May 12, 2011Dear Sir,The opinion piece by former PLP Senator Phil Perinchief in The Royal Gazette of May 10 entitled “Transforming the Economy” reminded me vividly of the Communist Manifesto written by Karl Marx in 1848. It uses the same terminology, passion and stupid statements such as antagonism between the classes and calls for higher taxes on the rich. In Mr Perinchief’s opinion, the Marxist creed of from each according to his ability, to each according to his need is far superior to that of free market Bermuda which states rewards are earned by those whose contribution and hard work improves the lives of other people.The main similarity to the Communist Manifesto, however, is the total nonsense spouted by Karl and Phil (let me be friendly and call him Phil he can call me Bob). If Phil’s suggestions were taken seriously the economy would not be transformed it would be murdered. Let me explain further.The prosperity of the Bermuda economy rests on four major factors:1. Its location between Europe and North America.2. Its climate.3. The absence of direct taxation.4. Its legal system, law abiding society, and its honesty.There are clearly other principles, but the above four are enough to be going on with, especially as the law abiding society and absence of corruption are at risk of being junked by a dysfunctional government. We cannot do anything about one and two, but with regard to three and four, we are masters of our own destiny and it is clearly in our own self interest to maintain them.However, let me return to the main issues Phil espouses and allow me to state why he is delusional.First, the antagonism between entrepreneur and workers is not what he thinks it is. I am not an entrepreneur but have been a worker ever since I left school at 15 and not once have I been exploited by an employer. If someone thinks he is being exploited, then quit and work somewhere else. I can also think of a few employees who have exploited their employer. Entrepreneurs (or capitalists or people who own businesses) see possibilities where others see headaches and problems and they provide workers with the jobs that allow us to earn a wage which then allows all Bermudians to enjoy a standard of living which is one of the highest in the world. However, Phil believes contrary to the lessons of history that left to their own devices employers would have everyone working as slaves on the corporate plantation.If the two groups were at each other’s throats as Phil states, we would have a standard of living equal to that of Haiti or North Korea about $200 per year (that is not a misprint). What he objects to is how it is distributed. But incomes are not distributed they are earned by people going out to work and creating wealth. Programmes of redistribution do not create wealth; they interfere with and destroy the wealth creation process as can be seen from the history of Russia and Eastern Europe.As things stand now and according to Government statistics Bermudians have an average income (in 2007) of $91,477. The US is around $43,000, and UK about $39,000. In other words, we are twice as well off as residents of the USA or UK. The World Bank reports that more than a billion people do not have access to safe drinking water and 1.4 billion do not have electricity. Compared to almost everyone else in the world those who live in Bermuda have it made. I could go even further and state that even the poorest Bermudian lives in a manner that would make a Mediaeval King jealous, and compared with a rich man 100 years, the average Bermudian has a standard of living that would make Andrew Carnegie jealous. We are at the top of the financial league table and have been there for many years.Some exploitation, and some nonsense spouted by Phil.Bermudians are rich, and Haitians are poor, not from the unjust distribution of wealth and income that people like Phil love to dwell on, but because of inequality of productivity between Bermuda and Haiti. For much the same reason, higher paid people in Bermuda enjoy a bigger salary because their productivity is greater. If accountants were a dime a dozen, they would be paid less than one cent a day. But the Marxist message is that successful business people become rich by exploiting the poor, and must therefore be punished for being rich and successful. That is how it is done in Cuba, for example, but does it work?Secondly, he proposes a price freeze on gouging rapacious and greedy merchants who with impunity push up prices. Even if the violent language he uses had any credibility, he clearly does not understand that prices cannot be controlled, not ever, not anywhere, not anyplace. I will gladly lend him a copy of “40 Centuries of Wage and Price Control” a book which catalogues in minute detail the failure of price controls everywhere, and in every era from Ancient Egypt to the present. All attempts to legislate prices are doomed to failure. He does not understand that economic laws are as constant and as inexorable as the laws of gravity. What he suggests is insane. How can a Government that cannot count in 15 months about 60,000 people in a census manage to control the prices of about 50,000 products that any medium size supermarket carries in stock?Thirdly, he accuses the Government of Sir John Swan with the assassination of the tourist industry, forgetting the prior claims of the BIU following the general strike of 1981 and the massive incompetence of the Department of Tourism. International business has proved to be an excellent employer of Bermudians and a great many people (myself included) have enjoyed happy and remunerative careers in that area. It has also been a major prop of the tourist industry by bringing to Bermuda thousands of visitors both as business people and tourists. International business thrived under the Swan Government and subsequent governments but has recently experienced a small decline, in large part due to the fruitcake six-year work permit rule.Fourthly, this brings me to another mad economic policy, that of introducing income taxes (disguised under the cuddly fuzzy name of progressive taxation system). He also wishes to increase taxation from some mythical group called the rich who, in his opinion, do not pay enough. If people like Phil told the unvarnished truth about tax increases they would say something like this:-I will authorise government officers to take from you before you are paid, or when you buy something in a store, more than you paid last year. I will then skim off an appropriate percentage for myself, my friends, and other assorted cronies. The remainder I will give to voters smart enough to vote for me, and astute enough to understand that without my ability to hoodwink you they would have to work for a living by doing something useful that customers are prepared to pay for.Politicians do not see people as individuals but as groups can be manipulated by giveaways to vote for them. Of course, Phil and his mates would never admit to such views but will make appropriate noises through the press about compassion for the poor, the need for social spending, income re-distribution, how poverty will be relieved, how the economy will be stimulated to do wonderful magical things like provide affordable housing or affordable healthcare. Such ingratiating names disarm criticism and obscure reality. Who could possibly be against government helping the less fortunate? Well I would because first of all it does not help them, and under the pretence of helping the poor government takes away a big slug of everyone’s earnings and makes everyone worse off. Heck it is easy to compassionate when someone else is forced to pay the costs.What his proposals mean is that the public will become poorer, and the governing classes and Phil’s friends will become richer and more powerful. Someone less charitable than me would conclude that income redistribution is less about helping people, and more about controlling them.Am I being unkind to poor Phil? I probably am. Economic understanding is something of a curse because it makes those who criticise kind-hearted notions of the sort Phil proposes appear like flint-hearted monsters. It is no wonder that economics is described as the dismal science. All over the world economics shows how freedom, enterprise and private property create wealth and prosperity, but economics has also a more sombre message. There is always scarcity and the resources that produce prosperity do not fall from heaven, or are delivered by Santa Claus. They have to be produced by hard work.Phil lives in fantasy land where there is a right to food, housing, healthcare, pensions and a hundred and one other things. To him there is, in abundance, all these things and it is only the wickedness of evil capitalists like me that prevents everyone from enjoying all the good things of life. Good things do not have to produced by other people’s hard work, they are just there, a gift of nature from a generous God, a virtual inexhaustible horn of plenty. All government has to do is get its hands on the stuff.International business is in Bermuda for several reasons a major one of which is the absence of direct taxation. Indeed most of them possess an undertaking from Government that direct taxation will not be introduced. To bring in direct taxation would make the six-year work permit rule seem like a policy of farsighted wisdom. Does he really want our incomes to match those of Haiti or North Korea? This would be madness and stupidity of monumental proportions.I have always said the statues of President Franklin Roosevelt and British Prime Minister Clement Attlee, proponents of high direct taxation, should grace Front Street for these two political leaders have done more to cement our prosperity than anyone else I can think of. Maybe Phil wants his statue in Washington for making crazy proposals to end our prosperity.Government has the power to make our economic lives worse, not better. From the ancient Romans to the present, politicians and civil servants do not create anything except perhaps law and order. People working in day to day jobs provide continuing improvements in our living standards and that is done largely under the direction of people that Phil wishes to punish and penalise. Attempts to do good can, in the final analysis produce great harm.Finally, he wants bold, innovative, competent and committed people to come to the wicket. I agree wholeheartedly, but we need such people to recall how prosperous people were in Bermuda only a few years ago when an honest Government minded its business, kept out of the way of entrepreneurs, did not borrow beyond prudent levels, had an efficient police force and education system, had competent honest civil servants, supported a successful tourism and hotel industry, enjoyed a low level of crime, and had plenty of jobs for everyone who wanted to work.Now if we could only regain what we have lost in recent years that would really transform the present economy. Who is up to the challenge? Not Phil.BOB STEWARTSmith’s