say that you have a small mechanics shop where you employ two young boys to sweep out the garage and help with minor repairs every day. You pay them each teh minimum wage ... $9 per hour for 8 hours a day at 5 days a week. In other words, your wage bill is $720 per week ($9 x 8 hours per day x 5 days a week x 2 boys). If minimum wage were to be doubled to, say, $18 per hour, your wage bill would go up to $1,440 per week. The problem is that you aren't making enough to pay those wages. The only way you can survive is to keep one boy and lay off the other. The one that you keep now has to do the work of two ... in other words, his productivity now has to be twice what it was. The one who has been laid off either has to go and re-train in order to get a better job, or has to understand that when he does get another job he is going to be required to work harder than he did before. In other words, for both boys their productivity is forced to increase.
I am sure that you get the point. And politicians, despite what they may say on the campaign trail, understand this fundamental fact that minimum wage is always about productivity and nothing else. And you can see from the two examples above that too great an increase in the minimum wage can and will result in serious ditortions in the labour market as marginally unproductive and/or unproductive workers are laid off.
The new Government has started well ... with a few hiccups, that is true ... but they have started well. One of the things that they must do is to remain honest and true with the people. At this time there is no reason to doubt that they will do just that!
Thursday, September 2, 2010
THE IMPOVERISHMENT OF VENEZUELA
Hugo Chavez came to power in late 1998 on a populist wave that sent tremors down the spines of the country's elite. Almost to a man every single upper class or upper middle class Venezuelan expressed loathing for Chavez and the change which he represented. But Venezuela's social and economic progress did not reflect what had happened in the rest of the world. To a large extent, the attitude towards the lower economic classes evinced by the upper and upper middle classes was eerily similar to the attitudes of their counter parts in Trinidad in 1959. The country was just waiting ... no, begging for somebody like Chavez to come along. He was, you might say, an accident waiting to happen. And when he finally burst onto the scene the poor flocked to his banner in numbers that no Presidential candidate had ever seen before.
But his promise of a better tomorrow has been squandered by his complete failure to understand that the world has moved away from the socialist rhetoric of yesteryear and his worshipping at the feet of one of the world's worst dictator's, Fidel Castro ... a man who has beggared his country by his stubborn adherence to socialist policies and principals which have all been disproved by bitter experience... has not helped matters any. Cuba is today one of the poorest countries in the Western hemisphere. But that's another story.
Instead of realising that he had a unique opportunity to become one of Latin America's greatest heroes by utilising Venezuela's vast oil resources for the benefit of his people, President Chavez chose instead to declare a virtual war on all who dared to oppose his ideology. It is perfectly true that Venezuelan society needed to change, and to change radically. It is also true that wrenching social change is never easy, and it is more than likely that those opposed to him would never have embraced him no matter what he did. But history has shown again and again that extremism, especially in politics, is never a good thing and that it will usually produce the exact opposite of what is really intended. Indeed, it is noteworthy that Lula in Brazil (a man who is probably just as left leaning as Chavez, and who came to power in a country that also needed serious social and economic reforms) has managed to achieve great social and economic change in Brazil to the great benefit of all Brazilians in more or less the same period. In other words, one has to question seriously whether Chavez ever understand the word "governance". Because today Venezuela is in a crisis to which there does not appear any answer that could bring a modicum of hope to thinking people.
Venezuela's official exchange rate is now around Bolivars 2,500 to the US dollar. The black market rate is at about 8000 Bolivars to the dollar! And the answer to that from President Chavez is that persons caught trading will be locked up! Yeah! Right! And this will engender confidence in the economy? In the currency? In the country? Exchange control is a tool that governments which have no confidence in their ability to control their economies institute. It is supposed to ensure fiscal as well as exchange rate stability. In real life, all exchange control does is create a further lack of confidence in the economy and a black market in which the real value (i.e. the market value) of the currency is traded to the detriment of the ordinary citizen.
Venezuela's annual inflation rate is well over 20 per cent. There are shortages of basic food items in the groceries in Caracas. The other day it was sugar and milk. The cost of everything has gone through the roof and ordinary Venezuelans are "catching their tails" to make ends meet. There has been no new investment of any significance in plant and machinery by manufacturers who are gradually closing down. Venezuela's import bill continues to climb. Unemployment has risen and life is harder now than it was, say, ten years ago.
There are Congressional elections due on September 26th. Opinion polls show that the Opposition forces are running just about even with the support for Chavez and his Unified Socialist Party. But new rules as to how many representatives each State can send to Caracas may make it difficult for the Opposition to win control.
On top of that there is the issue of corruption. The accusations and stories are so many that it is difficult not to believe that there is a lot of "fire" behind this particular "smoke". Indeed, a new wealth class has arisen in the last twelve years. The Chavistas are now the ones with the money.So much so that you can be forgiven if you go to Venezuela today in thinking that what the Venezuelans got twelve years ago was not change, but exchange!
Then, of course, there is crime. More people are being killed annually in Venezuela than in Iraq! Daylight robberies and kidnappings are virtually commonplace. No Venezuelan goes out into the street with a gold watch or any kind of jewelry again. And the conviction rate is worse than good old T&T's!
Underlying all this is the economy. How much longer can Chavez keep things ticking over? I don't know. But sooner or later reality is going to bite. what will happen then is anybody's guess. I wish that I could be more hopeful. The country is physically blessed and is beautiful. Venezuelans are by and large a warm and generous people. They deserve better.
Hugo Chavez came to power in late 1998 on a populist wave that sent tremors down the spines of the country's elite. Almost to a man every single upper class or upper middle class Venezuelan expressed loathing for Chavez and the change which he represented. But Venezuela's social and economic progress did not reflect what had happened in the rest of the world. To a large extent, the attitude towards the lower economic classes evinced by the upper and upper middle classes was eerily similar to the attitudes of their counter parts in Trinidad in 1959. The country was just waiting ... no, begging for somebody like Chavez to come along. He was, you might say, an accident waiting to happen. And when he finally burst onto the scene the poor flocked to his banner in numbers that no Presidential candidate had ever seen before.
But his promise of a better tomorrow has been squandered by his complete failure to understand that the world has moved away from the socialist rhetoric of yesteryear and his worshipping at the feet of one of the world's worst dictator's, Fidel Castro ... a man who has beggared his country by his stubborn adherence to socialist policies and principals which have all been disproved by bitter experience... has not helped matters any. Cuba is today one of the poorest countries in the Western hemisphere. But that's another story.
Instead of realising that he had a unique opportunity to become one of Latin America's greatest heroes by utilising Venezuela's vast oil resources for the benefit of his people, President Chavez chose instead to declare a virtual war on all who dared to oppose his ideology. It is perfectly true that Venezuelan society needed to change, and to change radically. It is also true that wrenching social change is never easy, and it is more than likely that those opposed to him would never have embraced him no matter what he did. But history has shown again and again that extremism, especially in politics, is never a good thing and that it will usually produce the exact opposite of what is really intended. Indeed, it is noteworthy that Lula in Brazil (a man who is probably just as left leaning as Chavez, and who came to power in a country that also needed serious social and economic reforms) has managed to achieve great social and economic change in Brazil to the great benefit of all Brazilians in more or less the same period. In other words, one has to question seriously whether Chavez ever understand the word "governance". Because today Venezuela is in a crisis to which there does not appear any answer that could bring a modicum of hope to thinking people.
Venezuela's official exchange rate is now around Bolivars 2,500 to the US dollar. The black market rate is at about 8000 Bolivars to the dollar! And the answer to that from President Chavez is that persons caught trading will be locked up! Yeah! Right! And this will engender confidence in the economy? In the currency? In the country? Exchange control is a tool that governments which have no confidence in their ability to control their economies institute. It is supposed to ensure fiscal as well as exchange rate stability. In real life, all exchange control does is create a further lack of confidence in the economy and a black market in which the real value (i.e. the market value) of the currency is traded to the detriment of the ordinary citizen.
Venezuela's annual inflation rate is well over 20 per cent. There are shortages of basic food items in the groceries in Caracas. The other day it was sugar and milk. The cost of everything has gone through the roof and ordinary Venezuelans are "catching their tails" to make ends meet. There has been no new investment of any significance in plant and machinery by manufacturers who are gradually closing down. Venezuela's import bill continues to climb. Unemployment has risen and life is harder now than it was, say, ten years ago.
There are Congressional elections due on September 26th. Opinion polls show that the Opposition forces are running just about even with the support for Chavez and his Unified Socialist Party. But new rules as to how many representatives each State can send to Caracas may make it difficult for the Opposition to win control.
On top of that there is the issue of corruption. The accusations and stories are so many that it is difficult not to believe that there is a lot of "fire" behind this particular "smoke". Indeed, a new wealth class has arisen in the last twelve years. The Chavistas are now the ones with the money.So much so that you can be forgiven if you go to Venezuela today in thinking that what the Venezuelans got twelve years ago was not change, but exchange!
Then, of course, there is crime. More people are being killed annually in Venezuela than in Iraq! Daylight robberies and kidnappings are virtually commonplace. No Venezuelan goes out into the street with a gold watch or any kind of jewelry again. And the conviction rate is worse than good old T&T's!
Underlying all this is the economy. How much longer can Chavez keep things ticking over? I don't know. But sooner or later reality is going to bite. what will happen then is anybody's guess. I wish that I could be more hopeful. The country is physically blessed and is beautiful. Venezuelans are by and large a warm and generous people. They deserve better.
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