Friday, December 14, 2012

Cayman’s uncertain future

This week our Premier was arrested, and his home and office were searched by the Police Commercial Crimes unit. For the next two months he will be “helping the Police with their enquiries”, as the saying goes. He has not yet been charged with anything, and is refusing to step down. Further, he has declared the British governor and the UK Government his enemies – and therefore Cayman’s enemies.

The anti-British stance is probably just a ploy to garner political support. There is some pro-independence sentiment among the native-born Caymanians, but most of them are fully aware that without Britain their prosperity would vanish. Our Offshore tax-haven – as structured – depends on Britain’s reputation for integrity. Without it these Islands would quickly revert to being “the lawless Caymanas”, as they were called in the bad old days of piracy and freebooting.

Britain is playing its cards close to its chest, for the moment. The most likely next step is to suspend our Constitution (a Mickey Mouse document cobbled together by the local illiterati a few years ago) and to impose direct rule from London, with our Governor administering day-to-day affairs, assisted by a team of helpers flown in from London. That’s what happened to Turks & Caicos in similar circumstances.

The arrest has been a long time coming. After all, it’s been at least a year since the Police announced that McKeeva was under investigation. Our Police and our Prosecution Service are both noted for their incompetence, so it’s quite possible that there will be no proper follow-through. We can only hope that the FCO really is determined to introduce good governance, at last. Good luck to them.

Unfortunately, the FCO itself has little credibility in an anti-corruption context. For the past forty years it has turned the blindest of eyes to endemic crony-corruption. It has allowed The Immigration Monster to flourish as the exploiter-in-chief of indentured migrant workers, especially the lower-paid of them.

In a crony-corruption regime, actual cash-corruption is not all that common. When government contracts at all levels are awarded to friends or family, there is no need for plain brown envelopes to change hands. Mutual back-scratching is what works best.

When government is an ever-expanding empire, the scope for corruption is also ever-expanding. When two-thirds of the workforce are foreigners, and all their Work Permits are issued as directed by political cronies, it is financially risky not to be a crony. That’s our situation here. Crony-government has been an integral part of the Caymanian community since slavery days, so there’s nothing new about it.

The only thing new about the economic environment in which it exists, is the quantity of revenue that flows into the Public Purse each year. In just 45 years or so, a little cowboy tuppenny-ha’penny money-laundry has grown into a hugely successful international financial centre that benefits from the taxes paid by hedge funds and other Offshore investment vehicles. I was working in Bahamas in the late 1960s when my employers were busy in establishing Cayman as a viable alternative to Nassau. I spent a weekend here in 1968. And I remember what an empty shell it was then. Not any more!

What prompts the FCO’s intervention now is the ineptness of our local community leaders’ money-management skills. You’d think that the legislators of one of the world’s most sophisticated financial centres would know how to balance their books – but no. They over-borrowed and over-spent like there was no tomorrow, with scarcely a nod of recognition for the principle of double-entry bookkeeping.

Well, tomorrow has arrived. Britain, the guarantor of all our Public Debt, is asking where all the Revenue went, and is demanding audited Statements of Account. They don’t even know how bad it is, yet.