Thursday, December 2, 2010

Everybody's Cheating (Cayman's protectionism)

Sooner or later, our politicians will have to take the brakes off private-sector productivity. Government’s labour-control policies make our local cost-of-living much higher than it needs to be. The same policies make the unemployment of native Caymanians worse than it need be, and create the glass ceilings encountered by those who are employed. When will the policies be changed – or, won’t they ever be?

McKeeva has criticised the various labour-control Boards, but the real problem is that they are too unaware of basic economics to know what to do and not to do. The Boards’ members change from time to time, but not one of them has the combination of courage and knowledge necessary to blaze the path that’s best for Cayman and Caymanians. That is a sad judgment on them.

As a tax haven, Cayman ought to be a capitalists’ dream. But capitalism as a business system relates to productivity and return on investment; and our political system works against those things. Government runs its state operations on classic Civil Service principles, whereby specified services are made available to the public with scant regard for productivity, and none at all for return on investment. Our rulers apply public-sector (socialist) principles to private-sector practices through the Immigration Law.

That Law requires private employers to hire Caymanians with minimal regard for their education, aptitude or attitude; and to promote them with minimal regard for their productivity or contribution towards profits. That requirement amounts to a social contract between government and each private employer. Government allows the employer to trade in Cayman, in exchange for hiring and promoting people whom he otherwise would not employ. It’s a contract that both parties cheat on.

The government (comprising FCO clerks, local Civil Servants, and Caymanian MLAs and their crony-committees) discriminates among businesses, denies Work Permits to foreign employees at will, and disallows the firing of Caymanian employees for any reason. That’s cheating. Local employers (company owners and managers) retaliate by not hiring Caymanians if they can possibly avoid it, promoting as few of them as they can, and by withholding genuine executive authority from those whom they are forced to promote. That’s cheating, too. Both of the contractual parties cheat.

Jobs for life and promotions not based on competence are features of Civil Service employment; but private employers do not willingly hire people they can’t fire. (The old Caymanian slavery tradition comes into play in respect of low-skilled workers from overseas. They can be fired out of hand, with no regard for the Labour Law or any other law.)

The contract and the cheating have existed for forty years, more or less. The government side keeps tightening the Immigration Law and the guidelines for the Department and the crony-committees. The employers keep reinforcing the glass ceilings. If government’s negotiators had the long-term interests of Cayman at heart they could significantly lower both the cost of doing business and the cost of living, pretty much at a stroke. Unfortunately, they are constrained by their stubbornness, their economic ignorance and their loyalty to their political sponsors. Consequently, they are driving Cayman down a dangerous road.

Lost sight of in all the frenetic scheduling of First Class trips to likely sources of overseas investment, our local labour-control laws and regulations actively discourage further investment in existing local sources. Of all the dumb things that our politicians and senior bureaucrats do and allow to be done, that is surely the dumbest.