Dear Sir,

Recent headlines have prompted me to reflect on Bermuda’s future. In my view, it is clear that public policy is the linchpin for a country’s growth. It rises above external events, geography and the ethnicity of the ruling party. Public policy shapes a nation’s destiny. Consider the stark contrast between North Korea and South Korea: a testament to the profound impact of public policy on long-term development.

What drives this connection? Public policy shapes and influences personal incentives, steering individual decisions that collectively drive overall economic activity. Unfortunately, we find ourselves on the back foot owing to misaligned economic incentives, which is evident in our sluggish median income growth despite the success of international business.

Over the past decade, the median personal income in the United States has surged by 50 per cent, while Bermuda’s growth lags behind at +14 per cent. The favourable gap between median incomes in Bermuda versus the US dwindled significantly. To maintain our overall standard of living as a country, this must be addressed.

Turning to the key part of this letter, let’s consider the personal incentives that exist today across various groups in Bermuda:

1, Government: Incentivised to maintain political power and preserve the status quo

2, High-earning Bermudians: Navigating the political climate, they are inclined to keep a low profile

3, Mid-earning Bermudians: Struggling to make ends meet, losing ground economically

4, Lower-earning Bermudians: Contemplating emigration as income growth trails expenses

5, Retired Bermudians: Considering emigration for similar reasons as lower earners

6, High-earning expatriates: Incentivised to live well in Bermuda for a limited period and export their savings

7, Low-earning expatriates: Incentivised to live frugally in Bermuda and also export their savings

This list includes various groups, demonstrating that everyone responds to incentives. The recent headline indicating that 72 per cent of respondents are thinking about leaving Bermuda should not come as a surprise. Policy change is needed.

How can we rectify this situation? We must address these incentives. I share three suggestions, the last of which rests with all voters:

a, Entrepreneurs need streamlined work-permit processes for expansion. Existing immigration policies appear disproportionately to favour high-earning office workers. A successful economy cannot run on international business alone. Overly restrictive and slow-to-approve work-permit approvals for the wider economy acts as a brake on the economy

b, High-earning expatriates should feel welcome and encouraged to stay long-term, reducing the trend of renting in Bermuda and investing overseas

c, A functioning political opposition is crucial to improved policy. Bermuda’s voters must reconsider their choices at the next election for a more balanced governance. A 30-6 advantage gives the Government little reason to even debate such suggestions, let alone enact them. See attached table for how lopsided the past elections have been. The safe-seat count is summarised in the bottom right.

Continuing with current policy will lead to continued stagnation. Implementing the suggestions above will spur growth, instil confidence in high-earning Bermudians to invest locally, support real estate prices, boost bank lending and enhance overall economic activity. Banks are understandably reluctant to lend into a shrinking population.

In closing, I hope this letter encourages Bermuda’s policymakers to reconsider the incentives they are creating, and for some of Bermuda’s voters to reconsider their next vote.

WILLIAM SOARES

Smith’s

Sources:

https://fred.stlouisfed.org/series/MEPAINUSA646N

https://www.gov.bm/bermuda-employment-statistics

https://www.elections.gov.bm/elections/results.html

Download PDF File

Bermuda Election Results 2003-2020 (1).pdf