We will not avoid another economic collapseas occurred
in the 1980sunless we get the economics right.
Paradoxically, correct economics requires we first correct
the politics: not by simply changing parties but
the rules of the constitutional game.
The current Patrick Manning and Ken Valley conflict and the
Andre Monteil/Home Mortgage Bank (HMB) affairs are, in fact,
mere symptoms of a more deep-seated malaise.
The authors of the recent book on Escaping the Resource Curse
observe that the lower economic development of countries with
large natural resource endowmentssuch as oil and gasalso
is a result of lower performance in terms of good governance.
In fact, the absence of good governance is central
to understanding why plenty (ie windfall oil and gas earnings)
is not routinely transformed into a diversified range of productive
investments before the end of such booms.
A middle eastern economist, Moma Katouzian, put his finger
on the causal pulse when he pointed out that in hydrocarbon
economies the domestic economic sectors are highly dependent
on the State.
This is as opposed to the normal economy where
the State relies on a productive private sector on which to
lever bounty (ie taxes).
Here, Katouzian notes
this position is reversed;
it is the domestic economic sectors, including the private
sector that are dependent upon the state for direct and indirect
welfare gains through the latters disbursement of the
What then determines the relative access to such State largesse?
Katouzian goes on:
..the most clear cause of social stratification between
various classes is neither their relative earnings, nor their
common relation with the means of production.
On the contrary, it is the common relations with the
statethe chief supplier of the means of consumptionthat
determines the relative welfare position and status of different
To put Katouzians point bluntly, directly, and concretely,
Mr Andre Monteil would not have been able to put his hands
on $100 million worth of shares in the Home Mortgage Bank
if he was not a PNM insider.
We need to be careful about simply focusing on Monteil. He
is one example and symptom of any number of similar instances
of privileged access to State largesse by those close to whichever
is the ruling party predominantly on the basis of making financial
contributions to all parties.
The rest of us in the society will only be able to redress
this imbalance of accessincluding investing for future
generationswhen the constitution is changed in two major
First, by creation of party finance regulations requiring
mandatory public disclosure of party funding sources; reinforced
by independent annual audit of their books and restrictions
on the ability of big ticket contributors to hold public office
and/or benefit from state projects.
The second major requirement is for genuine representation
of the people in Parliament with power to investigate questionable
decisions such as the Monteil/HMB case, which stinks to the
heavens. Heres why. It is not simply the $100 million
share transfer that is at issue since, ultimately, Monteil
actually paid for them. The more frightening aspect is the
two amendments to the HMB Act by Parliament.
A July, 2005 amendment took away prior restrictions on the
ownership and transfer of shares simultaneously giving directors
the power to dispose of shares on such terms and conditions
as the directors shall think fit. The second amendment
of February of this year makes directors immune from liability
for acts done in relation to the exercise of their functions.
It is these two amendments that, I suspect, led the Central
Bank to reluctantly conclude that the transfer of $100 million
shares to Monteils company was legal although going
against the spirit of broad based ownership of the HMB.
How did these two amendments fast track the legal drafting
traffic jam while many bills of substantial national importance
languish at the traffic lights of legal drafting and parliamentary
Was there a conspiracy of influence peddling across a spectrum
of legal drafting and parliamentary bill tabling corridors?
I can only speculate.
A genuine parliament, as in the case of the US Congress, would
demand answers by immediately setting up an investigatory
The question of MP Valleys representation of his constituents,
therefore, needs to be located within this context. To this
I will return next week.