Barlow: Cayman’s billion-dollar mistake

Gordon Barlow

My son and his family live in Norway – a country famous mainly for its cold winters, but also for its fiscal prudence. In 1990 its government set up a “sovereign wealth fund” to receive and manage some of the revenue from the oilfields in the North Sea. That revenue was and is considered to be in the nature of a windfall, and has been put into a perpetual trust for the benefit of future generations of Norwegians, against the day when the oil runs out.

A small percentage of the fund is paid over to the national government each year, to help finance its budgets; the rest is kept separate, invested in international securities, real estate and other long-term assets.

Other nations have set up similar funds, managed by professional investment managers. Singapore and Hong Kong have them, funded by revenue from their offshore financial services. Why doesn’t Cayman have one?

Cayman could have had one, funded from the revenue our government receives from our offshore financial services. If the government of the day (local politicians, senior civil servants and FCO clerks) had shown some foresight 40 or 50 years ago, we could today have a sovereign wealth fund worth at least a billion dollars – out of reach of the claws of politicians, for the benefit of future generations of Caymanians.

Instead, all the “windfall” fees from offshore companies were lumped in with other public revenue, and frittered away on vanity projects, everyday extravagances, and a shamefully bloated government payroll. Government officials – both elected and appointed – had no personal incentive to preserve any of the surplus revenue, so they didn’t. They [p—ed] it away like drunken sailors, if I might be forgiven the expression. It was a billion-dollar mistake.

Even back in 1978 when I first came to Cayman, we tax-haven professionals used to marvel at the short-sightedness of the politicians and senior bureaucrats. I know there are people who look back wistfully to The Good Old Days when politicians and bureaucrats were fiscally responsible, but it’s a myth. With supreme arrogance, they dismissed the very notion of saving for a rainy day. “Why bother? God will always smile on us.” “Anyway, who the hell are you foreigners to tell us how to run our country?”

Words of caution from outside the political establishment were then, as they sometimes are now, regarded as seditious – tantamount to treason, indeed. In the words of one MLA of the day, “We were elected to govern, and by God we’re going to govern!”

God will provide

So the politicians governed then as their successors govern now – according to their own whims and fancies and vote-winning strategies. Once all the public revenue was spent, they borrowed to finance their fancies, heedless of the eventual need to pay the loans back. Even today, after Britain’s intervention and coaching, there is still no fund in place to pay the pensions or medical expenses of government employees and their families. A segregated fund for the future? Tchah. Never even mentioned. God will provide, presumably.

So. Instead of a billion-dollar kitty, we have a perpetually unprofitable airline and turtle farm, and a vanity-school on Frank Sound Road that isn’t fit for the purpose. Thousands (yes, thousands) of Caymanian children rely on private charities for their daily needs. Give a Kid Breakfast, Give a Kid Lunch, Give a Kid Cookies After School, Give a Kid Christmas Presents … Teach a Kid Literacy Because the Government Can’t Do It, or Won’t … All those private charities are testaments to irresponsible policy-makers.

Instead of a billion-dollar kitty, all we have are worthless assets that cost a billion dollars. Instead of a wealth-fund invested in real assets, we have a drawer-full of IOUs from the airline, the turtles and the film-set on Frank Sound Road masquerading as a school. Instead of an army of sensibly educated school-leavers, we have an army of children dependent on private charities. There is nothing in the bank for a rainy day. Nothing for when the tax-haven runs out of steam under pressure from the high-tax jurisdictions.

Actually, it’s not too late even now to turn the situation around. The most sensible investment at this late stage would be four or five dollars in phone calls to veterans of the financial sector – individuals outside politics who know what to do and could do it. Of course that’s not going to happen. Our rulers are more likely to commit to waste another billion dollars over the next 40 years, than to admit that they’re out of their depth. Shame on them.

Gordon Barlow has lived in Cayman since 1978. He was the first full-time manager of the Cayman Islands Chamber of Commerce (1986-1988). He has publicly commented on social and political issues since 1990, and in 1998 served as the secretary of two committees of the “Vision 2008” exercise. His blog, “Barlow’s Cayman,” is located at