Ian Nar­ine

Yes­ter­day was Eman­ci­pa­tion Day in T&T and while it may be over­ly sim­plis­tic, it is a day that is syn­ony­mous with the word "free­dom". Free­dom is of­ten viewed as the ab­sence of con­fine­ment, the ab­sence of re­straint and even the ab­sence of ne­ces­si­ty. It rep­re­sents one's abil­i­ty to do what­ev­er one choos­es, when ever and how ever they may wish. Free­dom is al­so con­sid­ered a utopi­an ide­al in that it is im­pos­si­ble to achieve. When we look around us we see a so­ci­ety that is based on re­stric­tion. We are not told where to park, we are told where not to park. The sign says "no park­ing" not "park here on Mon­day, Wednes­day, Fri­day". When there is an is­sue there is of­ten a law in­tro­duced to try to pre­vent the is­sue from hap­pen­ing. As pro­gres­sive­ly more is­sues arise there are more laws and so more re­stric­tions.

Our gov­er­nance struc­ture is skewed to­wards at­tor­neys go­ing in­to pol­i­tics sit­ting in the Par­lia­ment and mak­ing laws to pre­vent any and every­thing that may be con­sid­ered un­de­sir­able. Is there an­oth­er way? On this the 20th an­niver­sary of Eman­ci­pa­tion Day cel­e­bra­tions per­mit your mind to wan­der on the top­ic of free­dom. Let us en­gage in a thought ex­per­i­ment. To be clear, I am not, for a mo­ment, sug­gest­ing that any­thing here is prac­ti­cal or im­ple­mentable. The ob­jec­tive is sim­ply to show that very of­ten we are faced with is­sues in so­ci­ety be­cause there are eco­nom­ic in­cen­tives skewed to­wards those is­sues. How­ev­er in­stead of re­mov­ing those in­cen­tives we opt in­stead to make new laws, which then car­ry an­oth­er cost, and an­oth­er set of skewed in­cen­tives. To take a line from singer Bob Mar­ley and then econ­o­mist Mil­ton Fried­man, can we eman­ci­pate our­selves from the men­tal slav­ery of cre­at­ing more laws, more bu­reau­cra­cy and more rules and in­stead give peo­ple the free­dom to choose and skew the eco­nom­ic in­cen­tives to guide peo­ple to­wards the ac­tions that we want.

In­cen­tivise Chaos

There is cur­rent­ly an out­cry from busi­ness­es af­fect­ed by the new traf­fic plan in West Port-of-Spain. Ques­tion: how many of those busi­ness­es pro­vide park­ing for their cus­tomers? Those that pro­vide park­ing should have lit­tle is­sue with the plan as im­ple­ment­ed. There are busi­ness­es op­er­at­ing in malls across the coun­try that pay a pre­mi­um rent so that their cus­tomers are pro­vid­ed with among oth­er things, park­ing. Is it fair to those mall busi­ness­es that some­one can set up shop on a main road with­out prop­er park­ing and sell a sim­i­lar good or ser­vice at a low­er price? Clear­ly the eco­nom­ic in­cen­tive is skewed to­wards chaos. Im­ped­ing the free flow of traf­fic is made more eco­nom­i­cal­ly vi­able and so we have the sit­u­a­tion that cur­rent­ly ex­ists. We are in ef­fect sub­si­dis­ing chaos.

Free to Choose

Speak­ing of sub­sidy it is es­ti­mat­ed that up to $25 bil­lion of the na­tion­al bud­get con­sists of sub­si­dies and trans­fers. Here is a thought ex­per­i­ment for you. How about if we elim­i­nate all trans­fers and sub­si­dies and move every­thing to its full cost. Take the $25 bil­lion and dis­trib­ute it to the 1.3 mil­lion cit­i­zens. That works out to just un­der $20,000 a per­son. Over time this sub­sidy can be re­duced based on means. I am not sug­gest­ing that this is pos­si­ble or prac­ti­cal but here are some of the is­sues that may come out from such a move. There is no more fu­el sub­sidy, wa­ter rates will prob­a­bly in­crease, there is no more free ed­u­ca­tion and free med­i­cines and hos­pi­tal care. The on­ly thing the State pays for is a po­lice ser­vice and an army.

A fam­i­ly of four with two adults and two chil­dren now has ap­prox­i­mate­ly $80,000 at their dis­pos­al and the free­dom to choose how they wish to spend those funds. One im­pli­ca­tion is that the en­tire school sys­tem is now in pri­vate hands. There is an eco­nom­ic in­cen­tive to be the best school as it is able to at­tract the "best" stu­dents. There is al­so an eco­nom­ic in­cen­tive for schools lo­cat­ed in par­tic­u­lar com­mu­ni­ties to cater to chil­dren with dif­fer­ent needs as this is their most ac­ces­si­ble mar­ket.

The teacher/stu­dent ra­tio is now based on the eco­nom­ics of the busi­ness mod­el as is the qual­i­ty of out­put. The teach­ers get snapped up ac­cord­ing to the ed­u­ca­tion niche be­ing tar­get­ed and there is an eco­nom­ic in­cen­tive (salary) for be­ing the "best" in one's field. Par­ents are free to de­cide how much they want to spend on their child's ed­u­ca­tion, whether that mon­ey is best spent on trav­el­ling far dis­tances to school or to a near­by school. Every­one is free to choose.

Lifestyle Choice

There is al­so free­dom in terms of lifestyle choice. We can eat what we like and drink what we like and ex­er­cise if we like but the con­se­quence of our choic­es is re­flect­ed in our health­care costs. If the prob­lem at our hos­pi­tals is man­age­ment then that is solved be­cause it is now all in pri­vate hands. We are free to drink al­co­hol, smoke cig­a­rettes and eat high calo­rie foods. Any ill­ness­es that are borne out of those choic­es are paid for in full. There are no more sub­si­dies on any­thing. Sud­den­ly, the eco­nom­ic con­se­quences are skewed to­wards the be­hav­iors we would like to pro­mote. There is now a clear trade off be­tween pay­ing for a prop­er ed­u­ca­tion for your chil­dren, set­ting aside for med­ical costs and buy­ing that SUV which gives rise to a hefty gas bill. Peo­ple are free to choose and to ex­pe­ri­ence the eco­nom­ic con­se­quences of that choice.

If you think these mea­sures are harsh then con­sid­er this anom­aly. $100 mil­lion is paid to­wards school books by the State and ed­u­ca­tion is free. How­ev­er stud­ies show that 75 per­cent of stu­dents in T&T have ini­ti­at­ed use of al­co­hol by age 13. Where is the mon­ey com­ing from? We live in a so­ci­ety where ed­u­ca­tion is sub­si­dized but there is a "rum shop" prac­ti­cal­ly on every cor­ner, a na­tion­al lot­tery sys­tem and pri­vate mem­bers clubs for gam­bling and gam­bling slot ma­chines in many bars across the coun­try. Who are the pa­trons of these es­tab­lish­ments and where are the funds com­ing from? There are sta­tis­tics from the World Health Or­gan­i­sa­tion that show that the con­sump­tion of pure al­co­hol in T&T is around 6.5 litres per per­son over aged 15 per year. If a drink con­tains 20 per cent al­co­hol by vol­ume then that amounts to 32.5 liters of al­co­holic bev­er­ages con­sumed. How is all of this paid for? Why do we have sub­si­dies if peo­ple can af­ford such lev­els of dis­cre­tionary ex­pen­di­tures?

Elim­i­nat­ing trans­fers means there is no more cor­rup­tion in un­em­ploy­ment pro­grams be­cause such pro­grams no longer ex­ist. Peo­ple have to de­cide whether they are con­tent with a stipend or whether they will strive for more. With the li­on's share of the econ­o­my in pri­vate hands, I feel con­fi­dent that there will be no short­age of jobs and wages will be at the lev­el of pro­duc­tive out­put. We no longer need a Gov­ern­ment pro­gramme to boost pro­duc­tiv­i­ty. With no trans­fers there are no more state fund­ed pen­sion pro­grammes. Every­one is re­spon­si­ble for sav­ing to­wards their re­tire­ment and every­one should re­view the fi­nan­cial vi­a­bil­i­ty of the com­pa­nies that they are in­vest­ing in. One of the ways of fight­ing in­fla­tion in re­tire­ment years is by hav­ing work­ing chil­dren to sup­port you when you re­tire. Take a page from Sin­ga­pore where the "Main­te­nance of Par­ents Act" al­lows for par­ents above 60 years to sue their chil­dren to en­sure fi­nan­cial sup­port. Sud­den­ly we now have an eco­nom­ic in­cen­tive to­wards start­ing a fam­i­ly, bet­ter par­ent­ing, spend­ing to­wards your child's ed­u­ca­tion, spend­ing less on en­ter­tain­ment and adopt­ing or­phaned or aban­doned chil­dren. Wow, imag­ine that! Those who lead al­ter­na­tive lifestyles and want their "rights" recog­nised. By all means but such choic­es do not al­low one to have chil­dren so their gam­ble is liv­ing to re­tire­ment and then hav­ing to sup­port them­selves. Free choice but you pay the full cost of your choic­es. For the avoid­ance of doubt, let me con­clude the way I be­gan. I am not sug­gest­ing that these are pro­grammes that should be im­ple­ment­ed. The ob­jec­tive is sim­ply to show that when we skew eco­nom­ic in­cen­tives to­wards the types of be­hav­iours, we want to en­cour­age so­ci­ety ben­e­fits. We need to con­sid­er the cost of sub­sides to chaos, law­less­ness and de­viant be­hav­iour. Give peo­ple the free­dom to choose and hold them ac­count­able for their choic­es. It may sound like a para­dox but my free­dom is on­ly pos­si­ble if you are made to pay the full cost of your choic­es and vice ver­sa.

Ian Nar­ine is a bro­ker

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