Paradise Regained
Some day a history of the world will be written in terms of islands. Where the continental masses spawn dictators and socialist repressions, the story of the islands is spangled with recurrent adventures in freedom. Historically it was Britain which led the procession, with its economists (Smith, Ricardo), its free trade politicos (Cobden and Bright), and all those merchant adventurers who picked up an empire without quite realizing they were doing it. In modern times Hong Kong shows what can be done in freedom; so, to a lesser extent, does Formosa. The trouble, as Leonard Read has said, is that islands in prosperity are tempted to go “the way of all flesh,” relapsing into protectionist and “control” philosophies, and even into insanity, as in the case of Cuba. But they can put on grand shows while the impulse lasts.
The Bahama Islands, off the southeastern coast of Florida, have recently been putting on a particularly dazzling display of the development that can result when the freedom principles are followed. Snatches of the story are told in a remarkable publication called Bahamas Handbook: 1966-1967 (Nassau, Bahamas, Etienne Dupuch Jr. Publications, $4.95), which is a blend of ancient island history and fascinating modern journalism. You won’t find much here about the shady side of Bahaman development, such as the alleged U.S. mobster penetration of casino gambling in Freeport, a completely new city on the island of Grand Bahama just a few miles across the water from Palm Beach. But this story has been twisted out of proportion in lurid magazine accounts, so the handbook’s failure to go into it redresses the balance. The point is that when people can work with 100-cent, tax-free dollars instead of 50-cent-net-after-tax dollars, the good things greatly outnumber the bad. There is no income tax in the Bahamas, and no capital gains tax, and foreign investors can still get breaks there even though their home internal revenue services in the U.S. and elsewhere are exhibiting more and more ingenuity in pursuing the fleeing enterpriser.
What impresses the reader of the Bahamas Handbook is the sheer joy of creation that is released when energy is uninhibited by the tax collector. Tycoons have been doing things in the Bahamas that they might very well have preferred to do in Florida, or Texas, or New Mexico, if the investment climate on the American mainland were all that it once was. Just ticking off the Bahama development stories should prove that capitalism, even as Don Marquis’ cat, Mehitabel, has a dance in the old dame yet.
A City of Enterprise
The big story in the book revolves around the island of Grand Bahama and the building, by Wallace Groves of Virginia, of the new city of Freeport-Lucaya. Mr. Groves may have been shortsighted when he let professional managers in to run his gambling casinos, for some shady characters who had worked the tables in pre-Castro Havana turned up as members of the crews. But if Groves has made mistakes, they can be corrected by the commission that is looking into the gambling situation, presumably with an eye to throwing any Mafia-connected gentry out. Meanwhile the solid achievements of Mr. Groves will stand any amount of inspection.
An acerb critic said that the Groves group had “only” to promise a deep harbor and some solid industries in order to get 50,000 acres of Crown Lands at $2.80 an acre. The use of the word “only” is a tip-off to what Ludwig von Mises has called the “anti-capitalistic mentality.” Nobody thought Grand Bahama Island was worth anything until Wallace Groves began inspecting its pine scrub wastes for lumber possibilities. He saw a lot more than lumber in the island, but to get land cheap he had to come up with a plan that included more than golf and casinos for prospective tourists.
After signing the so-called Hawksbill Creek agreement with the Bahama government in 1955, the Groves group spent five years on surveying, site planning, harbor dredging and construction, building roads, and so forth. It started a bunkering service for ships which, by 1961, had become the largest single installation of its kind in the Western Hemisphere. By 1965 more than 1,700 ships a year were taking on nearly 10 million barrels of fuel at the Freeport Bunkering Terminal. The refueling facilities at Freeport vastly extend the reaches of world shipping. Freeport’s harbor is expected to become the “Europort” of the hemisphere—a transshipment point for major bulk shipments to the Carribean area, where 100 million people live.
Enter, Industry
To carry out the promise of diversified industry for what had been a lazy tropical island, U.S. Steel was lured into creating for Freeport a mammoth cement company (4.8 million barrels a year). The cement company uses sand from the sea bottom, so its dredging operations are incidentally responsible for Freeport’s harbor. Hard on the arrival of U.S. Steel’s cement subsidiary, the Syntex Corporation chose Freeport for one of its big pharmaceutical plants. All this was to provide an offset to the Freeport tourist industry (300,000 a year by 1966). The profits made by Groves and the other developers of Grand Bahama Island were certainly legitimate rewards for good planning and hard work. The evils connected with casino gambling should pass once the investigation commission has finished its labors, but the community of Freeport-Lucaya will remain.
J. Louis Reynolds, the aluminum executive, is another American who has been lured by those100-cent investment dollars to the Bahamas. On the island of Andros, the biggest in the Bahamas, the U.S. government has built its $130 million Atlantic Undersea Testing and Evaluation Center, or AUTEC, close to the 6,000-feetdeep arm of the Atlantic known as the Tongue of the Ocean. Andros is where the sonar detection work that is necessary to repel Soviet submarines is being pushed. Reynolds owns a 4,000-acre island farm next door to AUTEC, where he specializes in cucumbers, one of the top three Bahama exports, for the Florida market. But what Reynolds is really interested in is farming the sea. He predicts great undersea farms of lobster, shrimp, crabs, turtles, and conch, and he hopes to be the first person to grow a great spiney lobster in captivity. Reynolds says he will make Andros “a model of free enterprise.”
$20 Million and Paradise
Two young men, James Crosby and Jack Davis, happened to be making a good thing out of their Mary Carter Paint Company of Tampa, Florida. But expanding the paint business on the U.S. mainland is a high-tax business. Crosby and Davis decided to put $20 million into Paradise Island, just opposite the Bahaman capital of Nassau. They will sell exclusivity to the few (as Huntington Hartford, who sold them the Paradise tract, once planned). But they will also sell swimming in the cleanest water in the world to the thousands of tourists who pour off the cruise ships. The Paradise development, naturally, will leapfrog ahead on those 100-cent dollars.
The Future?
Will the Bahama venture in free enterprise eventually go “the way of all flesh,” with capital gains taxes and high income taxes creeping in to bring it to a halt as venturesome men like J. Louis Reynolds, James Crosby, and Jack Davis turn elsewhere? Just recently the islands’ first “labor” (and Negro-dominated) government took over. Fortunately, Lynden Pindling, the first Bahaman Negro prime minister, sees the connection between what Groves, Reynolds, Crosby, and Davis are doing and full employment for the 138,000 native Bahamans. The native population of 138,000, which is almost exactly equal to the population of New Haven, Connecticut, caters to 900,000 tourists a year where New Haven has only a few thousand Yale students coming in from outside. With 900,000 spenders descending upon you, there are other sources of government revenue which make income and capital gains taxes unnecessary. Since Lynden Pindling took the portfolio of “Tourism and Development” in his own cabinet, the chances are that he sees this. The golden goose is not yet ticketed for the abattoir.
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A Better Approach
If individuals say that they want high-bracket income taxes reduced because it is unfair to have to pay such high rates — the common argument — nobody is convinced because so many lower income people think that those who pay 70 per cent are lucky to have the income to pay it on. But if, on the other hand, we declare our objective to be a new and greater prosperity and a higher standard of living for everyone, and then show by examples how certain tax rates — not exclusively income — hamper industrial development, reduce the incentives for expansion, and keep people who need them out of jobs, we make an argument that is at least acceptable to intelligent people.
HAROLD BRAYMAN, Corporate Management in a World of Politics
