Sunday, March 31, 2013

How to balance a budget

The process of “zero-based budgeting” is familiar to everybody who has ever been involved in starting a private business, and to most people who have bought existing businesses. All it means is, justifying every dollar spent. Right away, you can see why it’s not popular with government bureaucrats.

Every new venture of theirs starts with plenty of cash in hand and with instructions to spend it all. Their job is to provide the authorised service within the authorised budget; it is not to minimise expenditure. For existing government services, each annual budget is based on the preceding year’s expenditure. New expenses are required to be justified, but no existing line-item has to be justified ever again until the end of time. It is presumed to be justified, even when it obviously isn’t justifiable.

Whenever bureaucrats say they have cut back on expenses, they mean they have cut back on budgeted expenses, not actual ones. That’s the way they think. “We have cut expenses 10%! Are we being ruthless, or what?” Well, no, the reduced expenses are below the budget for the current year, but higher than last year’s actual. “Government accounting” is a different beast from real-world accounting. The former doesn’t even have to justify a purpose. That, too, is presumed to be justifiable, however many years or decades since it was originally justified.

Zero-based budgeting would require the closing down of Cayman Airways, for instance. Its formal purpose – bringing tourists to Cayman – could be served by paying foreign carriers a few million a year to guarantee a certain number of flights. Five million dollars, tops. We’d still be saving twenty or thirty million each and every year. Is Cayman Airways worth raising taxes for? Oh, please.

The formal purpose just wastes time and money; yet it goes on and on like the Everyready bunny. The true-but-unacknowledged purpose is to provide free trips to and from Florida for the families of government employees, past employees, friends, friends of friends, old Uncle Tom Cobbleigh and all. It’s simply a variation of the petrol-card scam – free use of the public’s assets.

(The total of all the Cayman Airways subsidies – overt and covert – over the years is about equal to the entire Public Debt. That’s irresponsibility of a very high order, surely.)

All these years, you know – all these years! – Cayman could have been running substantial Budget surpluses, not deficits. Ours is a wickedly rich little Island, and we should have no public debt at all. Our local representatives have acted with all the restraint of kids running wild in a candy store.

Well, now the British FCO has turned up and demanded that our local politicians and bureaucrats balance their budgets. Now, they must actually set aside some of the vast sums of taxes and fees that come in. They must stop borrowing. They must face the reality that Public Revenue may not increase year after year after year, and that new taxes are not the best option.

Let’s hope that the visiting FCO team has enough experience and wisdom to apply the concept of zero-based budgeting to all the state bureaucracies. If they don’t, then increased taxes will strangle our economy, sooner or later.

Some readers of these words may never have heard of zero-based budgeting before now, but it’s not a concept I pulled out of my hat. There are hundreds and hundreds of accountants here on the Island who could tell the FCO how it’s done. Those accountants are almost certainly all in the private sector, but the visiting team shouldn’t hold that against them. Come on, you FCO chaps: think outside the box!

Tuesday, March 26, 2013

Cyprus and Cayman

So. Creditors of Cyprus’s banks and government have destroyed the country’s Offshore finance sector, and probably the entire economy. Until last week, not everybody in Cayman had even heard of Cyprus, let alone knew it was an Offshore tax-haven. Not a sophisticated tax-haven like Cayman’s is now, but very like Cayman’s used to be thirty or forty years ago.

Could it happen to Cayman tomorrow? Yes it could. We have all the same weaknesses and vulnerabilities.

Could our local commercial banks become so insolvent as to need bailouts by government? Yes. Could our government become so indebted as to need bailouts by Britain? Yes, indeed. That’s why the FCO people are down here at the moment, to stop that happening.

The British government is itself woefully incompetent in the management of its financial affairs. It too – like Cayman’s – suffers from crony-corruption among its politicians and senior Civil Servants. It too has borrowed on the security of its future revenues – revenues that are now projected to fall a long way short of expectations. Our local rulers are not alone in pledging our grandchildren’s incomes as security for irresponsible borrowings – borrowings that finance our bloated civil service and its fat pensions and unlimited lifetime healthcare.

In Cyprus, irresponsible governance required a levy of 10%-40% on individual and corporate bank balances, to assuage the creditors. Could it happen in Cayman?

Yes, it certainly could. All the talk in our government circles is about increasing taxes. The alternative – cutting wasteful government expenditure – receives no serious attention. There is no real intention to go in that direction. Not one single candidate for election has identified one single dollar that could be eliminated from the government budget. From among such cowards will come our next rulers.

But would our elected rulers ever actually steal money from the accounts of bank customers, the way Cyprus’s elected rulers did? Damn right. The legislation and regulations are already in place! You didn’t know that? Think “dormant accounts”. Already, our government has authorised our banks to steal 100% of all accounts they deem “dormant” – inactive for 12 months, I think it is. If that’s not stealing, what is?

To date, the banks have been kind enough to let us re-activate dormant accounts for free. But the law doesn’t say they must. One day they might decide to levy a fee – 10% of the balance? 40%? – and it won’t even need a change in the law. Exactly as happened in Cyprus.

In Cyprus, all Pension Funds will be forced to invest in bonds issued by the government or any of its agencies. Could it happen in Cayman? Could our Pension Funds really be made to buy shares in or lend to Cayman Airways or The Turtle Farm or Pedro’s Castle? Huh. You betcha!

Back in 1987, when the ruling politicians of the day first proposed compulsory pensions, they drafted a law that required all contributions to be handed over to government, for investment by its cronies. I read the draft law; I know what it said. That’s what all the fuss was about with the Chamber of Commerce, back then. (See Confessions of a subversive in this blog’s Archives of last October.) I bet that old draft is being dusted off right now, even as we speak.

The essential difference between Cayman and Cyprus is that we are a British colony and they’re not. As an independent nation, Cyprus had no restraints on its politicians’ and Civil Servants’ incompetence. Britain monitors what our politicians do – belatedly, it’s true, but better late than never – and its FCO team is currently rescuing us from the mess incurred by our two political parties. God save the Queen, eh?

Friday, March 22, 2013

Bullying and bad manners

The difference between bad manners and bullying is only a matter of degree, when you think about it. Speaking on a cellphone during a meeting is bad manners, shouting on one (except in physical isolation) is bullying. Jumping a queue is bad manners; using force to do it is bullying.

Dog-owners who turn a deaf ear to their animals’ incessant barking are ill-mannered yokels; their failure to stop the nuisance crosses the line into bullying when the beasts wake the neighbourhood every morning. Bullying is leaving a person no peaceful option but to let the bully have his way.

I admit to something of an obsession with barking dogs and their irresponsible owners. Some people with Dog City values moved in across the fence from us a few months ago with two yappy yard-dogs. (“Dog City” is one of our Islands’ noisy slums.) Over the road is a dog that barks off and on all night, owned and uncontrolled by yet another bad neighbour. Actually, she is a wonderful neighbour in many ways. But she has a moral blind-spot when it comes to her bullying dogs. Sigh.

(A recent public petition here in Cayman called for a ban on the importation of Paraquat, which is a strong pesticide used by local farmers against weeds. It is the local householder’s weapon of choice against barking dogs. I wouldn’t use it, but I understand why others do. They (those others) should adapt the slogan of America’s pro-gun lobby. They could brandish placards proclaiming, Paraquat doesn’t kill dogs; sleepless neighbours kill dogs.)

Adult bullies have usually picked up the trait during their childhoods – from families, playmates, schools, and now Facebook. Sometimes their DNAs drive them towards psychopathic cruelty. For members of violent criminal gangs, bullying is a necessary means of survival – as is allowing themselves to be bullied, of course.

Legal gangs of one sort or another practise the art of bullying even in some of the more sophisticated of nations. Today’s police and soldiers (all too often dressed like stormtroopers, in their Star Wars regalia), other uniformed state employees, and of course priests... not all of them, of course, but plenty!

For a priest who has been trained to tell congregations who will and won’t go to hell and suffer eternal torment by the agents of God, it is a small step to tell children to take their pants off and submit to the will of God’s earthly agents. Why should we be surprised that it happens so often?

As we know from media reports from the world’s conflict-zones, whole tribes and nations can take on the aggressive behaviour we associate with criminal gangs. Military invasions and occupations are pretty much inevitable, by cultures that tolerate bullying and extreme bad manners in their communities.

Soldiers who, or whose units, commit atrocities naturally feel superior to any pussies who hold them accountable. Bullies feel contempt for their victims. Contempt dehumanises the victims. Thus, drone-pilots feel no compunction about wiping out villages full of civilians, any more than Air Force bombers and field-artillery gunners did in earlier invasions.

Ah well, war crimes are a far cry from shouting on cellphones in public, and barking dogs at midnight! However, the principle is the same. Bullies are bullies, regardless of circumstances. The meek might indeed inherit the earth, as the Christian Bible tells us; but short of Judgment Day it’s the bullies who hold all the title deeds.

Monday, March 11, 2013

1984 revisited – “Airstrip One”

This is my second post called “1984 revisited”. The first, in November 2010, complained about the American TSA’s operations against passengers in US airports, specifically its practice of grooming young children in such a way as to weaken their resistance to sexual predators. The TSA was and remains today the employer most favoured by child-molesters of both sexes, and its hiring policy doesn’t discriminate against them.

Since I discovered that policy, I have forbidden my Norwegian family from flying through the US to or from Cayman. (That is, I forbid them to fly that way if I am paying for the tickets.) Their other options are via Toronto, Havana, Jamaica or Honduras, from either London or Madrid. London-Nassau-Cayman and back costs me $1000 more each time, but protecting my granddaughters’ private parts from paedophiles is well worth the expense, of course.

Now it looks as though London Heathrow may have to be taken off the list. “Airstrip One”, George Orwell’s dismissive name for Britain in his novel “1984” looks set to fall into line with some of the US master’s practices.

Not the child-molesting, I hasten to say. The UK Border Agency tried that a few years ago, but backed down when threatened by the European Court of Human Rights. Not yet the rubber gloves stuck up selected orifices (the gloves are changed twice daily, whether they need it or not), and not yet the cancer-inducing “backscatter” radiation machine.

What the UK Agency is doing (so far) is testing the public’s resistance, and bearing down hard to see what it can get away with. Hastening to catch a connecting flight to Norway the other week, after an 11-hour overnight flight the other week, our nine-year-old granddaughter forgot to surrender her full bottle of water at the checkpoint in the in-transit area.

With insolent and exaggerated slowness, Big Brother’s goons inspected every single item in the whole family’s carry-on luggage, until the departure-time for the connecting flight had passed. Then they let them go. It was a clear victory for the storm-troopers, causing maximum stress with minimal effort. Well done, lads: gallantry medals all round!

This small incident would be nowhere close to the worst that occurs, I’m sure. But it illustrates the sheer banal nastiness that lies in wait for visitors to Airstrip One. One is left to wonder why British officials do that sort of thing. The actual luggage-searchers are jobsworths, of course, but how did their supervisors earn their stripes? Are they made to rip the legs off live frogs to earn their promotions? What will happen when they are given tasers, as is bound to happen sooner or later?

Cold-blooded, unprovoked meanness to defenceless strangers is not natural to most people. It’s not normal behaviour. It’s the kind of behaviour one expects from Blackwater bullies in Afghanistan and Iraq – savages, who have been trained to reject their humanitarian feelings. Why are people like that hired to harass innocent airline passengers? How did they get their jobs ahead of normal, decent, men and women who applied for the jobs? There must be a reason.

An attractive and cheerful nine-year-old with a bottle of water is not fair game, sleepy or not. Humiliating her was an act of petty meanness that is not easily explained. What a sad fate awaits ordinary visitors in transit at Heathrow, if checkpoints require weary children and their weary parents to run the gauntlet. What a sad place England will have become, a few years from now.

Tuesday, March 5, 2013

Such a waste! (Cayman politics)

There is widespread disenchantment with the Party system in Cayman politics, and nostalgia for the Good Old Days of independent MLAs. Party-politics is blamed for corruption, fiscal mismanagement, low standards of education, and everything in between. In the days before Parties, MLAs were honest and fiscally prudent, their policies produced well-educated school-leavers, and so on and on.

Huh. As if!

Whether in Parties or not, all native-born Caymanian politicians are populists, and always have been. To a man and woman, they decline to identify themselves with anything that could be called a policy, other than protectionism and entitlement for their fellows. They all refuse to espouse any specific fiscal policy. “I will do the best I can”, is their entire electoral platform. Plus, of course, “I will protect you from better educated foreign workers.”

Our government schools are charged with baby-sitting bloodline Caymanians until they are old enough to join the workforce. Thereafter, our Immigration authorities ensure they are given jobs in the private sector if they want, while the Civil Service gives lifetime tenancy to those who can’t hack it in the private sector. My February blog-post “Protection versus Education” sums the situation up pretty well.

As a general statement, any entitlement culture scorns the concept of productivity and responsibility in the workplace. Neither aptitude nor attitude is a factor in populist philosophies, anywhere in the world.

Our electorate traditionally awards victory to candidates whom it trusts to maintain the culture. Some of the candidates are patently honest, and they usually lose gallantly. Some are patently dishonest, and buy their way to positions of influence. “Here, let me lend you $500. You can pay me back after the election if I lose. If I don’t lose, you don’t have to pay me back at all. Deal?” “Deal!” That deal has been common in my 35 years of residence. The old-time political integrity is largely a myth.

Anti-expat sentiment is holding Cayman’s development back in all kinds of ways, and it’s a shame that it is set to continue for the foreseeable future, whoever gets elected this time. In April 2011 I posted, in “An Angered Caymanian”, the text of an abusive email that illustrated the hostility held by a great many of our native-born towards immigrants who (as they see it) have destroyed all that was valued. They brush aside the betrayal of their own political leaders during the past forty years.

Two months from now, there will be 18 MLAs in our Legislature. Every one of them will be a bloodline Caymanian (the FCO insists on that, for its own reasons), and all will have been elected on the promise of protecting “real” Caymanians from competition for jobs. Nobody seriously believes the MLAS will make more than token efforts to educate them instead. Sigh. What can you do?

Some of the candidates are famously xenophobic (or infamously, depending on the viewpoint), and some of them even participated in the ethnic-cleansing** during the hateful retrospective-rollover regime.
**A harsh word, but no other word fits the deportation of thousands of foreigners domiciled here.

So. The replacement of Party hacks without proper policies by independent amateurs without proper policies will not improve the quality of our governance one little bit. Except for the MLAs’ faces, nothing will have changed. Such a waste!