How to Fix the Belizean Economy

By Bill Lindo

Belize City, Feb 16^th 2021: On February 11^th, the new government of Belize released a note on the “Analysis of the State of the nation’s Economy” in which the Ministry of Finance set out the terrible condition of Belize’s economy in an effort to convince the general public that severe austerity measures are required to right the ship of state.

The numbers that I will quote below come from the Central Bank of Belize’s “Monthly Economic Highlights, Nov 2020”.

This article will be in three parts. First, let’s settle some theoretical stuff about how economies work. Second, we will discuss the numbers as presented by the Central Bank, and third how we can fix the problems using George Price’s mixed economy, and not the brutal austerity as promoted by the British/Neoliberal Parasitic model.

The Theory

In the 190+ countries of the world, the economies of the vast majority are mostly based on what was termed in the nineteen century as the British System of Capitalism – today we call it globalization or neoliberalism. Others have been to refer to it as handbag or parasitic models of Capitalist economics. A few countries still practice a version of Communism, but after 1990 this system became virtually extinct.  The other version of Capitalism known to the world since 1789 is called the American System or American School of Political Economy. It was invented mainly by Alexander Hamilton and after his assassination went into disuse until it was revived by America’s greatest economist and the main founder of the Republican Party of the United States – Henry Charles Carey, the economic advisor to United States President, Abe Lincoln.  

The major concepts of the American School that distinguish that version of Capitalism from the British School are:

1. Most Importantly — Exploiting nature rather than men.    
2. Tariff Protection of local agriculture and manufacturing because free trade has always benefitted the strong at the expense of the weak.    
3. High wages to workers, because as E. Peshine Smith, wrote: “In order to make labour-cheap, the labourer must be well-fed, well-clothed, well-lodged, well-instructed.”  
4. Money creation is a public utility and should be under the control of elected representatives of the people, not controlled by private individuals for private gain and control.  
5. Technology and innovation always causes new methods to enter production and thus profits and wages don’t diminish but instead leads to higher productivity and thus higher wages to workers. Therefore, the theory of diminishing returns is not valid to physical reality
6. A view of soil fertility and agricultural productivity as a product of capital investment – not nature.  Science is the way to solve the problem of “mining the soil”.   
7. Public infrastructure as a means to lower costs in an industrial society by introducing new methods of production and communications, and the public support of research and development. Agriculture and manufacturing industries need a glue to hold them together. That glue is infrastructure.
8. Government intervention in an economy. Government as the “brain” must put a bridle on corporate bodies, and must establish the pursuit of happiness as a natural right of citizens. In Belize this principle is enshrined in the PUP’s Constitution as a sacred duty of government to create full employment and completely end poverty.  The truth is that Belize’s private sector has created no new jobs.

Recently I looked at the syllabus being used by the University of Belize in the teaching of economics. I was shocked. The theory on international trade is pure foolishness. Some would say silly. “Errors and omissions” make no appearance, nor do things such as capital flight, smuggling, fictitious transfer pricing, and money laundering are not covered.  Why? These omissions are necessary to steer trade theory toward the destructive conclusion that any country can pay its foreign debt by any amount just by lowering wages enough to pay its foreign creditors. All the government needs to do is to devalue the cost of local labour by “labour market reforms” and austerity programs. For the last 30 years this theory have been proven false, but the IMF insists that it must be followed, especially now with Covid 19.

The IMF has made it clear that in order to receive loans, countries must abide by their long-held pre-conditions – increase taxes, reduce the wage bill. The Said Musa government resisted them for 10 years and the Dean Barrow government have also resisted them for 12 years.  Now the story is being crafted to seem like we have no other option but to engage in an IMF programme.

Popular morality usually blames the victims — individuals and governments for going into debt. The trick in this ideological war is to convince debtors to imagine that the general prosperity of the nation depends on paying bankers and making their shareholders and bondholders rich.  What one economist has called a “Stockholm Syndrome” in which debtors identify with their financial capturer.

Then there are the myths (lies) being taught at our Universities on money supply. The theory is that the new money as debt created by the bankers are lent to the private sector so they can create new jobs, or investment in capital goods. In fact the schools insist that the bankers are doing a wonderful service by allocating the savings of people who are willing to forego the pleasure of spending now and giving these funds of depositors to people who are willing to take risks and increase the quantity of jobs in the society. Belizeans, go to the Bank of England web site and look under “Publications” for March 2014, “Money Creation in the Modern Economy” to see that new money is created when a commercial bank makes a loan to a debtor. Commercial banks DON’T lend depositors money. The money is created as debt from thin air. Simple!

But the truth is that bankers don’t lend money for new ventures, unless the debtor has marketable assets worth two or more times the sum lent. And in Belize as all Western countries, bankers lend money for mostly, real estate, and other speculative ventures – so the bankers can extract more money out of the economy leaving less for food, medicine, education and other necessary consumption.

Michael Hudson, an American economist remarked that the way how the economy works today in most countries is like a parasite and host. The financial parasites have attached themselves to the physical economy — the host and is using debt to destroy the host.

Currently, most of what we call the “economy” is really two completely different systems. First, there is the real economy of current production and consumption, wages and industrial profits. The second, or FIRE sector (finance, insurance and real estate) consists of land, monopoly rights and financial claims that yield rentier returns in the form of interest, financial fees, economic rent (unearned income), and monopoly gains.

Human beings are at a pivotal stage. Either the real economy of production and consumption prevail and with it a new renaissance of a thousand years of peace on planet Earth; or we allow the parasite class to win and drag humanity into a new dark age of death, diseases, and perhaps the destruction of humans on planet Earth.

The Numbers

On March 16^th 2020 it was announced that a National Oversight Committee co-chaired by PM Barrow and Leader of the Opposition, John Briceno was created to deal with the Covid 19 pandemic that had started to destroy the global economy. Both sides appointed their economic czar, Carla Barnet for the then government and Chris Coye for the opposition PUP. For most of 2020 economic decisions were made in a bi-partisan manner.

The Coronavirus which none of us expected, nor wanted, has not only taken our economy to the brink but exposed all the weakness of previous generations’ decisions to build an economy on foundations of sand. Only some 34% of Belize’s economy is built on production (agriculture, mining, and manufacturing) the largest part – 66% is tourism and distribution – invisibles as the British calls it – foundations of sand.

 An analysis of the numbers from the applications for monetary relief through the Social Security Board revealed about 67,000 genuine applications or some 37% of the employed work-force of Belize as at April, 2019.  Belize District had some 23,030 persons losing their income because of the Covid 19 shutdown. San Pedro Town and Caye Caulker Village had the most of approximately 14,680 persons, while Belize City suffered about 8,350 persons losing income and jobs because of Covid 19. In Belize City some 4,160 persons were directly employed by the cruise tourism sector.  Of the remaining 4,190 persons without income, about 2,000 got back their jobs (as at June 1^st, 2020) in retail, transportation and the hospitality sector. The other 2,000 plus are what economists called the structurally unemployed. In Belize we say they hustle – they catch-and-kill.

Income per capita fell in the last three quarters of 2020 from about $ 7,000 to some $ 5,800 by the end of the year 2020. Unemployment now stands at close to 65,000 persons (out of 185,000) plus another 45,000 persons whom we say catch-and-kill. This has created about 42,000 persons who need a government hand-out – pantry/grocery bag.

Now we have been mis-educated/conditioned to accept the economic and cultural axioms of oligarchical rule are so embedded within our society and our minds that we accept that an economy must be measured/looked at from a monetary stand-point.  Thus Belize with a total debt at November 30^th 2020 of $ 4.155 billion dollars or debt-to –GDP ratio of 135.7% is not sustainable and can be dealt with in only one way – by lowering government expenditure – less jobs, reduced salaries, curtailing social programs.

First, let’s examine this debt of $ 4.155 billion dollars. Some $ 1.77 billion is from multilateral sources such as the CDB, IDB, etc. and $ 1.085 billion is the super bond.  The balance of $ 1.3 billion dollars is domestic or local debt mostly owed to the Central Bank of Belize. Now who owns the Central Bank of Belize? It’s owned by the people and Government of Belize. So, if the local debt is removed then the foreign debt is 93% of GDP, a more acceptable level.

According to the Central Bank local debt grew by $ 196.1 million dollars and foreign debt also grew by some $ 226.0 million, both because of the unusual expenditures incurred by government due to the Covid 19 fallout.  From April 2020 up to today, government has been feeding some 40,000 Belizeans because they lack an income caused by the nearly complete shut-down of the tourism sector.

For the eight months between April to November 2020 total government revenue fell by 21% to $ 608 million dollars while the money it spent increased to $ 859 million leaving a short fall of $ 250.8 million dollars of which some $ 196 million became an overdraft at the Central Bank in addition to treasury bills and notes. The balance came mainly from the CDB, IDB and World Bank as cheap long term loans.  According to the Central Bank recurrent expenditures were reduced by some $ 85.8 million “reflecting the impacts of Government’s restraint on purchases of non-essential goods and services.” And capital expenditure increased by $ 116 million “precipitated by Covid 19 emergency costs.”

And in the real economy, imports from January to November 2020 fell from $ 1.903 billion in 2019 to $ 1.459 billion for the same period in 2020. Exports also fell for that period from $ 382 million in 2019 to $ 339 million in 2020. This trade deficit of some one billion dollars per year is the main problem facing Belize from before 1981. Around 1991/1992 as the power of the merchants grew and George Price’s power waned the trade deficit grew almost threefold. In 1993 the trade deficit was $ 298 million dollars, which was some 53% of imports.  But again by 1996 there was a turn-around.  Imports fell to $ 511 million dollars and exports increased to $ 335 and Belize only had a deficit of $ 176 million dollars (34% of imports). A science teacher and pragmatist, Prime Minister Manuel Esquivel was trying to make Belizeans live within their means.

Then suddenly at the turn of the century, imports jumped to $ 1.029 billion dollars, while exports remained nearly the same at some $ 300 + million dollars. The trade deficit shot up to over $ 638 million dollars (62% of imports), and with it the rate of poverty to 33%. The deal between the merchants and the foreign owners of the tourist product was now sealed.  As 2008 came to a close Belize was importing $ 1.7 billion dollars per year and selling $ 960 million dollars resulting in a trade deficit of about $ 796 million dollars. The rate of poverty also climbed to 43%.  In 2019 Belize imported goods at a value of about $ 1.971 billion dollars. We sold $ 924 million in goods ($36 million dollars less than 2008) and had a trade deficit of $ 1.047 billion dollars, while the poverty rate had climb to 54.8%.

Notice the trend; imports increased and exports could not keep up. Local manufacturing fell, foreign debt increased, and more Belizeans entered poverty.

The Solution

Debt cannot be created without the physical economy’s ability to repay the debt. Every year some 5,000 persons join or attempt to join the labour-force. And we currently have 110,000 workers below the poverty-line. Government exists because we need a “brain” to run an economy. Government must create or cause to be created at least 14,000 new jobs each year in Belize. Where can these jobs come from?  In the military; research; education and health; manufacturing; infrastructure to build roads, canals, building; and especially family farms. The jobs in the military, education, health, and research are not productive but vital to our society. The workers in agriculture, mining and manufacturing must carry them plus government (the brain of the economy). These new jobs must pay more than $ 400 per week, and the family farm must earn at least $ 28,000 per year.

Look, Belize cannot now pay its average low-skill worker $ 10 per hour and remain competitive in today’s world. The minimum wage should now be raised from $ 3.25 to $ 5 per hour. In the real physical economy, wages depend on the intelligence of the worker and on the level of technology used in the process of production in agriculture and manufacturing. Note: technology is not computers or IT. Belize needs to “leap-frog” to new technology such as CNC machine tools, robotics, and automation. Any machine we buy must be of the latest technology. Doing only light manufacturing is to preserve backwardness.

Now to create those 14,000 new jobs will require at least $ 1.4 billion dollars per year in new investments. And where will Belize get it from?

The government must borrow Bz $ 630 million per year (USD $ 315 million) from foreign countries such as Brazil, USA, India, China, Germany, Russia, Taiwan, South Korea, and Japan to buy machinery and equipment – to buy technology – not “spring” water or goods we can produce ourselves.  The Central Bank should increase the local money supply by some $ 245 million dollars per year (free money – no interest) the National Bank of Belize (our financial independence) will create as debt (loans) some $ 385 million dollars as long term loans at 1.5% to 2% interest per year for only agriculture, manufacturing, infrastructure, and research.

The regular credit unions and commercial banks should continue their regular services to Belizeans.  Banks are not in the business of giving away money, so the person with a new idea never get funds to experiment or try his new venture. Only government can perform that service. And when it’s time for a Jubilee (to cancel loans), only government can do that as PM Barrow has showed in his first term in 2008 – 2012.  And remember that Belize cannot print nor create United States Dollars. Therefore, if our Central Bank and National Bank print and create some $ 630 million dollars per year, then at least $ 400 million dollars must be cut from imports in order to protect our dollar peg.

As I have written before, why not clean, clear the border with Guatemala and every 25 feet, plant a coconut tree?  If we plant the coconut trees up to a mile into Belize from the border, the Belize people and government will end up with about 64,000 acres of coconut farms.  This amount of coconut trees could yield some 103 million litres of virgin high quality coconut oil. We can export this oil to Taiwan which recently signed a partial free trade agreement with Belize. The value of the oil should be some USD $ 412 million or B $ 824 million per year. And when we add in the by-products, such as, flour, activated charcoal, etc. the foreign exchange will be more that USD $ 1.2 billion dollars.

To produce this amount of coconut products we need the 700 security personnel, in addition to 1,300 skill workers, 800 factory workers and about 8,000 youths-at-risk, as well as 50 administrative personal from the civil service.  All the gang-bangers will be sent to boot-camp to be educated, disciplined, and trained. And they will each work in the coconut farms some 4 days per week and attend school for 2 days per week. They will be paid $ 10,400 per year. Schools, churches, health facilities, apartments, shops, and entertainment centres will be established within the one mile zone of the border from North to South.

Belize imports about B $ 19 million dollars’ worth of oils and fats each year. Most of it is vegetable fats loaded with omega-6 – linoleic acid which is the leading cause of diabetes, obesity and other insulin resistance, and metabolic diseases. The simple coconut project will ensure that Belize is self-sufficient in oils and fats and also solve a deadly health problem.  And Belizean workers will be gainfully employed instead of foreigners.

We hear every day the nonsense that Government is broke. By definition, no sovereign government can be broke.

A sovereign government has two powers no individual has – it can tax (legally put its hands in your pocket); and it can create new money.  Some USD $ 18 million must be foreign exchange to buy machinery, equipment and some fertilizers each year. Most fertilizers and machinery will be made in Belize from Belizean raw materials and labour. Belize’s government cannot create that foreign exchange. At present our government does not have the USD $ 18 million dollars per year. So where do we find it?  We borrow it from Taiwan. Already our government is talking to Taiwan for a loan to bail-out the merchants by giving them access to foreign exchange so they can continue to import a lot of unnecessary foolishness. So, is it not better to borrow from our Taiwanese friends so that we can improve the lives of our Belizeans who gave the PUP such an overwhelming mandate to better their lives, not better the merchant’s lives, especially those who wants to supress our Taiwanese friends?

This one project will solve the border problem with Guatemala; create over 10,000 new jobs in just four years; solve the crime problem; reduce the trade deficit not by 50% in ten years, but reduce it by 80% in 4 years; and, increase government revenue by 68% in under 3 years. Plus the health of Belizeans will drastically improve with the consumption of less linoleic acid.

At my blog (bill-lindo.com) I have written a several articles on how to develop/industrialize Belize because we  have known for many years that the economy of Belize cannot continue as a parasitic economy based on exploitation of man by man for the benefit of the oligarchical few. We must turn to George Price’s mixed economy to end poverty and the pursuit of happiness as our Constitution demands.

The new PUP government under the leadership of John Briceno should institute the mixed economy of George Price — exploiting nature rather than men, tariff protection of local agriculture and manufacturing because free trade has always benefit the strong at the expense of the weak, and high wages to workers

Our problem is that the vast majority of us have been mis-educated. The way we think is our problem. Most will go for the “the low hanging fruits”. But we should remember the wise words of that American who was assassinated because of trying to bring back the American System of Capitalism to the United States – John F. Kennedy at Rice University: “We choose to go the Moon in this decade and do the other things, not because they are easy, but because they are hard.” 

The “key” to genuine development and full economic independence which will not reduce but rather eradicate poverty and create full employment in Belize –the objective of the philosophy of the nationalists of Belize, the George Price way — is advanced developments in basic economic infrastructure combined with rapid increases in energy flux densities per capita and per square mile. Government as the “brain” is the only institutional force which can implement it. As stated above, only some 34% of Belize’s economy rests on production (agriculture, mining, and manufacturing) the largest part – 66% is tourism and distribution – invisibles as the British calls it – foundations of sand. No economy with less than 45% of its GDP as production (agriculture, mining, and manufacturing) can provide a high standard of living for its citizens.

At the core of Hamilton, Lincoln, Kennedy, Price and this writer’s policy is the concept that wealth comes from the productive powers of labour, not from money, raw materials, land or any physical object. And that this must be through advances in science and technology which are driven by those unique powers of human creative reason.  As I continue to write, “Genuine development is an act of human creation – it is a complete change of our present culture – a reversal from hopelessness and hedonism to one of progress, but it is hard work, not easy work.