Dear Editor,
Recently I was in a meeting where it was argued by an influential Sint Maartener, very forcefully that the limitation by the CFT to allow Sint Maarten to create a deficit and to prevent greater public borrowing was an unfair and repressive act by the Kingdom government.
There are many influential and respected economists who argue that public spending can help pull an economy out of stagnant growth. The extreme positions in this respect were popular in Greece and they are still significantly influential there. There are, however, more moderate and respected holders of this position all over the world and there are certainly examples of public stimulation of the economy, creating growth and finally reducing debt as a result of the growth.
Making this argument in the context of our fiscal–economic situation in Sint Maarten is a little different. The historical evidence supports my view that we should be very disciplined in creating public debt and thankful for anyone who can help us avoid this:
1. Public sector investments previously made have a very poor record of providing return to treasury coffers. Our main public investments being the harbour, airport and utility company do not show a history of returns that would be able to repay public sector investments if they were to be made in the same way as the original investment in these entities. Recent investments in property are not going to provide a significant return either.
2. The country has relatively little unutilized assets that can be kicked into action by public sector investment. There is no Southern Peninsula as there was in St. Kitts. There are no natural resources that can be brought into play by public investment in infrastructure. There is no large, easy investment that could be made in capacities that would bring operational investments in agriculture, mining or industry that could be opened up by public sector investment.
3. Our history in investment in education has not paid off, particularly regarding tertiary education. This investment may have been of more value than metropolitan economies including the Netherlands than it has our own.
This situation in which the country finds itself in means that it is particularly important that we do not allow public debt to grow because the expenditures are not only unlikely to stimulate the economy, but the likelihood of easily repaying such debt when easy and quick expansion of the economy is unlikely is lessened. The better direction is for disciplined financial management and a focus on a well-managed economy, largely within the present scale, with diversification into carefully defined and managed niche areas .
Robbie Ferron
Unpaid Economist
