MYTH OR REALITY

Figures and statistics usually paint a totally different picture than emotion or political propaganda, the so-called glory years, and the economic boom that caused fast money to flow as a result of superb economic management was by all statistical accounts more myth than reality.

The so-called economic boom that probably started at the end of 2005 was definitely over by the end of 2007. The deep recession that started in 2008 has roots in the global crisis but was mainly caused by policy decisions and management style. The management style suggests that the politicians of the day believed that Anguilla would progress by borrowing and spending. Anguilla spent itself into a very deep hole; today the corpse of the spending is high debt and no revenue. Public debt increased form a low of 85.1 million in 2005 to a high of 191.4 million in 2009. (It would be interesting to know what the level of debt was in 2000. It is also interesting to note that presently Anguilla cannot afford to maintain most of the capital projects built during this period.) The funds required for debt service increased by 111% between 2005 and 2009. A high portion or 141.5 million of this debt is local; therefore looking at what is happening in other countries with high levels of debt we must question the financial stability of the local lending institutions. Another 16.3 million is owed to suppliers (mainly local businesses) and this amount don’t include statutory bodies.

Looking at the figures it is obvious that public expenditure was out of control during and after the so-called boom. It is also obvious that the public sector was promoted as the engine for economic growth at the expense of the private sector. The public sector was the main employer on the island and this is most likely resulted from the need of the political class to provide patronage and maintain its image as responsible managers. The number of government jobs increased from 994 in January 2006 to 1413 in January 2010 a 42% increase. Since most of the increases occurred in the area of established positions salaries increased from 47.9 million in 2005 to 90.9 million in 2009. Revenue however did not keep pace, in 2005 total revenue collected was 125.2 million. It did reach an all time high of 207.1 million in 2008 before falling to 148.3 in 2009. This amounts to an 18% increase over 2005 but during that same period salaries increased by 90%.

Looking at the figures it is obvious that Anguilla was in serious trouble for several years. The so-called economic boom was not sustained for any period of time. Its lasted a mere two years and during this time the economic managers behaved as if the upward trajectory would continue forever. The figures fail to support claims of superb economic management. It is commonly known in economic circles that capitalism creates a boom and burst economy. Therefore all responsible planning and spending have to take such factors into consideration. Thinking economist would also be aware that wealth is created from production not consumption. A responsible leadership would not have allowed the expenditure increases that occurred neither would it have borrowed money because it was easily available. It would have carefully spent the money borrowed on worthwhile projects and avoid waste. (Some of the payments to landowners for the airport project are nothing short of irresponsible.) A responsible government would have looked at the sources of revenue and determine their sustainability, it is obvious that non tax revenue started to slide from the end of 2008 and tax revenue changed little during the same period. Government realized it had a problem but found it impossible to bring expenditure in line with revenue after allowing the increases in salaries and debt. Corrective action would also have required certain confessions that would have proved suicidal in an election year although in the end death occurred from natural causes.

By: Statchel Warner