•This is the second and final part of Robert Stewart’s opinion piece on the economy

By Robert Stewart

Many Bermudians seem to be engaged in a process of mass deception. They seem to believe that there are unlimited government funds or government magically has an inexhaustible horn of plenty somewhere in the Ministry of Finance.

To repeat, the government has no money of its own. What money it spends must be taken from the people, or borrowed in the name of the people. When it takes money from some people and gives it to other people, it is engaging in legal plunder.

If a private person was to do the same thing, we would call it theft. When the government does it, we euphemistically call it income re-distribution. But that is exactly what thieves do — they redistribute income.

Avoiding specifics and concentrating on warm fuzzy phrases such as affordable healthcare makes difficult questions of “who pays” magically disappear.

The real issue which Jason Hayward and Charles Jeffers ignore is this: can a government which is broke continue to expand its social welfare programmes?

Social welfare programmes require funds, cash, dollars, resources, more government officials — but there is no money. Unlike other countries we do not have a central bank to print money. The cupboard is bare, the well is dry and our collective wallet is empty.

Many voters don’t know this and don’t care. Most politicians do know this but don’t care, which is why we are in a gigantic hole.

This brings me to the stratospheric level of our debt.

The debts of Bermuda Government are huge, and were outlined 2 years ago by the SAGE Commission and by the Minister of Finance in his recent budget. Few people paid attention.

Our total debt amounts to around $5 billion. That is about $100,000 for every man, woman, child, or pensioner. It is about $500,000 for a family of five — this is not chickenfeed. And this does not take into account private debt such as unpaid utility bills.

When we are in so much debt, it is not possible for Government to pay extensive welfare benefits, no matter how much they are justified and no matter how much they are needed.

Politicians speak vaguely about taxing the rich whose taxes will pay the cost. Who are they? What does rich mean? And what happens if the rich decide to go and live somewhere else? That means less government revenue. People who are rich are unlikely to hang around to be plucked like a goose.

The only way Bermuda can get out of the financial coffin it is in, is by improving the economy so that people can get back to work.

This is a huge subject by itself and is outside the scope of this article — except to say that we in Bermuda have to get back to the sound economic principles that made us such a success in the recent past.

Unfortunately, many politicians neither know, nor care, about sound economic principles because reminding voters of our precarious financial position does not win elections.

But does welfare really help the disadvantaged?

The late US politician Daniel Moynihan, a lifelong New Deal liberal and accomplished social scientist, warned that “the issue of welfare is not what it costs those who provide it but what it costs those who receive it.”

The history of welfare, or socialism, helping people to overcome their disadvantages is terrible. In the same way that a Ponzi scheme or chain letter initially succeeds but eventually collapses, government generosity may show early signs of success. But any accomplishments quickly fade as the fundamental deficiencies are exposed. It is the initial illusion of success that gives government spending its pernicious, seductive appeal.

In both the UK and USA, the welfare state has created a monster, the results of which can be summarized as follows:

1. It has made people poorer than they would otherwise have been.

2. It has created a permanent class of unemployables – go to Detroit or Liverpool and see for yourselves.

3. It has depressed millions of people because they are wholly dependent on others.

4. It has encouraged broken parenting, and caused millions of children to suffer misery and under-achievement.

5. Crime has increased because of broken parenting and unemployment.

6. Government health services are increasingly unable to cope.

7. Government schools have left millions of people illiterate and innumerate.

8. It has created ghettos of vandalism, crime and fear in many cities.

9. Old people have been neglected.

10. People generally are less decent and civil.

What are the reasons for the failure of welfare:

1. It is a disincentive to work and marriage.

2. Benefits have been given too freely.

3. Benefits have encouraged broken parenting.

4. Parents of children at school have limited, or no, power over the system.

5. Government money is spent unwisely.

6. But most of all, people who are not allowed to act responsibly become irresponsible.

Good intentions do not always result in positive outcomes. The road to hell is paved with good intentions and that has been the lesson of the creation of government-provided financial assistance, or the welfare state.

Government welfare tends always to harm the people it claims to help. It makes them weaker, less self-determined and less free.

The television programme on HBO Shameless is an excellent parody of how government spending on financial assistance makes a terrible problem even worse. How many “Franks” do we want to create?

The examples of what has happened elsewhere in the world is a warning to Bermuda. We can and should learn from their mistakes. As F A Hayek once asked “Is there a greater tragedy imaginable than when trying to do good we should in fact unwittingly produce the very opposite of what we have been striving for?”

Finally, let us not fool ourselves. Bermuda is currently up to its eyes in debt — there is no money to throw at social problems. The financial situation is dire. Spending money you do not have is not only stupid, it is immoral.

The oft-quoted Book of Proverbs says that “The borrower becomes the lender’s slave.”

It would indeed be a great irony if Mr Hayward and Mr Jeffers, both honourable and thinking people, inadvertently led Bermudians back to slavery.

•Robert Stewart is the author of A Guide to the Economy of Bermuda. Mr Stewart is part of a forum focusing on the economy to be featured on Channel 82 in the coming weeks.