Helping private sector

The first is cultural — a society must have mores and norms that respect the entrepreneurial spirit. If Bill Gates were Japanese instead of American, for example, he might well have taken a steady job with health benefits with a computer company. It is possible that the world would still have gotten the Microsoft operating system, but Mr Gates would not have become the richest man in the world.

But cultural norms are not sufficient. There must also be legal and institutional frameworks that provide some modicum of protection. If individuals think that business failure would lead to the complete ruin of themselves and their families, then they will naturally take the safe path in their business pursuits. This may still result in financial success, but not to the extent that will create strong companies or, by extension, contribute to significant private sector-led economic growth for the country.

To a large extent, nothing can be done about cultural factors that encourage entrepreneurship. These are dependent on the ethnic history of a particular group — persons of Lebanese descent, for example, have a strong merchant tradition which they have carried to most societies they have settled in. But a government can put in place legal measures to build upon the entrepreneurial impulse that exists amongst all peoples, no matter what their culture.

That the Government is aware of this responsibility is shown by its plans to introduce revamped laws to govern bankruptcy and insolvency. Until the 19th century in Europe, where the modern capitalist system started, people who went bankrupt were put in jail — a senseless procedure, since the persons jailed had no chance of paying their creditors. Realising this, as well as the inherent unfairness of the law, governments changed the law to provide protection for persons facing financial ruin. Such laws have to be balanced, not punishing bankrupts too severely but not letting off defaulting debtors too easily, since this would discourage potential creditors.

As Junior Finance Minister Conrad Enill pointed out at last Thursday’s post-Cabinet news briefing, Trinidad and Tobago’s bankruptcy law dates back to 1916. “Quite frankly, it fails to meet the needs of the society that is expanding at the rate our society is expanding,” Mr Enill said. The Government plans to introduce a new, single statute that would govern both individuals and companies, the core intent being to facilitate those who run into financial difficulty get over the setback. Once the Bill is properly written — and this is a pending question that will be answered only when the legislation is laid in Parliament — it should help encourage more persons to get into business.

This is a more crucial issue than might be immediately apparent — which perhaps is why the Government is drafting such legislation over other laws which may seem more urgent. But the fact is that there has been a slow haemorrhage of the nation’s business class because of the drastic rise in crime, particularly kidnapping. This exodus will not be stemmed until crime goes down, but the Government must also do everything it can to facilitate private sector activity. A new bankruptcy law is just one necessary step in this process.