WRONG_WOEID WRONG_WOEID

Loosening the Gordian Knot

Loosening the Gordian KnotIt should by now be crystal clear both to the Minister of Finance & the Economy and to the Chairman of the Social Security Board that the government of the day is hard up against it when it comes to securing popular support for any increase in the rate of contributions to the Social Security Scheme.

On the face of it the proposed 2% increase – 1% each to come from workers and employers, respectively – seems relatively small. The more jarring prospect of an increase in the age at which contributors may access their age pension (from 60 to 65 years over time) has caused some anguish but no real protest. The final bread-and-butter issue: to raise the cap on monthly insurable income from $4,500 to $6,500 – has occasioned barely a ripple on the surface of a calm pond.



In point of fact, all the stakeholders – those influential organizations representing the major players in the economy – agree wholeheartedly that the 40-year-old Social Security Scheme is in dire need of a makeover. Social Security is now, in years at least, a “mature” organization. Part of today’s problem is that during those 40 years, no ongoing maintenance was carried out on the Scheme to keep its capabilities in line with changing demands. As a consequence of this four-decade-long failure to ensure its viability and relevance, the Scheme now finds itself lacking the resources to fulfill its everyday functions: Antigua & Barbuda’s treasured Social Security Scheme is insolvent – or in the word now favored by SSB chair Everett Christian, “illiquid”.

But that is a problem quite separate and distinct from the huge overhang of debt that looms over the tottering Social Security Scheme. Another decades-long failure has allied with yet another generational disaster to cripple the Scheme’s capacity to deal effectively with the challenge of structural obsolescence.

For many years, successive governments failed to pay into the Scheme monies snatched from the helpless pay packets of thousands of public servants, or to make their own matching contributions. For an equal length of time, successive Boards of Directors of the Social Security Scheme cravenly acquiesced as those very same successive governments perpetrated raid after raid on the tempting piles of cash accumulating in the coffers of the Scheme, placed there by the workers and businesses in the private sector.

It apparently never entered the head of those reputedly good citizens who sat so responsibly on the Social Security Board during those years that they were conspiring to rob current contributors and future generations of their hard-earned patrimony. Or perhaps both politicians and SSB directors rationalized it all with the comforting thought that they were, after all, acting “for the good of the people,” and that it would all be made good in time, “when things got better”.

At this point we are approaching the edge of the vast divide separating the United Progressive Party Administration from a huge segment of the nation. That division was vividly demonstrated at the April 10 “Final Consultation” on proposed reforms to the Social Security Scheme. Private sector organizations, workers, and employers alike, stood united against an immediate increase in Social Security contributions as a means of solving the Scheme’s very immediate “illiquid” state.

Clearly, something is amiss here. For matters to have reached such an irrational impasse, there must be some factor, quite separate and distinct from real-world fiscal considerations, that is driving otherwise sane and responsible business and labor leaders to deal in such an apparently cavalier manner with the business of the people.

That very phrase, “the business of the people” holds the key to unraveling the mystery behind the refusal of the stakeholders to grant the current government the relief it seeks on their behalf. Politics has reared its head – and in fact was always deeply embedded in the issue. The truth is that an enraged public is on the hunt for someone to blame for the present situation, and the incumbent party is admirably positioned to be the target of their wrath.

It all goes back to 2004, when a rescue mission was launched to save the people of Antigua & Barbuda from the ongoing disaster that was the Antigua Labour Party. The shiny new UPP administration came to office with a mandate to tackle the shambles left behind by a government that had brought the economy to the brink of disaster during a period of world economic expansion. One of the issues that brought the Lester Bird regime down in defeat was the decrepit state of the Social Security Scheme, starved and repeatedly raped by successive ALP governments.

Unfortunately, having at last been lifted to power by a hopeful public, the new regime placed action to secure the challenged Social Security Scheme firmly on the proverbial back-burner. The public has since been required to digest the disturbing news that the Scheme, known to be encountering heavy weather since before 2004, passed its “tipping point” in 2009 – the year the UPP was returned to government on platform of justice and prosperity.



Today, the nation’s pensioners wait anxiously as month follows month and an insolvent SSB becomes increasingly less able to meet its commitments. Already, the monthly shortfall is $1.8 million, and will rise to truly crippling levels unless the negative trend is arrested and reversed. The current government, following sound actuarial advice, has proposed a number of practical measures designed to “keep the Scheme alive” for the benefit of today’s contributors and beneficiaries and of those to come.

Politically vulnerable on this and countless other issues, the insecure ruling party is seeking broad support from the body politic before exposing its soft underbelly. The body politic is not disposed to be cooperative. Whatever critically urgent corrective action is applied to the challenges confronting the Social Security Scheme will have to be pursued by the incumbent administration, acting on its own initiative. The body politic is requiring that the ruling party fulfill its mandate to lead on the issue, expend its own political capital, and pay its own political price.

Alexander the Great was once required to confront such a challenge. He creatively solved the challenge of loosening the Gordian Knot by boldly cutting straight through to the heart of the problem. The body politic of Antigua & Barbuda is telling the incumbent government that the time has come to fish … or cut bait.

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Illiquid assets

#1 skyewill » 2013-04-15 09:16

Illiquid assets are assets which cannot be readily converted into cash. In business School, Managers are taught to avoid maintaining a large balance of illiquid assets as these assets can become serious liabilities. This is basic economics 101. Last week I remembered my fellow bloger "Cool Ruler" stating how great the Chairman was and banking but this is another example where iit is clear they have no clue of how to manage this very important program. So it must be either they don't know or they don't care cause it is not their money and there is no accountability. SS need an infusion NOW. Put back at least $100,000,000 now and take back those worthless government bonds and sell some assets at a discount. There will be some lost but it will build a little confidence.
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Mr. Colin Sampson

 Mr. Colin Sampson is a Journalist and the host of "The Colin Sampson Show" on Caribantigua TV 

 

 

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