As the world is getting smaller and colder, with resources and people getting tighter it’s time to spend money intelligently. Can we subsidize smartly?
Everyone likes a free lunch. In Bahrain, we’’ve been having free breakfast, lunch, and dinner for so long now that we get insulted when a bill comes for that extra soup we ordered. Our subsidies (which originally had a clear goal and purpose) have transformed into a beast known in economics as ““perverse subsidies””— which are subsidies that are out of date, inefficient, and don’’t meet a tangible goal or requirement.
The predominantly panicky feeling in the air right now is because our cash-strained government, pummeled by historically- low petrol prices, needs to shed some weight and is exploring all options— including the removal of subsidies like starting with meat, then electricity, & water, petrol, diesel, natural gas, and eventually, wheat, medicine, and education. Our broken budget is damaging our economy and , our credit rating, and may even force us to devalue the dinar. We’’re faced with a looming fiscal crisis, and Parliament is reacting with its regular finesse—i: Its members cursing and threatening to block subsidy amendments because they foresee the ruin of local restaurants, and possibly the starvation and death of all those dependent on cheaper meat. Never mind that our deficit will hit ten billion dinars in the next few years;, just keep the old subsidy system.
Our broken budget is damaging our economy and , our credit rating, and may even force us to devalue the dinar.
Subsidies are designed to either alleviate pressure on the “‘disadvantaged’,” or to incentivize companies and people to take a particular direction the government is interested in developing. Subsidies are meant to be reviewed, measured, and amended based upon their success or failure, and not the random, short-sighted stabs and suggestions being tossed around underneath the dome of Parliament.
PSo parliament suggests we shed weight by giving meat subsidies only to Bahraini families, and their best proposal offers cash reimbursements (BD 5 monthly for ““heads of homes,”” BD 3.5 for for wivfes, and BD 2 per child) directly into their bank accounts. Registration begins now! Who cares about the expatriates and cheap labor who built (and continue to build) Bahrain virtually for free? Did we forget that cheap meat, petrol, and bread allows a cheap, mobile labor force to come and settle here happily? Did we forget that cheap labor allows us to compete globally? ItThey allows us to have cheap transportation, services, accommodation, and inexpensive domestic products. Giving subsidies to Bahrainis exclusively will compound the problem, not solve it! It’’s like starving the poor to starve everyone else. It’’s almost as preposterous as their last suggestion—that, when parliament suggested only Bahrainis should hold driver’sing licenses, since foreigners were mainly responsible mainly for traffic jams and accidents. True story.
That the best way to spend the budget is on subsidies that get TANGIBLE benefits.
As this molehill transforms into a mountain right before our eyes, everyone seems to have forgotten the following:
The reason we have subsidies in the first place
The negative effects they’’re having
That the best way to spend the budget is on subsidies that get TANGIBLE benefits.
Our subsidy system was originally created in the 1970’s to keep Bahrain competitive, keep inflation down, and thus keep the people happy. This ancient system was initially a huge success, but was due for reform (like any system) because Bahrain generatedgrew typical subsidy problems such as waste, corruption, and high opportunity costs, and creatinged a dangerous sense of historic entitlement.
We see waste because Bahrainis leave the AC on during the summer, even when no one’’s home. Instead of using a bucket, most people use a hose to wash their cars. We never share a car to conserve petrol, and one of Bahrain’’s favorite activities is ““dwara,””, or cruising around in your car going nowhere in particular.
We see corruption because it’’s well known that tens of millions of dinars of these subsidized products (petrol and diesel) are sold on a black market, for whichwhere tankers are regularly caught at our borders smuggling stuff to other countries.
We see historic entitlement because people demand subsidies without caring how they affect the economy. We grew up accustomed to this golden handout from the government, and now expect to get everything for nothing. The worst part is that instead of giving us a reason to work harder, our goal is to make the bare minimum, because the government will cover the rest. People even become furious when their electricity is disconnected for non- payment! We are a spoiled population, indeed.
ISo instead of redirecting these subsidies as cash payments, which makes them seem like charity or social aid (the original goal of subsidies, which has now been totally lost), I have a suggestion: “What if we spent that money helping locals build livestock production facilities?” IWhich means that incentives would be are offered to local meat producers like subsidized rent, salaries, feed, and even a guaranteed quantity bought by the government annually, as long as producers guaranteed a low price (close to current subsidized prices). We wouldwill then create jobs, keep our money in Bahrain, and, most importantly, continue enjoying thehaving low cost of beef whileand keeping inflation low, as well. Maybe we could can then create an export facility, compete globally, and begin a new industry for our future. My point isn’’t just to start a company;, my point is that we need to spend with smart money that gives our subsidies value. We need to let our money work for us—i. Intelligently. Wouldn’’t that be an accomplishment?
All successful global subsidy policies thrived when the public cooperated with the government to make themit work (Brazil, Germany, Egypt, Iran, U.S.A., the Netherlands). That only happens when the people clearly understand why and how the new subsidies will benefit them. This requiresneeds media campaigns, public opinion charm marathons, and a huge amount of interaction with businesses and consumers. I wonder what that would feel like. It seems like our Parliament has no clue why or how they’’re going to do anything, and may need more help than we do.
With the world shifting towards renewable energy, our time is dangerously limited. We need to start spending smart money. Either we allow our representatives to keep bumbling about in the dark and leadinging us to the edge of the cliff, or we design our own future and push for real subsidies that are measured and amended annually, like the rest of the world. And since we’’re tight on money and need to cut costs, here’’s another calculation: Bahrain i’s a tiny island with 1 million people andwho have a total of 40 members of parliament. Each member costs tens of thousands per month in salaries, staff, benefits, and a retirement package which rolls onto the budget for the next 40 newcomers joining in four4 years later. All the while, they’’re all consuming food, oxygen, and space. Isn’’t there a better way to spend our money? Whatever the case is:, Get ready, get set, subsidize!
by HAMED FAKHRO
