An Appeal to Review the Decision to Present George W. Bush DU’s “Improving the Human Condition” Award
I said that my last post would probably be my final one, but in light of some recent developments, I felt it wouldn’t be appropriate not to post this here. I did not want my final post to reflect badly on the Josef Korbel School of International Studies but in actuality, part of the reason why this protest is being made (by myself and many others) is because we do not feel this invitation reflects the values and learning of the majority of those within the School, either students or faculty. If you feel like participating, please sign the petition that is contained within the text of this letter I wrote to Josef Korbel School Dean, Christopher Hill (former US Ambassador to Iraq).
Please read my other posts in order to get a more full picture of what the School really represents and offers.
* Bahamian national motto
This is my last post on this blog, as I graduated on June 7th and with my new responsibilities back in The Bahamas will not have time to update it (and I also want to keep it as generally Korbel/GFTEI-relevant as possible…). I may have a new blog at some point in the not too distant future, however, and if I do, I’ll update this page to fill in the site address HERE, for those who may be interested.
So here’s a few things I’ve been thinking you should know if you are considering coming to the Josef Korbel School of International Studies to do a Masters degree. It’s my own personal opinions and observations, so please seek clarification or alternative opinions elsewhere if you feel the need, or feel free to ask me any questions you like at the bottom in the comments section. It’s long, but hey, it’s the last one…and I’m trying to be comprehensive here! (It is also possible that I am trying to fill some of the time I now find myself with in this post-graduation, pre-job start period, so as to avoid a minor existential crisis – a sort of mild, post-graduation stress disorder brought on by the sudden loss of all responsibility and sense of purpose, if you will…).
General observations on doing a “Masters” degree…
You will not come out feeling like a “Master”, if by master we assume expertise in some area or other, although this is of course, entirely relative. Compared to the general population, you will indeed by masterful, but in comparison to your best professors, you will still feel like an intellectual novice. However, if you are lucky, you will realize via your studies that there is no consensus in most subject areas of any real importance, and where consensus has seemed to at some point exist, or seems to at present, it is most often due to some kind of confluence of interests that have collided to result in a certain ideologically-driven worldview becoming dominant (but not necessarily correct) because it benefits one group or another (see: neoliberalism). Or it may be due to faulty data/ analytics that point to a particular conclusion which might not actually be well supported (see: recent controversy re: austerity). A liberating realization is that this enables room for debate and criticism, and the value of your contribution as someone who can read, write and consider these issues and arguments.
While you may not be a “Master” in the sense that you may hitherto have been imagining this degree would allow you to become, if you can, during the course of your degree, learn how to come up with answers under a time constraint given limited information which you have developed some adeptness in locating and analyzing, you will have reaped the rewards of your decision to pursue this degree. Being effective at this is basically at the heart of what being somewhat successful at life, and most work situations, is really about (as far as I can tell, based on my limited time and information thus far in life…).
As both a participant in classes with students who have done so, and as a student who has had such experience myself, I can only recommend that it is better to come in with some work/life experience. Not only are you more likely to know what you actually want to do, and therefore what you want and need to study in order to do what it is that you want to do, but you will find yourself applying what you’re reading and discussing to the context in which you had your experience. In my own experience, I felt this aided my ability to apply and critique theories tremendously and I can’t quite imagine having taken half of what I have from this experience had I not had work experience prior to arriving at Korbel. The ability to bring real world examples or counterexamples to class is a huge tool for your own and others’ learning. Given the cost of this education, it is truly worth thinking about how you can wring the most benefit from it as possible, and for me, prior world experience post-undergraduate studies was key to that.
Professors and adjunct faculty:
There is quite a large amount of variation in the quality of professors and adjunct faculty, and consequently, the classes they teach. Some are leaders in their field, on the cutting edge of research and scholarship, and have excellent world-renowned reputations. Some have excellent world-renowned reputations but have less interest in teaching. Some are just starting out, but have a solid academic background, interesting research interests and a real commitment to passing on knowledge (although less experience in doing so). Some are primarily teaching professors, who do not do much research at present, and in some of these cases, can seem less up to date with the latest scholarship in their field (but may nonetheless be enthusiastic and helpful disseminators of knowledge and inspirers of discussion).
Among adjunct faculty, there are a number of people who are leaders in their professional spheres, and more often than not, the enthusiasm for teaching among this group is very high (most likely reflecting the fact that they do not have to teach classes as they have full time, successful, professional careers elsewhere and simply do it out of a desire to pass on expertise). Their enthusiasm may or may not be matched by their ability to structure classes well and impart their knowledge. Again, there’s a lot of variation. In classes, this variation can be reflected in discussions, readings assigned, and more. Depending on how deeply you intend to pursue their particular subject area, whether or not a professor is a deeply-involved researcher who remains up to date with their field and will be more or less important to you. My personal recommendation would be to take as many classes with those professors who are indeed truly on the cutting edge of their field, whether it be academic or in the private sector. You will feel like you have really been given a true insight into the most critical debates in these areas, and engaged with someone who can challenge your thinking in ways that will help you see the world differently in important ways that my shape your outlook and approach going forward.
(It’s also worth noting that Korbel has hired a number of new teaching staff this year, and I can’t vouch for where any of these will fall among the categories mentioned above!).
Some students seem to be here primarily to get a degree under their belt to put on their resume, others to expand their minds. Some come to find the practical means to tackle real world problems, and a significant minority are using the time and ability to indulge in studies of a variety of areas to try to figure out what they want to do in life. Some are older, with significant international work experience, others younger and fresh out of undergraduate college (it’s also a fact that the cohorts have been getting younger on average in recent years). By and large, however, most people have something interesting and worthwhile to bring to the table.
Besides this, it’s worth appreciating the fact that the simple pleasure of being surrounded by a group of individuals of roughly your age with interests that either directly align with your own, or if not, which cover a variety of subject areas that you would love to have time to study, but may never get the chance to do so, is a rare, huge and sometimes unanticipated benefit of doing this degree. It’s been extremely gratifying to meet so many people who want to do good and improve the human condition, and more importantly, who are intelligent and realistic. You will make some of the best friends of your life. And eventually, once the job search settles, you will have a network all over the world – for vacations and for future jobs! (a Google map of the future locations of all of the 2013 class is currently being created by one enterprising Korbelite…).
Talk to them:
You should get to know your professors. Talk to them – seek their advice and input. By and large, they are interested in your future. There are few professors from undergrad whose names I recall, but I doubt there are any who can recall mine. Classes were larger, and in general, individual attention much less forthcoming. The level of personal interest and attention from professors at Korbel was a surprise, and a truly gratifying aspect of the experience.
Do your homework (before taking classes…):
Each quarter students at Korbel are required to evaluate their classes/professors with both scores on a five point scale, and comments. Read the class evaluations that you can find on WebCentral before deciding what classes to take. This will minimize your chance of taking one which has been widely assessed to be lacking (and such classes do exist), and maximise the likelihood that you will take a kick-ass one instead. Checking these evaluations is also advice that often isn’t given to incoming students, but only passed on by word of mouth from others in the previous year’s cohort. But bear in mind that it’s also clear that a five point scale can’t accurately depict everything about the quality and characteristics of a class and professor. Neither is the syllabus always the best description of what the class will entail, or whose interests it is aimed at. So talk to fellow students, in the years above you, and your own, before deciding to take certain classes.
And on this note, please continue to push for the administration to make student’s written comments on quarterly class evaluations which we are asked to submit available for all to read. The DU law school does it, and if lawyers think it’s okay to make students’ comments regarding the strengths and weaknesses and classes and professors available, it surely should be okay for Korbel to provide this qualitative information to students too (should it be litigation we are concerned about…). When students are paying thousands of dollars a quarter to get an education, they deserve to be fully informed about the product they are going to consume – especially if the information has been collected already. The fact that it is not seems like an oversight, and has been raised with the Dean, Christopher Hill, who appeared sympathetic (as did other members of the administration). Let’s make sure it happens, so that even though my year won’t get to benefit from it, others will.
Can I handle this program?
Perhaps this is not a politically-correct comment, but don’t worry about whether you can handle this program. I am saying this as someone who almost didn’t come because I was afraid I wouldn’t be up to it, and who now in retrospect finds the thought of that unwise and uninformed decision having played out quite terrifying. If you have done well in undergrad, you are not going to fail this degree. If I’m being entirely candid, besides not handing in papers, totally missing the point of an assignment question, or ignoring all related readings, my sense is that it is extremely hard to totally screw up. Furthermore, if you’re here agonising over doing a masters degree, and ultimately decide to come, it generally means you’re at least somewhat committed to learning something and doing well, which is at least half of the battle. You will also be given the benefit of the doubt – it’s the unavoidable impact of the profit motive of a private school. No one wants masses of disgruntled, failing students to complain about having spent large sums of money on a program that failed them. However, by no means does this mean the program is not worth the while. The key takeaway here is that if you really want to make your degree valuable, you must realize that you get out of it what you put in. It’s possible to get a B+ or even an A- without killing yourself, but the solid As are generally reserved for those who have gone a step further – who do all the readings, who participate thoroughly in class, who bring some additional insight and perspective to discussions and essay writing. More importantly, it is only by doing the above that you are going to feel like you earned the letters M and A after your name once it’s all over. You will also be preparing yourself for succeeding at whatever it is you decide to do next by honing your ability to engage with material and deadlines in a disciplined way. And you may just be more likely to remember what you did in 10 years’ time.
Flexibility in the program is a blessing and a curse. It enables you to specialize in a variety of areas of your choice (GFTEI with a concentration in global health, Security with a concentration in development, etc), but it also means you may end up taking certain classes prior to others which you would have been better off taking afterwards if you are going to garner the greatest advantage from them, and not feel either overwhelmed or under-challenged by the material. It can also be like going to a restaurant with a very large menu – it’s just hard to choose what to eat, and you may end up with an unsavoury combination/lose focus in your degree if you try too many different things. Try to get some advice on this from fellow students who have already taken the classes (having not taken the classes, professors, while generally aware of what classes are more popular, and which professors are most accomplished, are not always the best at advising which classes to take and when, except if it is their own). As an example, taking Martin Rhodes’ Political Economy of Globalisation class is best done after taking DeMartino and Grabel’s trade and finance classes. You will simply be able to focus on the arguments and not the terminology more, for one.
With regard to language requirements, it is necessary to understand that one of the benefits of Korbel is that they, unlike many other schools, allows students to be admitted who are not already fluent in a language. This was a huge advantage and part of my decision to come to the school (the admissions director at GWU, for example, told me that I could not get into the school without already being fluent in a second language “even if I had a letter of recommendation from the President). However, due to the fact that you cannot take language classes for credit while at the school, it turns out that the requirement is akin to an unsupported mandate within the school. This essentially means you must be prepared to take time out of school hours and pay-out in addition to your school fees to fund any language tuition you may need to meet the requirement. It’s also worth noting that whereas in the past, the test required only language reading skills, it now involves reading, writing and speaking. This said, if you come in with some language skills (I would say I was a low-intermediate reader in Spanish, and an advanced beginner in speaking when I came to Korbel) you can easily manage to meet the requirement as long as you don’t leave it until half way through the last year. There is a language center which provides language tuition (at additional cost) in various, sometimes relatively obscure, languages, as well as people (generally undergraduate students who speak the language as their native tongue) who you can practice your speaking skills with. Korbel also allows you to meet the requirement if you pass a level 4 language course with Berlitz.
Attend as many of these events as you can. I can’t emphasise this enough. Not only do you get a free lunch (most of the time), but also a free education (or at least, some extra education as part of your degree which you are already paying for…). Some may fear that Korbel is outside the beltway, away from the heavy-hitters in international politics, diplomacy, and academia, but if you take advantage of the series of speakers who visit the school, you have little reason to feel this way. Korbel’s Center for Middle East Studies, the Center for China-US Cooperation and the Center for the Study of Europe and the World, in addition to individual professors and student groups, have been doing an excellent job of bringing in a fantastic range of speakers. Personally, having had the opportunity to hear heads of state, ambassadors, military officials, bureaucrats, business leaders, journalists, transgender libertarian feminist economists, and other academic experts from various leading universities and think-tanks in the US and globally talk on topics from the Arab Spring, to the Eurozone crisis, to China’s rise, and dozens of esoteric topics in between, was easily one of the most valuable parts of my experience at Korbel. These individuals are world leaders in their respective fields, and to not only be able to hear them speak, but to engage them in Q & As in an intimate setting has provided me with some unforgettable memories and insights into some of the most important issues in the world today. Go to as many speaker events as you can – and ask questions! In some cases, it may be one which few others would get the chance to ask.
In my opinion, if you plan your degree well (seek advice before or soon after you arrive on what order to take classes in, and with whom, and have a good idea of what types of classes will help you get where you need to go), come with work experience and get some more while you are here, read, read, read (and take notes on your readings, it will help massively with writing papers and if you are like me, remembering what you did in class by the time the next quarter rolls around), talk to professors outside of class, participate in class (answer and ask questions), attend as many outside speaker events as possible, and aim not to become a master but a discerning consumer and producer of information within a time constraint, your experience at the Josef Korbel School of International Studies will be extremely valuable and fulfilling.
International monetary relations (Ilene Grabel – on sabbatical until 2014)
International Trade (George DeMartino – on sabbatical until 2014)
Political Economy of Globalisation – (Martin Rhodes)
Econometrics (Mark Evers)
International Project Analysis (Tom Laetz)
International Campaign Management (Rick Ridder)
Capital Markets in Africa (Robert Fogler)
International Business Transactions (Josiah Hatch)
If you have any questions regarding any of the above, feel free to comment below and I’ll try to get back to you. I hope some of you prospective students will find this blog useful in making your decision about whether to come to Korbel. I’ve really enjoyed having this outlet (even though I never did get the giant muffin I was promised for writing it…), and more importantly, my time at Korbel, for so many reasons.
Just ten days until I have my last class and 18 until I graduate, in front of Ban Ki Moon, my mum (coming from the UK), Dad, and step mum (coming from the Bahamas). Hard to get my head around at this point!
In the meantime I have to finish writing my Bahamian trade and development Significant Research Project (SRP – sort of a mini, but not in actual fact very mini, thesis…), two final essays for Martin Rhodes’ Political Economy of Globalisation class (great class, in which we have touched on issues relating to the inequality effects of trade, how welfare systems come into being and evolve, the origins and remedies of financial crises, the advantages/disadvantages of different varieties of capitalism…), and a presentation and final paper for Rick Ridder’s International Campaign Management class (our group presentation will see us present a campaign and communication strategy for the Australian Green party going into the elections this year).
In around a month I will return to The Bahamas where I have accepted a job as the Business Editor of one of the two major daily newspapers there, The Nassau Guardian. I’m really excited to be able to put to use a lot of what I’ve learnt in the GFTEI program – international economics, political economy, investment, trade, business, finance, economic development – applying it to the particular challenges in The Bahamas. I was a business reporter before but the GFTEI program has enabled me to gain an in depth level of understanding of many issues that I lacked and which will position me well to highlight what people need to know about the business and economic landscape in The Bahamas and beyond. Having used some of my class assignments to do research projects on specific aspects of the economy – trade agreements the country has signed, the domestic financial sector, inequality – I feel like I now have a more detailed understanding of some of these key areas which I can use to make sure I ask the right questions and pursue important angles.
I feel extremely fortunate to have been offered the post, particularly as many of my very employable fellow students here at Korbel are finding the job search to be quite arduous. To be sure, people are finding jobs, and it is early days, but I fear that with the combination of the continuing weakness in the economy overall, combined with the US government’s sequester, opportunities are at a low, and competition at an all time high. Networking is definitely more important than ever, and luckily for me, a job as a reporter prior to coming to Korbel turns out to have been an excellent networking opportunity which I have been able to capitalise on now that I am finishing here. I’m looking forward to seeing where everyone eventually ends up… and for them all to come and visit me on my little rock in the Atlantic as soon as possible!
I’m going to write some more in depth reflections on my time at Korbel at some point when I have some more time, but for now, if there are any specific questions that you might have about the school, the GFTEI program, and anything else that might help you figure out if it is the right choice for you, just leave me a comment.
Take a look at this image, if you haven’t already.
It’s a haunting photo from within the factory building in Bangladesh where to date over 800 workers have been found dead after the unsafe structure, the site of five garment factories, collapsed with thousands inside it last month. These avoidable deaths came even after workers expressed fear of widening cracks in the walls days before.
To peer into this intimate moment of unspeakable tragedy, the culmination of a chain of exploitation that begins right under our noses, seems almost intrusive: perhaps a condemnable continuation of this ethos of detachment that allowed this collapse of human dignity to occur in the first place. In life, and in death, we consume them and what they create; their bodies byproducts of the most trivial appetites of our everyday “advanced” existence.
Or maybe to look and reflect on it is the least we can do?
Having studied trade and the debate over the role of labour standards in several of my classes at Korbel, I can say that my reading has taught me there are no easy answers here, and I must admit to finding comfort in the numbing apathy induced by mental and geographic distance.
But if we are to look at their bodies, might we take from this image a sense that it is incumbent upon each of us to continue to trouble ourselves with the question of how we move from this place: a place where people are continually reduced to disposable inputs whose lives have less value than the capacity to fulfill a supply order on time. Or perhaps more importantly, with understanding how we got to this point to begin with. I am totally guilty of failing to do so.
What would you do if you were the head of a multilateral organisation, charged with “maintaining international peace and security, developing friendly relations among nations and promoting social progress, better living standards and human rights” and you happened to find yourself with some free time on June 7th, 2013?
You’d come and speak at the Graduate Commencement ceremony for the University of Denver, of course! Which is precisely what UN Secretary General Ban Ki-moon will be doing. Today Korbel was a-buzz with news that the Grand Overlord of all Korbel students’ employment hopes and dreams will be coming to wish us well as we head out into the world, post-graduation. Sorry to all of those students from other departments who thought that they might get a Nobel laureate, or a business magnate, a great legal mind, or an athletics champion…nope, this one’s for Korbel. Another Dean Hill draw, I would imagine.
Exactly what the Korbel School’s Dean, former Ambassador to Iraq and lead negotiator for the US on North Korea-related matters, Christopher Hill, did to pull in Our Man Ban is yet to be determined. A solution to the latest North Korean crisis? A promise to re-unify the Republic of Korea and North Korea within a year? A commitment to be a direct conduit to the President for Ban if/when Hill goes back to Washington to serve in the State Department again? We’ll never know. What I do know is that I now feel a whole lot better about the fact that I have people flying thousands of miles to attend this graduation thing, and that I will be paying $48 to wear a very unflattering gown and square hat that I will then have to return before I even get a chance to go dancing in it. Even my most internationally-clueless relatives know who Ban is (or at least they pretended to, when I mentioned it…).
Also, I’ve heard, but can’t confirm the veracity of the claim, that a particularly proactive Korbel student is currently printing out reams of mock UN job contracts with each of the graduating Korbel students’ names on them, to place in front of the Sec-Gen after he’s had a few glasses of wine and feels he’s gotten to know us all a bit better…so I’ve heard…
(Joke, of course…)
Sincerely though, what a suitably legendary end to two years of studying global challenges it will be, to have the closest thing we have to a true world leader speaking at our graduation ceremony. I can’t help but feel that rather than some stroke of administrative luck, or a devious deal struck by Dean Hill on our behalves, this may just signify a positive omen for the Josef Korbel School of International Studies’ class of 2013 ;)
I can put it off no longer. All the grand delusions I have had lately of writing a blog post to commemorate the 10th anniversary of the Iraq war, a blog post about the International Consortium of Investigative Journalist’s recent release of an unprecedented expose on those who have maintained thousands of offshore bank accounts, a post about the international drug war, or just a blog about my new home, the lavish Anderson Academic Commons – otherwise known as DU’s new library, which opened last month – have come to naught.
It’s not that I’ve lacked inspiration. I’m finding myself regularly uplifted to Sound-of-Music-outburst-esque-levels while sitting in this special spot in the academic commons that offers a panoramic view of the Rockies to my left, and downtown Denver to my right (if you come to visit, or end up studying here, try spending some time in the upper level of the library on a clear night and waiting until the sun sets behind the mountains… absolutely worth the tuition, I’m telling you…). However, I’ve had to admit it: I just need to write a regular old blog post about school, or I won’t write at all. And isn’t that what this blog is supposed to be about anyway?
To be fair, my failure to live up to these mighty aspirations of wordsmithery may have something to do with the fact that I’m in my last quarter of grad school, technically taking 19 rather than the usual 15 credits, thanks to my overlong independent study project on Bahamian trade and development. It could relate to the fact that the student group I’m a part of has been organising a series of 4 events this week on drug policy – specifically, the impact of the legalisation of marijuana in Colorado for the international drug war – for which we’ve flown in a drug expert and member of the UN International Narcotics Control Board to speak, along with panelists that include one of the authors of legislation that led to the legalisation of marijuana in the state of Colorado. It may be connected with my ongoing work for Professor Ilene Grabel, which sees me doing my utmost to keep up with Professor Grabel’s phenomenal pace of academic productivity, as she conceptualises and creates paper after paper on subject matters at the cutting edge of international political economy. Or it could tie in to the fact that I’m also trying to actually enjoy my last couple of months here in the way that any normal person would – that is, by socialising and taking in the Colorado scenery – and therefore find myself just saying yes to leaving the house more often than I have until now.
I’ve also been compiling a major dossier of biographic documentation to submit to the Bahamas government, where it has been suggested I may end up working come July. I’ve been told my skills could be of use in the trade unit, which deals trade promotion, the implementation and negotiation of trade agreements, and a host of other intimidatingly important issues facing The Bahamas. However, that doesn’t preclude having to go through the formal application process, which involves an “everything-but-the-kitchen-sink” application process, to put it mildly.
Whatever the case, time is flying. But whenever things get away from me, there is always something to bring it back: the finitude of my time in Colorado. A reminder me that while I might not be keeping track, someone else is. Case in point: I just received an invitation to my graduation reception (if I decline, can I stay?!), and a notification about what I need to do in order for my scholarship administrator to book my flight home. Meanwhile, as I was prior to my job offer in The Bahamas, all of my friends are indicatively deep in their own job searches, sending out resume after resume, cover letter after cover letter. On a more typically absurd Korbel note, “Spring Formal Fever” has taken over the school, and campaigns to be the Korbel King or Queen at the upcoming and surreal Korbel “spring formal” (otherwise known as “Korbel Prom”) are underway. My take on it is that the amount of effort and thoughtfulness that has gone into these campaigns should be enough to convince any prospective employer that my Korbel compatriots are prepared for employment in any which way they are needed. Our Class of 2013 Facebook page has been blowing up with not only photographic campaign material, but also fully edited (soundtrack and all) homemade attack ads involving those who have entered the race in the run up to Saturday’s prom, showing that not only have we used Facebook as a distraction and social tool par excellence during our time at Korbel, but we’ve truly excelled at it, becoming champions of online tomfoolery. In other words, is it really a waste of time if you get really, really good at it?! (and manage to do so while adeptly juggling an impressive number of ACTUAL adult/”real person” responsibilities). Alas, it’s hard to finds ways to heighten visibility for your prom royalty campaign video during the job application process.
Anyway, I’m not sure if that was really a blog post about “school” but I do know it is bed time. Tomorrow is International Campaign Management, a panel on the drug war, and all the usual stuff. Worth mentioning, I think, is the fact that a coincidental tie-in between these two activities is that my International Campaign Management “professor” aka professional political consultant, Rick Ridder, is currently consulting with the government of Uruguay on their efforts to legalise and monopolise marijuana production in that country. Ridder’s class has so far been chock full of entertaining anecdotes about his escapades as a political sorcerer and communications doctor — attempting to conjure up election campaign victories and/or trying to avert foot-in-mouth crises brought on by political aspirants the world over. A very interesting insight into the science of electoral strategy from a top player in this field, and definitely a worthwhile class for anyone interested in potentially conducting communications-type work for anyone from a politician to an NGO.
I decided I would post this case study that I put together as my final paper for Professor Ilene Grabel’s Finance and Development class. We were given the chance to choose a country of our choice to assess, and of course, I chose The Bahamas. One of the nice things about many of my classes has been the opportunity to tailor my papers around my specific interests and that’s what I’ve done here. I haven’t included the bibliography since it’s enormously long, but if anyone is interested in the sources of this information, feel free to contact me. I figured that since I had taken the time to compile all of this data on The Bahamas (people don’t often take time to compile much data on The Bahamas…) I may as well share it for those who could benefit from it. For those of you with no interest in finance or development, who don’t know how you ended up here and have a fear of percentages…run away now!
I’m warning you in advance, this aint no romance novel. It’s pretty dry and straightforward, but for those of you who are thinking about coming to Korbel to study the GFTEI program it will give you a good idea of the kind of work you might do, and for those of you who may be interested in the Bahamian financial system, well here’s an overview for you. Any feedback welcomed. Please don’t reproduce this without my permission…thanks!
The Bahamas: A Financial System Case Study
The Bahamas is a developing country of 355,000 people with a GDP per capita of $22,431. It forms a part of the Caribbean Community and its economy depends revolves primarily around two sectors: tourism and financial services. This case study will begin to assess the Bahamian financial system, according to its institutional characteristics, depth, access, efficiency, stability, opportunities and challenges.
The Bahamian financial system consists of banks (private banks, and trust services), non-bank financial intermediaries (insurance companies), financial and corporate service providers and “other financial services”, including investment fund administration and investment advisory services. It is a primarily bank-based system, but with a significant degree of involvement by the government in both directing and allocating credit. There is also a stock market, established 12 years ago. Within this financial sector, commercial banks are the primary financial intermediaries. In 2008, 271 banks and trust companies were licensed to operate in The Bahamas, of which 20 institutions provided services to the domestic sector, including 8 commercial banks (Central Bank of The Bahamas, 2009). Of the eight different commercial banks, the three largest are Canadian (Beckett, 2011).
One may get a sense of the development of the financial sector when considering the overall significance of the financial services industry to the economy. The sector is estimated to contribute around 27% of GDP and represent around 22,000 jobs, or 13% of total employment, according to a 2007 report (Britton, Sacks, 2007). These alone generate around 15% of GDP and between 5 and 10% of total employment. The system is quite concentrated, with 89% of all financial assets owned by the top 5 banks in 2010, according to the Global Financial Development Index. This has been steadily increasing, from 63% in 1998.
In the years immediately prior to the financial crisis of 2008, and even during the first year of the crisis in the US, commercial banks in the Bahamas have benefitted from significant operational efficiency, seen in their high levels of profitability. Between 1995 and 2005 net interest margins average 1.09%, ranging from a low of 0.02% in 1995 to a high of 1.79% in 2000. Between 2006 and 2009, net interest margins averaged 3.11%, before falling to 1.06% in 2010. This coincided with an increase in loan loss provisions related to a growing segment of non-performing loans. By comparison, net interest margins in the US averaged 2.47% between 1995 and 2010, while in the Latin America and Caribbean region as a whole they averaged 3.76% during this time (GFDR, 2012).
The government has not appeared to take an active role in how banks operate – that is, there has been little evidence of “voice” in the bank/state relations. That was the case until the most recent crisis when the government stepped in to ask banks to work with mortgagees who had found themselves unable to make their loan repayments due to reduced income as a result of the economic recession that occurred following the financial crisis. The government offered to contribute by assisting with the payment of some part of the overdue amount. This program was not large, however, and the government came under some criticism from international credit rating agencies who viewed it as a “credit negative” proposal (McKenzie, September 2012). It has also been stated that 86% of all delinquent mortgagees have remained in their homes rather than being foreclosed on, and although this might be related to the fact that banks perceive it as counterproductive to foreclose in a down real estate market, this also suggests an element of “voice” in the system, as mortgagees are being given the opportunity to work out refinancing plans or to sell their homes rather than be foreclosed on (Todd, 2013).
The sector and those it serves have benefitted over the last decade from the implementation of a Payment System Modernisation Initiative (PSMI) coordinated by the Central Bank of the Bahamas in conjunction with the clearing banks. This resulted in payments being settled on a basis which conforms more closely to international best practices. The Central Bank, in conjunction with the clearing banks and the private sector, is said to be responding to customer demand by implementing further modernisations in 2013, suggesting some “voice” in the system. These modernisations include implementing systems which would allow Bahamians to use their debit cards at any Automatic Teller Machine (ATM), rather than just those belonging to their particular bank, and enable users to go online and make payments to any account, at any bank (Hartnell, December 18, 2012).
The Stock Market
The Bahamas International Securities Exchange (BISX) was established in 2000 and is regulated by the Securities Commission of The Bahamas, a statutory regulatory agency. The Bahamas International Securities Exchange (BISX) currently has 27 company listings, with a total market capitalization of $2.78bn. Given the Bahamas’ 2011 GDP of (US)$7.78bn this provides a stock market capitalization to GDP ratio of 35.8%. The stock turnover ratio, however, for the 9 month period ending September 30, 2012, is a low 5.4%, indicating significant illiquidity.
In the most recent information available, the BISX was reported to have just 46 shareholders (Securities and Exchange Commission, 2011). These include individuals, retail institutions, banks, insurance companies, financial services providers, two of the Exchange’s Broker-Dealer Members and the Government of The Bahamas. As of 2011, the single largest shareholder is the Government of The Bahamas, which bought a 43% stake in the Exchange in 2006. This small shareholder base suggests the BISX is not significantly increasing savings options for the average Bahamian.
The majority of the institutions listed on the exchange are part-foreign-owned banks or industrial sector companies (Bahamas International Securities Exchange, 2012). It would appear those listed are among those who would also have the best chances of raising capital from within the bank-based system, suggesting that its contribution to diversifying and widening credit provision may be limited. In addition there were 19 mutual funds listed on the Exchange, with approximately US$300 million under management (Securities and Exchange Commission, 2011). The majority of the listings are equity issuances, while there are also 4 tranches of debt issued by a bank, Fidelity Bahamas.
The characteristics of the stock exchange have been evolving. Between 2007 and 2010 the market capitalization of the BISX decreased from a high of $3.98bn to $2.91 bn, although the number of listings increased from 19 to 23 (21%). Trading value and volume also increased significantly, from $28,255,458 in 2007 to $110,226,124 in 2010, an increase of 290%. The listing requirements for equity are that the listing must be no less than $1million Bahamas dollars. For debt, a listing of a minimum value of $400,000 is required. Accounts must be prepared in accordance with International Financial Reporting Standards. Participants must publish and file unqualified audited annual financial statements annually (Securities and Exchange Commission, 2011).
BISX is now moving to take further steps to enhance confidence in the exchange. These efforts include moving to implement a Takeover Code that would ensure a certain level of protection for minority shareholders in the instance of an effort to engage in acquisitions or mergers of companies (Hartnell, 2012). Mergers and acquisitions of public companies have taken place fairly frequently in The Bahamas and this had led to a situation where minority shareholders had been “clearly abused.” In June 2012, the World Bank gave the Bahamas a 4.7 out of 10 for investor protection in its Doing Business report (Doing Business, 2012). BISX has also expressed interest recently in developing a “small market facility” (presumably for smaller firms) and a commercial paper market, suggesting it is hoping to expand BISX’s ability to assist with allocational efficiency (Adderley, 2013). BISX has sought and received recognition from the US Securities Exchange Commission as a Designated Offshore Securities Market and is now seeking such recognition from Brazil.
BISX Chief Executive Officer, Keith Davies, suggested this came about because BISX “made possible by the initiatives undertaken by BISX in the form of investments in our trading technology, as well as our investments in maintaining a regulatory regime that meets international standards.” Mr Davies noted however that BISX “still (has) much more work to do to take full advantage of the access and benefits this affords us to investors from the larger United States market.”
The role of development finance Institutions
While The Bahamas Development Bank was established in 1978 with a particular mandate to assist in this area, it has been acknowledged to have had little success. The BDB has a delinquency ratio of over 50% on its roughly $50 million loan portfolio. Recent news articles suggest the Government intends to wind-up the BDB, rolling its functions and that of the Bahamas Venture Capital Fund into a new Small and Medium Sized Enterprise Development Agency (SMEDA). This is in part due to a recognition that to date the failure to promote economic development through the BDB has been in large part due to a lack of overall business development support. As a successor to the BDB, the SMEDA is now being envisioned as a “one stop shop” in this regard (Hartnell, 2013).
There is also a government-run housing finance corporation, an agricultural and industrial finance corporation, and several other small funds designed to direct credit to particular ends. The Bahamas Mortgage Corporation is suffering from a non-performing loan ratio of 36%. Figures such as this and the BDB’s default rate make these institutions’ contributions to any form of financial efficiency questionable (McKenzie, 2012).
The Bahamas operates a “soft” or “conventional pegged” exchange rate regime, along with a total of 22.6 per cent of all IMF members, as of 2012 (IMF Exchange Rate Report, 2012). This system, which anchors the Bahamian dollar to the US dollar on a one to one basis, has been in place for decades. Capital controls on the domestic sector are necessary to protect this fixed-exchange rate regime between the Bahamian dollar and the US dollar and the balance of payments.
This fixed regime, in conjunction with an informal dollarization of the economy, is logical when one considers The Bahamas’ proximity to the US and dependence on the spending of primarily US tourists and investors, as well as the small size of the economy which would leave it particularly vulnerable to speculation. Capital controls require that all investments by non-Bahamians in the domestic economy be approved, and the resultant currency flows recorded. There are no restrictions on current account transactions (Central Bank of The Bahamas) and with regard to the capital account, there are not restrictions on liquidation of direct investment (IMF Exchange Rate Report, 2012: 71). This latter openness suggests the government’s willingness to concede this control to encourage the inward investment which successive governments have made such a focus of economic development efforts.
It is worth noting that the extent to which the domestic sector is not as subject to “exit” based financial flows due to exchange controls is said to have been reflected in the relative stability of the Bahamian banking system during the most recent financial crisis. Despite having a large amount of liquidity, Bahamian commercial banks have not been able to simply invest those funds abroad and therefore their exposure to international toxic assets has been limited. Similarly, individual Bahamians would have had limited international investments to be threatened during the crisis. A perceived downside is the inhibition of access to foreign capital by local entrepreneurs (McKenzie, 2009).
On the opposite side of the coin, there have been some arguments put forward that exchange controls have contributed to the level of non-performing loans and unofficial indebtedness in the economy by incentivizing sub-prime lending. In a recent news article it was claimed that “privately, several Bahamian commercial bankers have admitted….that so-called ‘sub-prime’ lending is ‘alive and well’ in this nation, with numerous individuals receiving credit who should not do so. A contributory factor to this is exchange controls, which restrict Bahamas-based lenders to this nation when it comes to seeking returns on their excess liquidity.” (Hartnell, February 18, 2013).
Despite these controls, The Bahamas is relatively internationally-integrated. As the recipient of $840 million (US), the third largest quantity of FDI by GDP in the Latin American and Caribbean region in 2011 (ECLAC, 2012), it has no shortage of investment for large-scale foreign-owned ventures. Foreign direct investment (FDI), is attracted and directed to a significant degree thanks to governmental incentives (Demeritte, 1998: 1).
With regard to participation in the Bahamas International Securities Exchange (BISX), participation is restricted. Due to exchange control requirements, foreign entities seeking to hold Bahamian Dollar denominated securities on the BISX are required to receive approval from the Exchange Control Department of the Central Bank of The Bahamas. This restricts ownership of BISX to those persons who are approved by the Exchange Control Department of the Central Bank of The Bahamas as well as by the Securities Commission of The Bahamas (Securities and Exchange Commission, 2011).
While primarily dependent on domestic credit, the Bahamian government has accessed an increasing amount of capital abroad, suggesting an increasing degree of international integration in the area of public financing. International debt issues to GDP doubled from 7.6% in 2007 to 16% of GDP in 2010, this followed a low of just 2.76% of debt comprising of international issues in 2000.  According to the Central Bank, disaggregated by creditor profile, the largest holders of foreign currency debt were private capital markets (36.7%), followed by other “miscellaneous” institutions (27.2%), commercial banks (20.9%), multilateral institutions (12.8%) and bilateral companies (2.5%). The average maturity of the outstanding debt was 15.7 years, with a dominant 97.2% in US Dollars, while Chinese Yuan and Euros accounted for the remaining 2.5% and 0.3%, respectively.” (Central Bank of the Bahamas, September 2012)
Remittance outflows averaged $108 million annually between 2000 and 2011, recovering to $125 million in 2011 or 1.6% of GDP (World Bank Migration and Remittances Database). This is higher than the worldwide average of 1.3% of GDP among the 149 countries for whom data is available. No data is available on remittance inflows.
As a middle-income developing country, The Bahamas receives minimal foreign aid except the occasional hurricane-related grant from the Inter-American Development Bank (IADB) with whom it also has a borrowing relationship focused on the provision of loans for systems modernization and large-scale public infrastructure projects. With respect to domestic banks, significant foreign presence in the banking system has led it to be designated the most significantly exposed country outside of Europe in terms of “upstream exposure” to possible crisis in a creditor banking system, in this case – Canada’s (Cerutti, 2013 :15).
Of note is the fact that the Bahamian financial system could be considered a “dualised” system, as it is home to a fully internationally-integrated international financial sector. In 2008, as resources flowed out of US credit markets, assets of international banks and trust companies advanced by 24% to an estimated $503bn, dwarfing the country’s annual GDP of just under $8bn (Central Bank of the Bahamas, 2009: 34). This dualism of the economy also reflects some of the extent to which the financial system is both “exit” and “voice” based. In this internationally-integrated sector, banks are deemed “non-resident” and are differentiated from the domestic sector by not being subject to exchange controls that apply to the rest of the “resident” or domestic financial sector. They can operate freely in foreign currencies and as such are subject to the vicissitudes of international financial flows. They also contribute little to the economy in comparison to their size and profitability and would appear to have no impact on domestic financial access or efficiency (Sacks, Britton, 2007).
With regard to allocational/operational/functional/informational and/or social efficiency, the Bahamas financial system has a mixed/unclear performance. As noted, based on the capitalization and constitution of the BISX, some large and often co-foreign owned firms have been able to obtain capital in this way. Historically large foreign direct investment inflows suggest foreign investors have not had an issue accessing credit abroad for investments in the Bahamas, which have been incentivized by government action. The existence of a public pension fund with assets totaling 21.6% of GDP (2008) which is mandated to invest only in domestic assets (primarily government registered stock) provides a vehicle for savings mobilization and domestic credit access. An unregulated private pension sector valued at 15.9% of GDP is estimated to invest primarily in domestic securities, while also making some portfolio investments (Deveaux, 2008:5, 7).
A significant question is to what extent the relative “depth” of the financial system corresponds to broad-based access across social-strata and industries. As a small economy it suffers from some data deficiencies which complicate this analytic effort. The Bahamas does not appear in the Global Findex (Financial Inclusion Database) and the World Bank’s most recent Global Financial Development Report Index also lacks data in critical areas, such as basic figures such as the percentage of adults borrowing from a financial institutions in the past year to total adults, or the percentage of adults saving at a financial institution to total adults.
Private credit to GDP overall stands at 82.2% and there is significant credit being funneled into personal loans, which make up 72.5% of total loans outstanding to commercial banks in 2012. However, it is not clear who is accessing this personal credit. What can be seen is that personal loans greatly outweigh any of the other categories, with the next largest recipient of credit being the construction sector, which represents just 5% of outstanding private sector credit.
Of note is that the Inter-American Development Bank (IADB) recently approved a grant under the heading of “Providing microfinancial services through technology” to a Bahamas-based company, Transfer Solutions Providers Ltd (TSP), which aims to provide banking services to the low-income segment of the population. The grant will fund research into how to rate the risk of the low-income segment of the Bahamas population. TSP aims to provide an “electronic wallet, accessible by a card, SMS and the internet”. In an interview conducted for the purposes of this report with the President of this company, Johnathan Rodgers, he said that studies undertaken by the company suggest that 60 to 65 per cent of people in The Bahamas are unbanked, while a further 10 to 15 per cent are underbanked. While this figure may seem surprisingly large, it is partly likely to be contributed to by the effect of illegal migration. Illegal migration to The Bahamas from Haiti is significant, and it is estimated that of the 355,000 total population of The Bahamas there may be as many as 50,000 to 70,000 undocumented Haitian migrants. Without formal legal status and related documentation, these individuals do not have access to financial services. Furthermore, their children, once they reach the age where they might want to open an account, also will not get access to financial services since they can only apply for citizenship at the age of 18 and this is not a definite path to citizenship. This high “unbanked” figure would also seem to be validated by the extent of inequality (the Gini coefficient) and unemployment for The Bahamas (noted elsewhere in this report).
The continued popularity of revolving credit associations (ROSCAs) in The Bahamas may be perceived as both a cultural feature in a country where 85% of the population is of African heritage, which contributes to “resilience, pride” and identity (Stoffle, 2009: 72). However, it may also be viewed as a potential signal of the proportion of this unbanked or underbanked population. To what extent people are relying on credit in light of a lack of other alternatives is an issue to be further explored.
In the Quarterly Economic Review of the Central Bank of the Bahamas for September 2012, it notes that 82.9% of the value of all deposits in the banking system are held in just 3.2% of accounts. “The largest number of deposits were held within the under $10,000 category (89.4%); however, these balances comprised the smallest proportion of the total value, at 6.2%. Accounts with deposits between $10,000 and 50,000 represented 7.0% of the number and 10.9% of the value, while those in excess of $50,000 were the least in number (3.6%) but held the highest value (82.9%),” it is stated.
In terms of the cost of capital – an indicator of access – there is a discrepancy which cannot be fully explained. According to the GFDR, the Bahamas lending spread in 2011 was 1.8%, the lowest of all developing countries in the GFDR. The central bank, however, notes a weighted average lending rate of 11.18% coupled with a weighted average deposit rate of 1.93%, which would suggest a much higher lending spread of 9.25% (Central Bank of the Bahamas, September 2012). A higher rate would suggest lesser access for those on the lower-income end of the spectrum. It seems intuitive to imagine that a wider lending spread is likely in a situation where no credit bureau exists.
There is also a well-documented issue in terms of constraints to SME financing (Turnquest, 2012). However, again, there is a lack of solid empirical data in this area (the GFDR does not include data for the percentage of small firms with access to a line of credit for The Bahamas). The IADB’s choice of SME development as a focus area in its country strategy for 2010-2014 for the Bahamas and Government statements suggests this is recognized as a trouble spot in terms of financial provision. This may suggest some concerns in terms of the allocational efficiency of the financial system, since there is a significant demand for such credit and yet obstacles remain to it flowing to these areas.
SME financing also relates to the functional efficiency of the financial system. There is certainly a case to be made that while capital is quite abundant for the development of large-scale real estate projects (primarily aimed at the foreign second home market) and for resort construction, it is capital in the area of Bahamian-owned SME financing which has the greatest potential to contribute to reducing the unemployment level in the long term and contributing to sustainable development. Furthermore, there are two issues that arguably affect the functional efficiency of FDI for large scale resort and real estate projects. For one, in order to attract this FDI the government has typically granted very generous concessions on taxation and in other areas, which may minimize their impact on economic development as a whole (Demeritte, 1998). There is a question whether this “loss in revenue is adequately compensated for by the employment and tourism gains” (Demeritte, 1998: 21). Second, these types of foreign-financed and owned projects typically see a large amount of leakage in terms of subsequent profits which leave the country, and do not create significant benefits within the economy except in terms of creating a large number of fairly low-skilled service-sector jobs.
While there are backward and forward linkages to suppliers from resort projects and real estate construction, this is typically concentrated within a relatively small segment of well-established firms. The ability for more firms to benefit is arguably held back by the lack of SME financing to create businesses that could harness some of the demand created by these projects for local benefit.
It is also worth recognizing that a significant portion of financing for loan term projects has come of late from institutions such as the Inter-American Development Bank. For example, loans for a very large country-wide road network upgrade project. Other funding for road projects and the biggest resort project underway in The Bahamas at present, Baha Mar, has come from China at concessionary rates.
In terms of informational efficiency, The Bahamas accounting profession complies with accounting standards, but generally uses cash-based accounting rather than accrual accounting. Since cash-based accounting is generally considered to be less reliable as a means of predicting future company performance and therefore as a basis upon which to make an investment decision in a company. It has been suggested by the Bahamas Institute of Chartered Accountants and outside bodies that the country needs to move to internationally recognized International Financial Reporting Standards (IFRS) and begin accounting using the accrual method if it is to be able to compete more successfully internationally (Adderley, 2012). However, it is to be noted that companies listing on the BISX are required to provide financial statements annually that are prepared in accordance with IFRS.
As far as lending to individuals is concerned, there is a major deficiency in terms of informational efficiency in this area as there is no credit bureau in the Bahamas, although there is an intention to set one up. The absence of such a bureau would exaggerate informational asymmetries in the financial system (Global Financial Development Report, 2013: chapter 5), possibly biasing lenders in their risk aversion to the exclusion of many potential borrowers with lower incomes and employment that is deemed less secure than those of government or large hotel employees. It would also reduce competition in the banking sector to the detriment of borrowers as there would be an incentive to seek credit from banks with whom you have an established relationship (GFDR, 2013). The lack of a credit bureau also factors into the stability of the system, and when combined with the level of financial depth seen, would seem to have an undeniable role to play in the high level of non-performing loans (NPLs) in both the mortgage and consumer loan segment at present.
Rising NPLs have severely diminished bank’s operational efficiency and led to tightened credit conditions. The International Monetary Fund has identified these above-regional-average NPLs as a “source of concern” in the system, despite high overall capital adequacy ratios (IMF, 2011). The IMF has warned the Bahamas to “strengthen its monitoring of credit risk” (Hartnell, February 13, 2013) and it seems that with the intention of establishing a credit bureau the country is headed in this direction.
With regard to lending to the government, significant information is available regarding public finances, based on reports provided by the Central Bank, and The Bahamas is also rated by several international credit ratings agencies. The public, the government and investors may also pay attention to the results of stress tests on local banks which the Central Bank has undertaken in recent years as an indicator of overall financial sector stability and a signal of which banks may be a better option when one is seeking to determine where to make deposits and so forth. The IMF has used the results of these tests to make statements about the overall soundness of the Bahamian financial sector of late, finding it to be quite stable despite a large number of non-performing loans. However, it is of relevance in this regard that credit unions are yet to be brought under the regulatory supervision of the Central Bank of the Bahamas, a point which has been noted by the IMF in its assessment of the stability of the Bahamas financial sector (Hartnell, 2013).
One of the only comprehensive surveys of poverty and inequality in the Bahamas, the Bahamas Living Conditions Survey of 2001, estimated a Gini coefficient of 0.57 for the Bahamas – as high as Brazil. However, it also noted that the Brazilian GINI is based on income distribution, which tends to be more unequal because of savings and seasonality, whilst the Bahamian figure is based on expenditures. This implies that true inequality is likely to be significantly higher in The Bahamas and thus probably the highest in the Caribbean (Handa, 2004: 14). This fact may be taken to signify a failing on the part of the financial sector to fulfill social objectives.
Factoring into this is the issue of land title and the possibility that a lack land reform is impeding access to collateral and hence, financial services. There is an antiquated system of land registration, which, along with a significant proportion of generational land of uncertain title, combines to limit people’s access to the land title that might provide them with the form of collateral needed to access credit (Hartnell, 2012). The process of “quieting” land title can be costly and time consuming, leading to the likelihood that only those with greater resources to begin with may benefit from the process, therefore increasing inequality.
There is also a recognized problem with structural unemployment. Between 1995 and 2008, unemployment averaged 9%, reaching as high as 11.5% in 1996 and as low as 6.9% in 2001 (Bahamas Department of Statistics). While the causes of this structural unemployment are myriad – with investment in education a key factor – it is possible that an analysis could be drawn that it may also indicate that the financial sector is not providing credit to the sectors which could create significant employment. This relates to the SME credit crunch which has certainly been identified as a problem within the economy. However, ironically, the financial sector provides some of the best paid jobs in the country – between 75% and 100% higher than the national average of B$24,000.
Public finances as a whole remain a looming challenge (Hartnell, February 13, 2013). Prior to the crisis, The Bahamas had established significant headroom, in the form of foreign reserves, upon which it has been able to draw down during the crisis (in lieu of undertaking the kind of active monetary policy that might otherwise take place if the fixed exchange rate regime was not in place). It now needs to rebuild these “macroeconomic buffers” (Hartnell, February 13, 2013). After years as one of the countries with the lowest debt to GDP ratios in the Caribbean The Bahamas is now joining the ranks of some of the more indebted countries, with public debt to GDP projected to increase from 44 per cent in 2008/2009 to 69 per cent by the end of 2015/2016 (IMF, 2011: 4). Of additional concern is that, between 2007 and 2012 the government increased its short term debt borrowings by just under 80 per cent, to $674m. The most recent government has since announced plans to increase the government’s short term debt limit threefold from 20% of ordinary revenues to 60% (Hartnell, October 24, 2012).
Addressing this, according to the IMF, requires some medium-term growth strategies which are currently lacking. The Bahamas credit rating has been downgraded three times in as many years, and now standards at BAA1, with a “negative economic outlook”, according to ratings agency, Moodys (Hartnell, January 24, 2013). It is noteworthy, however, that The Bahamas is still accessing credit at reasonable interest rates and long-term maturities.
While at present, with reduced demand for credit in the economy, there should not be too much concern about government financing requirements crowding out the private sector, as the economy recovers this may be a related issue. This aspect of the government seeking more credit domestically than abroad, as it has traditionally done, may be viewed as a double-edged sword. As the Central Bank states in its Quarterly Economic Review for September 2012, “Government’s financing requirements…dominate commercial bank lending,” (Central Bank, 2012: 5).
While overall stability has been assessed by the IMF as satisfactory during a 2012 Financial Sector Stability Assessment (Hartnell, 2013), non-performing loans and the conditions which created them are a challenge. The creation of a credit bureau, which is forthcoming, should limit this problem in the future, and further contribute to the stability of the sector.
Functional Efficiency appears to be an area worthy of concern in the financial sector. Structural unemployment has remained high throughout the 1990s and 2000s, and inequality has also been identified as an issue, which suggests that investments are not necessarily being made in the sectors that contribute most to sustainable economic growth and development. This relates to the SME financing crunch, which is also in the process of being addressed via the revamping of the Bahamas Development Bank and creation of legislation specifically to benefit this sector.
Another potential challenge is the extent to which such financing for long term investment will continue to be available to The Bahamas in the future. The Bahamas relationship with China, from whom it has increased its borrowings in recent years, is a strong but politically-contingent one, and one which depends on uncertain Chinese foreign policy considerations. There is also discussion of pressure on the IADB to “graduate” countries including The Bahamas, Barbados and Trinidad and Tobago away from IADB concessionary loan eligibility (Best, 2012). This would diminish The Bahamas’ access to the type of loans it has typically used for long term productive investments at a time when the government is increasingly challenged by rising debt levels, worsening credit ratings and therefore increased cost of capital elsewhere. The Bahamas has argued before the UN that Washington-based international financial institutions have “rushed to graduate” many Caricom countries on the basis of per capita income, while “ignor(ing) the fact that many middle‐income countries have not yet fully developed the capacity and capabilities to independently resolve the challenges they face” as “small, open, vulnerable and highly indebted economies” (Bethel, 2012).
There are major challenges to the offshore sector in the form of demands for ever-increasing transparency and information sharing. As the Director of the Cariforum grouping, Ivan Lora, has argued, Caribbean countries, including The Bahamas “have essentially moved land and water to try and comply with the new rules and when they do so, the rules then change again and the costs are extremely burdensome. The cost for the Caribbean financial centres complying with international rules is ten times as the per cent of GDP as the cost of the larger rich countries complying with the rules they have set” (Richards, 2012). This has been seen most recently with the scramble to respond to the Foreign Account Tax Compliance Act (FATCA). This Act requires Bahamas-based financial institutions to enter into “contractual agreements with the US Treasury Department to identify and report all US persons, and their assets, otherwise a 30 per cent withholding tax will be imposed on all US-sourced income post-December 31, 2013” (Hartnell, October 5, 2012). This is just the latest in the string of regulatory demands being made from abroad on Bahamas-based offshore financial services providers, in particular since the financial crisis of 2008 when government revenues fell precipitously and governments looked for new sources of tax. However, such demands ultimately have little impact on the functional efficiency and access to credit within the Bahamas economy, given the somewhat segregated nature of this portion of the sector which primarily exists to serve foreigners. The primary concern would be in terms of the overall competitiveness of the economy and resources devoted to this response.
A related challenge for the sector is continued upgrading of regulation in response to the Basel III standards. In some respects, The Bahamas already exceeds these standards. As it has been noted, commercial banks are “well-capitalised with quality capital”, beyond Basel requirements. However, there are other areas where adjustments will need to be made and enhanced supervision will be required (Central Bank of the Bahamas, quarterly letter, 2012). The financial sector itself has noted a challenge in responding to the continually evolving demands of the international regulatory community (Bahamas Investor, 2012).
Clearly data availability is an issue which could be addressed to the benefit of the country. The fact that data on access to lines of credit by firms, accounts by individuals, and such other fundamental statistics are not filtering through to major entities such as the World Bank and its Global Financial Development Report Index suggests a need for improvement in this area if The Bahamas is going to be capable of benchmarking itself against other countries and identifying areas of weakness in its system. If one was thinking conspiratorially, the question arises whether there may be political motivations for why this basic data is not being made available to the general public when it is clearly easily accessible.
 2011, Current US$. World Development Indicators database.
 Although one could argue that the fact these modernisations are only taking place now despite such high levels of bank profitability in prior years suggests a lack of voice in the system, and a possible negative impact of high bank concentration.
 This compares to 20.3% in Latin America and the Caribbean on the whole.
 Around 70% of tourists come from the US.
 The Bahamas banking sector has a stability Z-score 23.6%.
 The extent to which the US financial crisis and the subsequent downturn in The Bahamas has exposed other potential causes of instability/fragility in the system via an elevated non-performing loan rate, however, is an open question
 Global Financial Development Report database.
 See the IADB’s Country Strategy for the Bahamas, 2010-2014 for further details: http://www.iadb.org/en/countries/bahamas/country-strategy,1071.html
 As an Article VIII member of the International Monetary Fund, The Bahamas does not restrict current account transactions.
 There is a known preference for government employees and employees of major hotels in lending.
 Given that the vast majority of consumer durables are imported, the predominance of this type of credit to overall economic development is highly debatable.
 The Bahamas has been “graduated” out of eligibility for concessionary loans from the World Bank due to its “middle income status”.
 Loans which are over 90 days overdue increased to 13.4% of all loans in 2012.
 The Central Bank of the Bahamas Quarterly Economic Review in September 2012 noted “sharp contractions in bank’s profitability” for this reason.
After that brief but necessary intermission to talk about Saru Jayaraman’s inspiring efforts to reform working conditions for US restaurant workers in my last post, it’s back to regular programming: all things GFTEI, Korbel and Colorado.
Unbelievably, Winter Quarter 2013 at the Josef Korbel School of International Studies has reached its close after a lightning-fast 10 weeks and that venerable American tradition – Spring Break – is upon us.
On my part, the end of the quarter involved completing a 13-page case study on the Bahamian financial system for my Financial Systems and Development class with Professor Ilene Grabel, and an 18-page research paper for my Political and Economic Development in Latin America class with Professor Lynn Holland on why the Caribbean is being wrongly “lumped” with Latin America in discussions of the latter’s “turn to the left” from neoliberal orthodoxy. I’m also continuing to work on an independent study which I am doing under the supervision of Trade professor, George DeMartino, on how trade agreements recently signed or currently under negotiation by The Bahamas with countries such as Europe and Canada will impact Bahamian “development policy space”.
Next quarter, which begins in only a few, short days (the 6 week vacation that comes at the end of fall quarter sadly lacking this time around…) I am taking Political Economy of Globalisation (known unceremoniously to us GFTEI-ers as “PEG”) with Prof. Martin Rhodes, International Campaign Management with Rick Ridder, a professional political campaign consultant who owns Denver-based RBI Strategies and Research, and continuing with my independent study project.
PEG is my last required class here at Korbel, and I think it will help to bring together a lot of what I have learned so far in the area of political economy, trade and finance. The International Campaign Management class is one that appealed to the former journalist in me, who wonders whether some day she might end up working in some capacity -whether full time or freelance – as a communications specialist-type, on NGO, governmental or international organisation campaigns. Ridder also has a very intriguing background, having worked on both US (Clinton-Gore, Howard Dean) and international presidential campaigns, US gubernatorial campaigns, and having assisted political parties the world over (Sweden, the UK, Bermuda) in strategising their electoral message. How to successfully communicate an organisation’s “message” and potentially affect opinion and change is something that interests me greatly.
I’m also hoping to ensure I make the most of what will now be my last few months in Denver, a place that has become my home, a place full of friends, brimming with intellectual inspiration and fulfillment, whose weather and scenery I cherish on a daily basis. Parental plane tickets have already been booked for graduation on June 7th, so it would appear this thing is really happening…
In the spirit of Colorado joymaking, I just returned from a blissful 3 day trip to Breckenridge, in the Colorado Rockies, with a group of Korbel friends. Skiing, snow-shoeing, morning views of the mountains, communal breakfasts and the world’s most distasteful yet hilarious card game all featured…Herein lie some of the best reasons why you should consider coming to Korbel to do your Masters, my friends.
Disclaimer: This post has nothing to do with GFTEI or Korbel! Instead, it relates to an event I recently attended in Denver which I believe included important lessons for everyone who eats out in America today. Let me know what you think…
Do you eat ethically? If you live in Colorado, the health nut heaven of America, where our love of all things organic and locally-sourced is inversely matched only by the smallness of our waists, chances are you care a lot more than the average American about the ethical quality of your food: whether it is locally sourced, organic, humanely-raised, sustainable, and most of all, makes you feel good.
Case in point: in 2010, Boulder was named “America’s Foodiest Town” on the basis of it having, among other things, “quality farmers’ markets, concerned farmers, dedicated food media, first-rate restaurants, talented food artisans, and a community of food lovers.”
In Boulder, and indeed all over Colorado, it is hard not to be bombarded when perusing a menu (if you happen to be lucky enough to be a middle-class person with disposable income to spend on good food) with head-spinning descriptions of how ethical, how healthy, how spiritually wonderful, your meal is going to be.
One might feel relatively satisfied by simply mustering the ability to choose what to eat from among these at times elaborate choices. Let’s imagine that once you’ve made your selection, you chose ethical food, by all the typical foodie standards. But having done so, can you be satisfied you are really eating ethically? This is the question that Saru Jayaraman, co-founder of the Restaurant Opportunities Center-United (ROC-United) poses in her new book, “Behind the Kitchen Door.”
Jayaraman, a Yale law graduate who founded ROC 12 years ago, is blowing the lid off the reality of the restaurant industry, currently the fastest growing sector of the US economy in terms of employment. Beyond the certificates telling us our restaurants are health and safety certified, and our menus are ethical, there is a grubby situation behind the kitchen door.
And it’s a reality that you should be concerned about whether you are care about workers rights, or just about your own health. Which is what makes Jayaraman’s organization, her book, and her infectious verve so exciting – it’s got such potential. Potential to change the lives of the over 20 million people (1 in 10 workers) in this sector if it succeeds, and a significant chance to in fact succeed, because it appeals to both progressives and to those who just like to eat.
As Jayaraman pointed out during a recent visit to Denver to speak at an event organised by Colorado Jobs With Justice, the fact that restaurants are working extremely hard to cater to the foodie market did not happen overnight. It was a result of the release of several books and documentaries that lit a spark under the national foodie conscience. In so doing, “ethical” food became a permanent part of a modern foodie’s lexicon. Books/documentaries like Eric Schlosser’s Fast Food Nation (2003), Michael Pollan’s The Omnivore’s Dilemma (2006) and Food, Inc. (2008) played a huge part in this.
One of the most compelling components of Jayaraman’s argument for restaurant workers’ rights builds on this sea change in consumer preferences. It’s the idea that if we care about the chickens, pigs and vegetables that become our dinners, we should care about the hands that prepare them and serve them: about the bussers, servers and others who are behind the kitchen doors.
The facts of their situation are shocking: The federal minimum wage for “tipped” restaurant workers has remained at $2.13 per hour for the past 22 years (the federal minimum wage for non-tipped workers is $7.25). This means it has not even risen in line with inflation (so essentially, it has decreased). Worse still, workers oftentimes do not make the tips necessary to make up the difference since 1 in 5 do not receive the tips that are owed to them – the tips that are supposed to make up the majority of their salary. Paid sick days are a benefit not enjoyed by 90% of those who work in the sector. Segregation is also rampant in the industry, with white workers twice as likely to get (somewhat better paid) jobs as servers than Latino or black workers.
What all of these statistics equate to is “incredible poverty” among those working in the industry. In fact, says Jayaraman, restaurant workers suffer poverty at three times the rate of other workers, and are twice as likely to use food stamps. This inability to make a “living wage” and the lack of paid sick days also means a greater likelihood that those who are sick are going to be forced to come to work anyway (because they can’t afford not to), and pass their germs on to you via your dinner which they are preparing.
This unsavoury reality reflects the powerful lobbying influence of the National Restaurant Association (the “other NRA”!), ROC’s main opponent in its fight for restaurant workers’ rights. In 1996, when Herman Cain (remember him?) took over as President of the NRA, he struck a deal with President Bill Clinton and his fellow Democrats. In so doing, the Pizzaman’s enduring legacy became the ongoing economic injustice meted out to restaurant workers nationwide: In exchange for a federal increase in the regular minimum wage, the tipped minimum wage was de-coupled from the “regular” version. The result: despite occasional increases in the regular minimum wage, the tipped version hasn’t changed since 1991. Consequently, recent talk by President Obama of raising the minimum wage would have no effect on restaurant workers even if it were to be acted upon.
For the last 12 years, ROC has been working on building the “groundswell” which they see is now needed to overcome the influence of the NRA and get congress to recognize restaurant workers’ fundamental rights to decent working conditions via legislation. Their innovative efforts, which include producing a diner’s guide to ethical eating (available in smart phone app form to help you find ethical eateries), have been met with major victories, as well as a backlash from the NRA, which Jayaraman says only adds further validity to ROC’s mission.
“It’s clear they don’t have anything legitimate to say about raising the tipped wage from $2.13, and are therefore trying to attack us as individuals,” said Jayaraman, who recently appeared as a guest on MSNBC’s Up With Chris Hayes, and found the NRA refused to send a representative to appear along side her to respond.
Whether it’s the realisation that those who are putting food on your table may not have the means to put food on their own, or simply the cringe that crosses your face when you think about the hands of a sick worker preparing your food which urges you to action, Jayaraman recommends several practical steps that each of us can take to begin to address this disturbing scenario.
When you eat out, you can choose to select restaurants that are truly ethical using ROC’s Dining Guide. Perhaps more efficaciously, as a paying customer you can choose to say something to managers at restaurants which aren’t. Jayaraman recommends approaching them with the following: “I loved your food, I love your service, what I’d really love to see is the opportunity for some of your Latino bussers to work as servers. Or for your employees to receive paid sick days…”. While this might not elicit an immediate reaction, “if a manager were to hear it 10-15 times a week, he would definitely start to think about it,” suggests Jayaraman. You can also pressure your elected representatives to support raising the tipped minimum wage and paid sick days for restaurant workers. As Jayaraman tells us, as consumers we “don’t just hold forks when we eat, we hold incredible power.”