HOW PUP GROWTH ECONOMICS DESTROYED BELIZE!

HOW GROWTH ECONOMICS OF THE PUP DESTROYED BELIZE FOR FORTY YEARS INTO THE FUTURE



( taken from the Belize Culture Listserve debates )

ASSAD SHOMAN ASSAILS GROWTH ECONOMICS

We have received an advance copy of Assad Shoman’s recently launched second edition of A History of Belize in 13 Chapters. Shoman assembles and unveils a string of statistical data that shatters any remaining notion that “growth economics,” the economic program of the Musa/Fonseca 1998-2008 administration, benefited the people of Belize.

Shoman points out that “growth economics relied on government pumping money into the economy, often through large private sector companies which it lent money; the funds came from privatization and increasingly, when there was no more to sell off, from borrowing abroad.” This borrowing resulted in “large and persistent public deficits especially from fiscal year 2000/01 until 2003/04 when the total government deficit reached 9.3% of gross domestic product (GDP).”

Citing an Inter American Development Bank report, Shoman illustrates that the economy did grow by an average of 5.6% through the PUP years to 2006. But this growth benefited a very narrow elite – wealthy and well connected Belizeans, not the masses of the people to whom the PUP had promised a more just and equal society.

Indeed, the alarming upsurge of Belizeans living in poverty convincingly indicts the so-called growth economics model. While in 2002, 33.5 percent of the population lived below the poverty line, by 2010, an exhaustive poverty assessment showed that 43.5 percent of citizens were poor, and an additional 13 percent were in danger of sliding into poverty. That’s 188,000 Belizean men, women and children poor or on the verge of being poor. 56 percent of children between the ages of 14 and 17 live in poverty, an increase of 19 percent compared to 2002. Instead of lifting people out of poverty, growth economics made them poorer, by the tens of thousands.

And what defines poverty? Shoman shows that the 142,861 people who are considered poor earn less than $3,587 per year: that’s $9.80 per day. Another 44,936 Belizeans earn just $12.28 per day, far below the minimum wages for a day’s work.

Shoman also highlights the many shortcomings in health and education evident even after the massive doses of growth economics. 16 percent of primary school-aged children are not enrolled; 59.3 percent of children are excluded from secondary schooling; tertiary enrollment is even more dismal, standing at 4 percent, the lowest rate in the entire region. Instead of keeping more school-aged children in school, growth economics put more young people out of school, as monies were diverted from education to paying the high cost of borrowing. And in healthcare, Belize’s infant mortality rate is more than 3 times the rate of 5.5 deaths per 1000 that it agreed to achieve by 2015.

Referring to the expatriation of profits earned from economic activity, an extraction Shoman labels “the Ashcroft factor,” the author tracks the dwindling share of Gross National Income (GNI) that accrues directly to Belizeans. “Real per capita has been falling relatively rapidly since 2003 … real GNI per capita fell by 1.29 percent in 2004, and again 2.7 percent and 1.9 percent in 2007 and 2008. It is this reduction of real income of the typical Belizean that reflects the essential pattern of underinvestment and financing, and which underlies the increase in poverty between 2002 and 2009.” Rather than increasing the share of income for Belizeans, growth economics shrank that share, and allowed for that wealth to be shipped abroad.

Shoman writes of the controversial Ashcroft as “one of the men who has benefitted most from the fabulous wealth of Belize, an English capitalist who in short order ended up owning the biggest local bank, the telecommunications system, several lucrative companies and a whole bunch of politicians from both major political parties, is fond of turning the weary socialist slogan on its head: Profits Before People, he (Ashcroft) declares with a mischievous twinkle in his eye.”

Shoman describes the explosion of government debts under the Musa/Fonseca experiment. “In 1998, total public debt amounted to 55.8 percent of GDP; by 2004, those figures had ballooned to 100.2 percent. The cost of servicing external debt grew from 3.3 percent of GDP in 1998 to 19.4 percent in 2004.”

And if not to alleviate poverty, or to improve health and education service, where were these hundreds of millions going? To answer, Shoman calls upon an IDB study, among other reports, which concluded that “public expenditure was not mainly driven by investments aimed at generating sustainable growth … capital expenditure has been falling during the last five years [2000-2005].” In other words, the tributaries to which this river of debt were diverted included the DFC and Social Security, the agencies that doled out generous loans and loan guarantees to crony companies.

Exposing the infamous process of “securitization,” Shoman had this to say: “The process transformed private debt – owed by the local private sector to DFC and SSB – into sovereign debt. These securities, in fact, were guaranteed by the Government of Belize through the DFC and the SSB, which were issuers of the bonds collateralized with loans to the private sector. “

Those remaining apologists who point to the growth economics years with nostalgia will be smothered by the sequence of facts put together by Shoman. Yes, per capita GDP grew by around 30 percent between 1999 and 2008. But as Shoman discovered, “This 10-year average masks the overall stagnation that has occurred in the last 5 years. Between 2003 and 2008, real GDP per capita barely increased. Indeed, GDP per capital ... peaked in 2000 at 10 percent; the next highest was in 2003, with 5 percent; from 2004 to 2006 it hovered around 0 percent and in 2007 it was actually below zero.”

Whatever GDP per capital growth was achieved came at the unpardonable cost of a doubling of the government’s debt level, with debt service payments six times greater than before the growth economics era (because of the usurious interest rates applied to the commercial-type loans tapped by Musa/Fonseca) and shoved more than 75,000 Belizeans into poverty or near poverty.

“History is replete with ironies,” Shoman writes in his book and surely one of those ironies is that a former PUP Minister and lifelong friend of the former Prime Minister Said Musa would be the person to catalogue in such a compelling manner the stunning crash of growth economics.