Go Lean…Caribbean

Go Lean Commentary

‘Rent’ is a 4-letter word …

… in the field of Economics.

This is not referring to the positive action of paying for the monthly expense for a house or an apartment, but rather the bad practice of extracting uncompensated value from others without making any contribution – getting something for nothing.

With such a simple definition, the assumption would be that ‘rent’ is unwelcomed and marginalized in society. And yet, for the Caribbean, this bad practice proliferates.

“Say it ain’t so…”

Unfortunately, there is plenty “rent-seeking” in the Caribbean. If we want to reform and transform our society – we do – there is a need to “Wage War” against this bad practice of rent-seeking.

The movement behind the book Go Lean … Caribbean describes rent-seeking as a societal defect … in the Caribbean, and most other societies. It is destructive and self-defeating. In a previous blog-commentary, this defective practice was fully dissected, detailed and dismissed as behavior we want to weed out of Caribbean society.

How?

First we start by recognizing that there is a problem:

“There is rent-seeking in our communities”.

Now we can arm ourselves for battle in this War Against Rent. This is an important first step in reforming and transforming our regional society. This is commentary 3 of 4 from the movement behind the Go Lean book on the subject of Caribbean societal defects. So how do we move our communities from the deficient-defective status quo to our targeted destination: “a better place to live, work and play”? By waging war on our defects. All of these commentaries detail that effort, for the following defects:

1. Waging a Successful War on Orthodoxy
2. Waging a Successful War on Stupidity
3. Waging a Successful War on Rent
4. Waging a Successful War on ‘Terrorism’

These commentaries draw reference to the Go Lean book, as it details the quest to transform the Caribbean; it features a how-to guide and roadmap for elevating the region’s societal engines for economics, security and governance. Rent-seeking can, and have, penetrated all these three spheres of society.

In the previous commentary on ‘Stupidity’, it was established that when stupid policies-practices persist in a society, it is usually because “someone is profiting” in the shadows. Rent-seeking on the other hand, tends to be “out in the open”, i.e. guaranteed gratuities at a restaurant/bar. Both stupidity and rent-seeking are therefore tied to Crony-Capitalism: the abuse of public funds for private gain.

Consider these details of rent-seeking in the economics, security and governing societal engines:

The movement behind the Go Lean book seeks to reform and transform the economic engines of the Caribbean by being technocratic in applying best practices from the field of Economics. Rent-seeking is distinguished in economic theory from profit-seeking, in which entities seek to extract value by engaging in mutually beneficial transactions.^[6] Profit-seeking in this sense is the creation of wealth, while rent-seeking is the use of social institutions such as the power of government to redistribute wealth among different groups without creating new wealth.^[7] For the Caribbean elevation quest, we see the defects; we see the destructive rent-seeking practices; and we now know how to supplant them. This intent is declared at the outset of the book with this Declaration of Interdependence (Page 10) for the region to work in unison to remediate the broken systems of commerce:

Preamble: As the colonial history of our region was initiated to create economic expansion opportunities for our previous imperial masters, the structures of government instituted in their wake have not fostered the best systems for prosperity of the indigenous people. Despite this past, we thrust our energies only to the future, in adapting the best practices and successes of the societies of these previous imperial masters and recognizing the positive spirit of their intent and vow to learn from their past accomplishments and mistakes so as to optimize the opportunities for our own citizenry to create a more perfect bond of union.

So how exactly do we supplant rent-seeking practices in the Caribbean? Foster best practices for economics and governance.

There is an implied Social Contract in every expression of governance everywhere, where “citizens surrender some of their freedoms and submit to the authority of the State in exchange for protection of remaining rights” (Page 170). In modern societies, there is a role for governments and a role for commercial entities. This was the assertion of the father of modern economists, Adam Smith, that the “division of functions” between governments and commerce should be carefully regulated to keep free enterprise operating “freely”; governments should limit their deliveries in commerce. The Go Lean book relates this (Page 67) as follows:

Adam Smith, the 18th century Scottish political economics pioneer, is best known for his classic work: An Inquiry into the Nature and Causes of the Wealth of Nations (1776), usually abbreviated as The Wealth of Nations. This book is considered the first modern work of economics, and he is thusly cited as the “father of modern economics”, even today, and among the most influential thinkers in the field of economics. Through reflection over the economics at the beginning of the Industrial Revolution the [Wealth of Nations] book touches upon broad topics as the division of labor, productivity and free markets.

Smith attacked most forms of government interference in the economic process, including tariffs, arguing that these create inefficiency and high prices in the long run. It is believed that this theory, laissez-faire economic philosophy, influenced government legislation in later years.

Smith advocated a government that was active in sectors other than the economy. He advocated public education for poor adults, a judiciary, and a standing army—institutional systems not directly profitable for private industries.

So according to a scholar in economics from 240 years ago, the cause of Caribbean rent-seeking is governmental interference and the solution is a governmental “pull back”.

This is how to wage war against ‘rent’.

Look back at the foregoing list of Caribbean rent-seeking activities; and consider here how we can mitigate:

• How much tips/gratuity should waiters/waitresses receive when they serve tables? The experience is that they always receive more that government-mandated 18% when the service is good. The incentive to provide good service is lost when the gratuity is guaranteed by government policy.
• In other markets, the “Sharing Economy” has spurred the economy in creative ways: 1. AirBnB has created opportunities for festivals to absorb bigger crowds than hotel capacity; 2. the presence of Uber has forced taxicabs to become more efficient with smartphone apps and have created prospects for any restaurant to now offer delivery.
• Fuel tax dependency in the Caribbean keeps electricity costs high; the average is US$0.35/kWh, one of the highest in the world. Green Energy alternatives have been avoided, even discouraged, despite an abundance of sun and wind resources; with these mitigations, the cost for electricity can be lowered to US$0.088/kWh.
• Traffic Light Cameras will be a new deployment in the region. When these are implemented, they must be regulated at the government level. The government should never be the service provider but rather the escalation authority. It would be rent-seeking to just sit back and collect traffic fines … uncontested. Everything at a traffic light is not always “black-and-white or red-and-green”; there are scenarios with breakdowns and pedestrians that must be accounted with allowances.
• Passports For Sale – This is indefensible; to tarnish the Caribbean Image for “30 Pieces of Silver”, sorry, make that $100,000. See VIDEO in the Appendix below.
• 

The Go Lean book serves as a roadmap for the introduction and implementation of the Caribbean Union Trade Federation (CU). The CU is designed to be a technocratic intergovernmental entity that shepherds the Caribbean region. The goal is to reboot and optimize the region’s economic, security and governing engines. Optimization would entail weeding out any rent-seeking practice.

As previously detailed:

“Rent-seeking can prove costly to economic growth; high rent-seeking activity makes more rent-seeking attractive because of the natural and growing returns that one sees as a result of rent-seeking. Thus organizations value rent-seeking over productivity. In this case there are very high levels of rent-seeking with very low levels of output. Rent-seeking may grow at the cost of economic growth because rent-seeking by the state can easily hurt innovation. Ultimately, public rent-seeking hurts the economy the most because innovation drives economic growth.”^[19]

“Government agents may initiate rent-seeking – such agents soliciting bribes or other favors from the individuals or firms that stand to gain from having special economic privileges, which opens up the possibility of exploitation of the consumer.^[20] It has been shown that rent-seeking by a bureaucracy can push up the cost of production of public goods.^[21] It has also been shown that rent-seeking by tax officials may cause loss in revenue to the public [treasury].”^[8]

The Go Lean/CU roadmap employs some counter-tactics; consider the “Separation-of-Powers between CU federal agencies and Caribbean member-state governments”; so the limitations of national laws in a member-state would not override the CU. The CU‘s technocratic practices would directly apply to the installation of Exclusive Economic Zones (EEZ) and Self-Governing Entities (SGE); these operate in controlled bordered territories like campuses, industrial parks, research labs and industrial plants. Lastly, there is the power of “peer pressure” to reform the member-states. When progress is made by one Caribbean state, this would incline the others to follow suit. In total, the Go Lean/CU roadmap will employ strategies, tactics and implementations to impact its prime directives; identified with the following 3 statements:

• Optimization of the economic engines in order to grow the regional economy to $800 Billion & create 2.2 million new jobs.
• Establishment of a security apparatus to ensure public safety assurances and protect the region’s economic engines.
• Improvement of Caribbean governance to support these engines.

The Go Lean roadmap seeks to “Wage War against Rent” by optimizing the entire Caribbean economic eco-system with the adoption of best practices for commerce and governance. This vision is defined early in the book (Page 12) in the following pronouncements in the Declaration of Interdependence:

xi. Whereas all men are entitled to the benefits of good governance in a free society, “new guards” must be enacted to dissuade the emergence of incompetence, corruption, nepotism and cronyism at the peril of the people’s best interest. The Federation must guarantee the executions of a social contract between government and the governed.

xii. Whereas the legacy in recent times in individual states may be that of ineffectual governance with no redress to higher authority, the accedence of this Federation will ensure accountability and escalation of the human and civil rights of the people for good governance, justice assurances, due process and the rule of law. As such, any threats of a “failed state” status for any member state must enact emergency measures on behalf of the Federation to protect the human, civil and property rights of the citizens, residents, allies, trading partners, and visitors of the affected member state and the Federation as a whole.

In order to make the Caribbean a better place to live, work and play the people of the region must change their attitudes about elements of their society – elements that are in place and elements missing. This is referred to as “Community Ethos”, defined as:

“the fundamental character or spirit of a culture; the underlying sentiment that informs the beliefs, customs, or practices of a group or society; dominant assumptions of a people or period practices of a group or society; dominant assumptions of a people or period”.

Rent-seeking is one of the negative community ethos – societal defects – that must be weeded out of the Caribbean. This ethos stems from an attitude of entitlement; to get something … for almost nothing. The Caribbean was colonized originally with this type of community ethos; a previous blog/commentary related this:

Most of the property and indigenous wealth of the Caribbean region is concentrated amongst the rich, powerful and yet small elite; an oligarchy. Many times these families received their property, corporate rights and/or monopolies by Royal Charter from the European monarchs of ancient times. These charters thus lingered in legacy from one generation to another … until …

The Go Lean book presents a roadmap on how to optimize the economic engines without continuing rent-seeking practices. The book stresses key community ethos, strategies, tactics, implementations and advocacies necessary to transform and turn-around the eco-systems of Caribbean society. These points are detailed in the book as follows:

In considering this economic history, the CU/Go Lean roadmap distinguishes rent-seeking from profit-seeking:

• Profit is Good!
• Rent is Bad!

The new Caribbean must foster good economic habits … and abandon bad ones. This is how to grow the economy: create jobs; create businesses; retain people; foster new opportunities, learn from past mistakes and accomplishments.

This is new …

All Caribbean stakeholders are urged to lean-in to this roadmap/plan for change … and empowerment. This plan is conceivable, believable and achievable. 🙂

Download the book Go Lean … Caribbean – now!

———–

Appendix VIDEO – CBS 60 Minutes: Passports For Sale – http://www.cbsnews.com/videos/passports-for-sale/

Posted January 1, 2017 – Steve Kroft reports on how cash-starved countries [in the Caribbean] offer citizenship for a price, creating ways to ease travel for foreigners, including those running from the law.