REPORT #64 May 1999

Produced by the Belize Development Trust
May 12, 1999. The announcement of the resignation of Treasury Secretary Rubin in the USA comes as no surprise. After eight years of economic boom, of which Secretary of the Treasury, Rubin is credited with six years of the continuing boom; while the rest of the world economies collapsed around him, the accolades he is receiving are high from all and sundry.

The sad thing is; that while his overall policies would work in Belize, they can never be implemented. Under the 200 year historical record of political party controlled parliamentary systems, especially from Europe; including particularly central European countries of agricultural bias with limited industrial capacity; our system of government, has always been a total failure, ending in devaluations, inflation, massive foreign debts and bankruptcy. There are dynamic reasons for this, beyond the ability of humans to control, within the structure of such governing systems. No matter how well intentioned, the elected representatives in our structural governing system in Belize, the political structure itself precludes a similar success to what the USA has enjoyed these last eight years.

Rubin was a pro market forces economist. He himself, while working for Goldman Sachs earned a personal fortune estimated at $50 million. Then he was tapped by Clinton and the Democrats for Secretary of the Treasury. If money can be a measure of economic intelligence, then Rubin had scored high.

What did he do, that created an eight year boom in the USA, while the economies of most of the rest of the world collapsed around the USA? Essentially, he believe in letting competition and market forces provide the quick changes necessary to settle economic disturbances outside of the norm. He was the enemy of monopolies. Nor did he believe government itself, particularly the Federal Government, had any business in trying to control market forces and the economy. The Democrats are noted for their social programs and conscience, for big government solutions to social problems. The Republicans for their lean toward capitalist big business. But Rubin as a social Democrat appointee, showed how in the battle between socialism and capitalism, you could use capitalist incentives and the role of profit, to create social development, superior to any that could be done by an increase in bureaucracy size and government regulatory controls. Rubin pioneered the capitalist scheme of tax credits to steer corporations willing to establish businesses in poverty ridden inner cities. Where there is a profit, there the capitalists will go. So it proved in practice in the real world. Where big government failed by regulation and bureaucracy management, he let market forces and the profit motive do the job.

Rubin masterminded Clinton's greatest economic achievments by enforcing government strict fiscal discipline. He converted a running record of chronic federal budget deficits into abundant annual surpluses. The deficit in the USA was $290 billion when Clinton was elected in fiscal 1992. (Belize in 1999 has a deficit of about 3/4 billion, after six months of the PUP in power). Surpluses are the norm now in the USA. ( Foreign debt is the norm forever in Belize under this system ) Projections are to total $2.3 trillion surpleses over the next 10 years in the USA. (In Belize, under our governing system, the deficit is projected to grow in the next five years to $1.1 billion and $1.8 billion in 10 years.)

The turnaround in the USA by Rubin was remarkable. His methods were simple. No grand costly initiatives at Federal government expense. The discipline of tight balanced budgets and harnessing the effectiveness of private markets. Holding the rein on government expansion and reducing it, in many cases. "Respect for market forces more than governmental interference was Rubin's guiding theme." This is not possible in Belize. With appointed cronies of the party leader in cabinet ministerial positions, even if some are excellent men with high credentials, the dynamics of political patronage, payback, bleating relatives wanting government jobs, coupled with a government by political favor and "discretion", rather than a government by laws, prohibits a cost effective government. European history over 200 years proves that.

What hinders any particular economic Guru in Belize, even a successful one like Fonseca, is the political structure of government that we use here. European history shows us, that despite having the odd person with excellent abilities, there will be enough political party opportunists in government to ruin the best laid intentions of mice and men. There are not enough layers in Belizean government to decentralize the power structure and the effects of one corrupt individual. Always, history shows us in comparable countries to Belize, there are hordes of people in towns and cities, begging favors from controlling political party politicians and influential bureaucrats in the centralized system, to get them a government job. A salary for cash flow in what is otherwise a seasonal agrarian society. Education is partly to blame. The town people are not educated to exploit the natural resources of the country. They lean toward desk and academic education; which leaves thousands of them educated but poor.

It is a combination of things in Belizean structured political management. It is "leadership" instead of management. It is a political party "winner take all" political structure from colonial control times. It is "ministerial discretion" or law by political fad, or favor; instead of law by laws, equitable to all. This breeds lawlessness and anarchy, eventually revolution, or banditry. Micro-management, by well meaning, or even corrupt Cabinet Ministers, interfer with the natural play of market forces finding equilibrium. Exploitation of the political system by party hacks, solely to gain a salary and perks for themselves, friends and relatives, because they cannot effectively run a business. The need for a winner take all political party, to pay off debts, patronage and buy votes and support; which exorbitant costs require the need for foreign loans to pay the high costs of party control and dominance. The use of government contracts to line the pockets of cabinet ministers, through (friends - "bribes"),or relatives.

The list goes on. Our system has always failed because of the political structure of European political party parliamentary controls. And it always will. Better would be a Co-operative Government Management system. In which, villages and towns would be one vote in a district government, matched by rural votes in the same district government. From these would come Senators and Legislators and the Cabinet, in a structure of Federated Co- operative Management. Then, as 35 years of Belizean History has shown in Co-operative political management; we would see a new Belize growing and serving it's people, with social programs and worthwhile economic development, as needed by the people on the ground at grass roots level.

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