Everyone is concerned about the cost of living on the Cayman Islands, certainly no one more than I.
However appealing to Government for price controls can only make it worse and it does not require a degree in economics to understand why.
Simply put, prices are set by the balance between supply and demand. If a price is too high, the result is a surplus. If a price is too low, the result is a shortage.
If a price is just right, then no one needs a Government bureaucracy to control it.
The cost of living is nothing more than the sum of the cost of commodities, the cost of labour and the cost of government. No mystery here.
The cost of commodities is determined by the supply and demand in world markets, so nothing can be done about them. If you need them, you pay for them.
The cost of labour is determined by supply and demand in Cayman and the amount of labour required is determined by its productivity.
The cost of Government is the total fees and taxes it collects from the private sector, whose only choice is to pass this cost on to you and me through higher prices.
Given that the cost of commodities is beyond our control, increased productivity is the only way we can reduce our cost of living. Hits to productivity include employees standing in line, waiting in traffic jams, goofing off from work, and coping with unnecessary bureaucracy. So all these must be reduced or eliminated. Productivity is the key to reducing our cost of living.
Our Government needs to focus on productivity, both in the private sector and in itself. Every intervention in businesses by Government decreases productivity and increases prices.
Prime examples are its rollover and staffing plan requirements. With loss of control over who they can hire for what job, how can business be efficient?
Who pays for the extra personnel to meet with Government enforcers and who pays the cost of the Government enforcers?
The answer, of course, is you and I pay for both sides through higher prices. In other words, it’s a double whammy to our cost of living!
At least Government has not yet crippled its own productivity by applying its rollover law to itself.
Government needs to privatize its money losing businesses. History has shown that no government anywhere has ever been able to run a business.
The reasons are simple.
Governments are not constrained by the need to make a profit
They tend to employ political cronies instead of the best person for a job. Often they create make believe positions for their relatives and friends. Sometimes they give away services (or sell them at a discount) to persons in the know. Of course every person in the country ultimately pays for the total amount a government pays out in subsidies, gives away or wastes. Why should Cayman be any different?
Government needs to take some strong measures to improve its own productivity. All projects should be conducted under tight cost controls with open bidding.
Ministers and civil servants need to be held accountable.
Government needs to appoint a powerful, independent commission to monitor government efficiency, make binding recommendations for improvements, and root out waste.
Until this is done, all statements by Government spokesmen laying blame on the private sector for our increased cost of living are sheer hypocrisy. Members of the public should be in no doubt at all, that our high cost of living is not the fault of the private sector.