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Today's Date: 26 May 2012
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Andrew P. Morriss (Chairman) is the D. Paul Jones, Jr. & Charlene Jones Chair in Law  & Professor of Business. He was formerly the H. Ross & Helen Workman Professor of Law and Business at the University of Illinois, Urbana-Champaign. He received his A.B. from Princeton University, his J.D. and M.Pub.Aff. from the University of Texas at Austin, and his Ph.D. (Economics) from the Massachusetts Institute of Technology. He is a Senior Scholar at the Mercatus Center at George Mason University, a Research Fellow of the N.Y.U. Center for Labor and Employment Law, and a Senior Fellow of the Institute for Energy Research, Washington, D.C., as well as a regular visiting faculty member at the Universidad Francisco Marroquín, Guatemala.

He is the author or coauthor of more than 50 scholarly articles, books, and book chapters, including Regulation by Litigation (Yale Univ. Press 2008) (with Bruce Yandle and Andrew Dorchak), and is the editor of Offshore Financial Centers and Regulatory Competition (American Enterprise Institute Press 2010). He regularly teaches a class that brings US law and graduate business students to the Cayman Islands to learn about the offshore financial sector.


T: +1 (216) 272 9187, +1 (217) 244 3449
E: amorriss@law.ua.edu
W: www.law.ua.edu/directory/People/view/Andrew_Morriss 

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The view from 1963
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Letter from the Board  

The global financial crisis, Cayman’s struggles to balance its budget, the sequential financial meltdowns among Europe’s PIIGS, and the turmoil in the Middle East’s impact on energy prices (let alone the question of whether countries like Egypt will end up better off or not) could all make one gloomy about the future. Although there’s nothing I like better than indulging my natural pessimism on matters of economics (my last Letter was headlined Night of the Living Dead), we also ought not forget how successful Cayman and the offshore financial world generally have been.

As part of my academic life, I spent a week last fall buried in the British Archives in Kew, looking for material for a work in progress (with CFR tax columnist Craig Boise) on the historical development of Cayman’s offshore financial industry. Among the materials I found were a series of “Monthly Intelligence Reports” sent by the Administrator (in those days, Cayman didn’t even have its own governor) to the Foreign and Colonial Office during the 1960s. We can use these to remind us how far Cayman has come in a short time and put current problems in perspective. CFR is seeking permission from the Archives to reprint selections from the thousands of pages of material I located and we hope to bring readers a regular “From the Archives” item in future issues. Here’s a sample from those 1963 reports.

The first report of the year opened with discussion of the 1962 election results, a report of an unsuccessful attempted arson in a government building (concerning which “public opinion places the responsibility … with disgruntled politicians”.) The Administrator worried about imports of “ganja” from Jamaica. More seriously, an attempted murder of a police constable with an ice pick followed an “outbreak of disorder” and the arrests of “a few drunken and disorderly men”. Resignations from the Legislative Assembly, the resulting by-elections, and litigation over the by-elections made up most of the news for February, although the governor also reported “a record tourist month” due to the easing of tensions between the US and Cuba, a particularly cold winter in the US, and efforts at mosquito control the previous year.

Tourism fell off in March, as the weather warmed up in North America. Coming out of a social function that month, the Administrator found his car treated with “cow itch”. Recognising that the FCO mandarins across the Atlantic were unlikely to be familiar with the practice, he noted that plant involved was defined in the Oxford Dictionary (under “cowage”) as a “tropical plant with stinging hairs on the pod” which caused “intense irritation and a rash”. He suspected “a politician with a grudge” as this was one of the “traditional Cayman weapons of revenge”. 

The economic report in April noted that 258 tourists had visited during the month, up from 204 the prior year. More economic good news was National Bulk Carriers of New York was continuing to employ Caymanian seamen and that the thatch rope industry, which had suffered a “severe set-back” in 1962 was cheered by news from Jamaica that buyers there were ready to resume purchases. May was “quiet” and the one page report mentioned only the conviction and sentencing of the men who attacked the police constable (five years each).

The return of “troublesome numbers” of mosquitoes in the West End and two shootings (one fatal) made up the July-August report; both shootings were the result of romance. Since the last recorded murder had been in the 1920s, this was a major shock to the community. The arrival of several Cuban planes at Owen Roberts Field, to offload passengers to connect to flights to elsewhere, led to a demonstration against such traffic. “The demonstrators, led by a number of influential politicians, virtually took over the Airfield, blocking the runway and eventually the plane was forced to return to Havana with all the passengers.”

The arrival of a new Medical Officer for Cayman Brac, a position that had been vacant for “many months”, was top news in the September-October report. Even better, the new doctor was reported to be “of a pleasant disposition and a lover of the sea and fishing” and so forecast to “fit in well in this small community”. “Quiet” on the political front was contrasted with the news of a second killing, this one by a constable during an attempted arrest of a man with a “lethal weapon”. On the economic front, “steady purchases” of rope continued and hopes for a good winter tour season were the main news.

The final report of the year noted the arrival of 170 tourists in November and 344 in December. The sale of the Galleon Beach Hotel and the potential sale of the Coral Caymanian Hotel, both to a Canadian firm, were reported. The senior British naval officer for the Caribbean arrived to discuss a possible future visit by a navy ship. The legislative assembly passed a budget with an £8,000 surplus (approximately US$210,000 today) although an on-going problem of Cuban refugees arriving by boat, and costing 10s. 6d. per day to feed while awaiting transfer to Jamaica was “creating a heavy burden on the finances of the islands”. The report closed by noting the return for Christmas of many of the seamen employed off island.


It would be easy to romanticise 1963 – life in Cayman was undoubtedly a slower pace, and crime – despite the unprecedented assaults and two deaths during 1963 – was more likely to take the form of rubbing cow itch on an opponent’s car than something more serious. But the real message of these reports is the almost complete absence of economic activity on the islands. Tourism was minimal – a few hundred visitors a month during the winter – and the only other activities noted were the sale of thatch rope to Jamaican fishermen and Caymanian seamen’s service off-island. A slow pace might sound good while you stew in George Town traffic, late for a meeting and bemoaning the arrival of multiple cruise ships, but it was the result of the absence of on-island economic opportunities that slowed life, not a desire to relax.

Families missing husbands, fathers, brothers and sons off serving on ships and dependent on creating thatch rope would likely have been delighted to know the next generation would have opportunities to earn a living on Cayman. Moreover, before we idealise the past we need to remember that the arrival of a single doctor on the Brac was major news. Whether Cayman goes forward with the proposals for medical tourism or not, that such a project could even be considered feasible represents an astonishing change from just a few decades ago. Caymanian politics might still produce heated exchanges at the LA, but no one has tried to burn down the Glass House recently. Things have gotten much better in many ways. 


Just a few years after these reports, Cayman took the first steps toward its modern economy, passing modern company and banking laws and improving its communications and transportation infrastructure. Within twenty years, Cayman had surpassed Britain in GDP per capita. Had any Administrator suggested that this could ever happen – much less within two decades – the mandarins in London would have likely shaken their heads over the impact of too much tropical sun on a formerly sensible man.

There are challenges ahead, to be sure. Cayman’s most pressing government finance problem in 1963 was covering the 10s. 6d (approximately US$13.70 today) daily cost of a few dozen Cuban refugees. No doubt Premier Bush would find having a problem of comparable size as his most important agenda item a welcome relief from the more serious public finance questions today. Whether to allow Cuban passengers to interconnect to other flights was an issue that prompted great public passion in 1963 but was still far less thorny than today’s officials’ need to be constantly negotiating with the US, UK, OECD and EU over financial services issues.

Pondering how to keep tourism levels at growing from their then record levels of 350 per month would be simpler than the strategic challenges facing tourism officials today. But we should remember that today’s more numerous and complex problems reflect the astonishing development of the Cayman Islands from a place where many of the men had to leave to find work and the mainstay of the economy was bartering thatched rope to a world class financial centre, where trade in financial services creates opportunities for both Caymanians and the rest of the world. There is much work to be done, but let’s not lose sight of Cayman’s astonishing success.
 

 
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