ANNUAL REPORT

2017

B ANNUAL Report 2017

CANNUAL Report 2017

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Whilst every care is taken in the preparation of this document, no responsibility

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Paintings reproduced with the kind permission of Ana Tzarev.

Freedom to Create (FTC) is an international non-profit organisation. FTC partners national governments to catalyse positive governance and policy reforms, as well as promote

principled, effective public leadership.

CONTENTS

SEIZING THE PROMISE OF PROSPERITY 01

2017 ACTIVITIES

Uncovering the Creative Potential of South Africa 02

The Creative Potential of The Bahamas 04 The Role of Cities in Nation Building 06

Russell LowChief Executive Officer

FREEDOM TO CREATE

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good physical and social infrastructure, preserve harmony among social groups, and improve the ease of doing business by supporting investments and innovation. Though good governance, principled leaders ensure that their citizens receive opportunities to maximize their potential.

That is why Freedom to Create partners with national leaders and governments to build up their capabilities as leaders, policymakers, and public administrators. By supporting these countries with training and resources, we help create more principled and effective governments that can unlock prosperity for their people.

SUPPORTING GOVERNMENTS In moving towards this goal, we visited national leaders in South Africa and the Bahamas. Both countries stand at pivotal points in history and face the same crossroad between promise and danger.

We also examined the nature of national leadership and uncovered the power of cities to shape nations.

Every year offers an opportunity to seize the promise. Let us learn to seize it together.

SEIZING THE PROMISE OF PROSPERITY

“The point in history at which we stand is full of promise and danger. The world will either move forward toward unity and widely shared prosperity – or it will move apart.”Franklin D. Roosevelt

Russell LowChief Executive OfficerFreedom to Create

THE PROMISE OF A MORE PROSPEROUS WORLD These words that Roosevelt spoke at the close of World War II ring true even now. On one hand, we face many dangers. Large scale conflict and wars still threaten the lives of many around the world. 767 million people – one in ten people on earth – still live in extreme poverty. Hundreds of millions more are held back from opportunities because of lack of education, health, or security. Wealth inequality is causing tears in our shared global fabric.

On the other hand, we live in a world of promise. Human creativity continues to spark new ideas, technologies, and initiatives that enable humans to thrive, and nations to prosper. We see human creativity as a deep wellspring, one that flows beyond the arts to nurture markets, communities, and governments. When more and more people receive the “freedom to create”, promise becomes prosperity.

CAPABLE GOVERNMENTS CREATE PROSPERITYCountries need sound, effective national governments that can provide the foundations required for markets to be vibrant and civil societies to thrive. We believe that good governance creates the conditions and environment for long-term prosperity.

The prosperity of a nation is not solely dependent on its natural resources, but also on the quality of its leadership. Good governments will provide national security and stability, establish and enforce property rights, build

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POTENTIAL AND PERILS IN SOUTH AFRICASouth Africa holds several “firsts” in tension. On the one hand, it is the most prosperous country in Africa. On the other hand, it is also the country with the greatest income inequality in the world, owing to a legacy of racial disempowerment. It spends more on education than any other African country, but was ranked last out of 140 countries in quality of math and science education. Its government is among the least trusted in the world by its people and has one of the worst savings rates in the world.

“PROSPERITY FLOWER” ANALYSISIn our research and analysis of the state of prosperity in South Africa, we found several aspects that are very promising, and others that will seriously threaten future development in the nation. We found that country is very strong in comparison to peer countries in preserving its “cultural capital”, especially in its protection of religious freedom and tolerance. It struggles a bit more when it comes to “human capital”, especially in producing good national healthcare outcomes, and even more in “institutional capital”, though a bright spot lies in the vibrancy of its civil society. As we examined national

UNCOVERING THE CREATIVE POTENTIAL OF SOUTH AFRICA

“If there are dreams about a beautiful South Africa, there are also roads that lead to their goal.”Nelson Mandela

Meeting with Mmusi Maimane, leader of the Democratic Alliance in South Africa.

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TRUST IN GOVERNMENT FURTHER EVAPORATESPercent trust in government, and change from 2016 to 2017

Source: Edelman Trust Barometer 2017, http://www.edelman.com/global-results/

Distrust Neutral Trust

Distrust in 75% of countries

Declines in 14 countries

Y-to-Y Change

“wealth and well-being”, we found that the country does well in protecting property rights and investing in economic infrastructure, but performs abysmally in growing household wealth and equity, no doubt due in part to the legacy of apartheid.

Institutional capital was the weakest link overall. Investing in public institutions and rule of law, and tackling corruption will be key to bringing down the sky-high rates of income inequality and building up prosperous households across the Rainbow Nation.

ENGAGING STAKEHOLDERSFTC met with stakeholders in South Africa, including Mmusi Maimane, leader of the Democratic Alliance political party, to discuss priority areas in the country. South Africa’s major cities such as Johannesburg and Cape Town are hubs of growth, jobs and development. We believe the mayors of major South African cities play pivotal roles in priority areas such as urban governance, economic development, and municipal finance.

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THE CREATIVE POTENTIAL OF THE BAHAMAS

2017 was a year of change for The Bahamas as the people voted in a new government. FTC had the opportunity to meet with the new national leadership to discuss pressing issues that have hindered the nation from reaching its potential.

THE BAHAMAS

GDP per Capita since Independence (1973)

CRACKS UNDERNEATH THE SURFACEThe Bahamas is known to the world as a country with beautiful resorts and stunning beaches. However, looking past its renowned tourism market, the nation faces several challenges. High unemployment due to a mismatch of skills to jobs, poor family support and culture, and rising crime rates are just part of the whole story. In addition, an influx of migrants in the country has put pressure on the health care system, education system, and national expenditure.

The Bahamas’ economy is driven mainly by off-shore banking and tourism. However, with the growing of tourism in neighbouring countries, the country has to find other sectors to diversify its market. The Bahamas is also riddled with high government expenditure and public debt. Its sovereign credit ratings were downgraded by

not one but two credit rating agencies (S&P and Moody’s) in Q3 2016. These ratings are only the most recent in a string of sovereign downgrades.

ASSESSMENT & RECOMMENDATIONSEconomic Rejuvenation and Ease of Doing BusinessThe Bahamian economy is highly dependent on the USA, and the strengthening U.S. economy could lead to economic growth in The Bahamas. The priority for the government is to establish frameworks to translate growth into tangible benefits. Examples of such policies include using VAT revenue to improve the potential economic capacity of the country and introducing fair employment frameworks to ensure that citizens have fair opportunities to be hired. In addition, a functional framework for private sector-led industrial development will enhance the ease of doing business, and open up the Bahamian market for foreign investments.

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A Flourishing WorkforceAs The Bahamas focuses on fostering a vibrant workforce, it could look at engaging proven initiatives that support families and poor or at-risk youths. If possible, state-subsidized but community-driven initiatives can be further encouraged to help at-risk youths and families. Good education also involves continued investment in high teaching quality and an effective curriculum. Awarding scholarships is one option for the ministry of education to groom and retain a pool of highly qualified and passionate teachers. Engagements and consultations with private sector partners can help build a curriculum that matches the needs of the current economy and anticipates the skills needs of the future.

Fighting CorruptionThe Bahamas can be a leader in regional anti-corruption best practices, given its small size and hence relative ease of policing and enforcement. Establishing a credible anti-corruption agency and good processes will aid the fight against corruption. The most important element is strong political will among top leaders to tackle powerful vested interests.

ENGAGING NATIONAL AND BUSINESS LEADERSIn 2017, FTC met with the national leaders of the Bahamas to exchange ideas around policy reform. FTC also conducted discussions with the Committee on the Ease of Doing Business, sharing experiences on how successful countries have created positive and welcoming environments for investors and companies to operate.

Meeting with Hubert Minnis, Prime Minister of the Bahamas.

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THE GROWTH OF CITIESThere can be no question of the importance of cities today. Cities produce the people, economic resources, businesses, art, universities, political policies, research and development, and culture that shape and define our modern society. Our world’s economic wealth, technological innovation, and cultural development hinge on the proper development of cities. The growing importance of cities coincides with the unprecedented expansion of the global middle class. Together, both work as drivers of prosperity and progress.

SHAPING CITIES, TRANSFORMING NATIONSOur new report Shaping Cities, Transforming Nations sheds light on the critical role city leaders play in building prosperous nations. It describes the rich history of cities standing as powerful centers of cultural development, influence and innovation. It also explains why

the natural units and engines of the modern global economy are not nations, but megaregions and megacities.

Despite the pre-eminence of urban centers, guiding a city’s growth and leveraging its potential for national development is no easy task. Cities are vulnerable to many negative outcomes and challenges that choke their potential to be places of prosperity and development, including issues with migrants, labor markets, land use, utilities, and crime. This is why local leadership and municipal governance are so important: city leaders have the power to unlock the creative potential of their cities and drive national transformation. The report includes several stories of visionary leaders that built prosperous and healthy cities.

Today, more people live in cities than at any other time in human history. If we wish to transform a nation, we must first shape its cities.

THE ROLE OF CITIES IN NATION BUILDING

“Our cities’ gleaming spires point to the greatness that mankind can achieve, but also to our hubris.”Edward GlaeserProfessor of Economics at Harvard University

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Megacity clusters dominate the world economy.

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OUR VALUES

CREATIVE SOCIETIES ARE PROSPEROUS SOCIETIESPeople are born to be creative and to express their gifts and talents in service to others. As a society our great challenge is to provide each person with the freedom to create and participate as the builders and caretakers of peace and prosperity for tomorrow’s world.

GOOD GOVERNANCE ENABLES CREATIVITY, ENTREPRENEURSHIP & SOCIAL MOBILITYCountries, like companies, prosper through good governance. Good governance rests on principled leadership and responsible stewardship. It comprises both policy and moral dimensions. Good policy fosters economic growth through appropriate regulation and incentives that encourage the flow of goods and services within free, efficient and transparent markets.

An enabling environment where entrepreneurship can flourish includes the rule of law, property rights, access to capital and utilities, and fair taxation.

FREEDOM WITH RESPONSIBILITYWe believe in individual responsibility for advancement through enterprise, initiative and hard work. We believe in the sanctity of free choice with responsibility. This includes choice as to culture, language, religion and association.

Governments should seek to achieve that degree of regulation which maximises creative freedom, risk taking, entrepreneurship and innovation while balancing the need for public safety and economic stability.

MERIT & EQUAL OPPORTUNITYWe believe in all systems of merit over systems based on birth, gender, faith or privilege. Merit based systems correctly reward individual effort. Societies’ resources, including their human and financial capital, should be managed by the most able and not the privileged or best connected. All people should have an equal opportunity to learn, grow and contribute to society. Human creativity is liberated through equal opportunity, not enforced equality.

FREE MARKETS & COMPETITIONWe believe free markets best allocate society’s resources in a productive and efficient manner. Eminent economists such as Ludwig von Mises (1881-1973), Friedrich von Hayek (1899-1992), and Milton Friedman (1912-2006) have all advocated the benefits of competition. History has repeatedly shown that capital and entrepreneurship, operating within the context of a free market, is the most successful accelerator of prosperity.

VALUES AS ROOTS OF STRONG NATIONSMoral and spiritual values form the roots of strong nations and establish the norms and boundaries of behaviour. Values must be modelled and defended by leaders who should expect elements of society to demand more freedom and less responsibility – especially as the nation becomes more prosperous.

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JUSTICE & TRUSTOne of the responsibilities of government is to provide fair and just laws which regulate individual and institutional behaviour, ensuring impartiality and certainty of action. It is not enough that justice is done, it must be seen to be done. Governments that nurture and protect creative freedom and property rights build high-trust societies which attract human capital and financial investment. They foster an environment where diversity, innovation and entrepreneurial creativity build economic vitality.

UNITY, COMMUNITY & CO-DEPENDENCEPeace and prosperity has seldom been a natural state of the world in the history of human affairs. Conflict and poverty occur more naturally. The path to harmonious society is therefore intertwined with a struggle for the nobler ideals and aspirations of man over the self-interests of individuals, tribes and elites.

“Ubuntu” is an age-old African term for humaneness – for caring, sharing and being in harmony with each other. Ubuntu is the essence of being human, it speaks to our interconnectedness. No one can be human in isolation. As our neighbour prospers, so do we. As he or she suffers, so do we. In a global family we are our brother’s keeper. As a family, our human race is in the adventure of life together. Ubuntu is the recognition that “I need you to be all of who you are in order for me to be all that I am.”

COMPASSION, NO PERSON LEFT BEHINDFair taxation and efficient government should lead to resources being available to create a safety net for disadvantaged and disabled members of society.

HERITAGE, CULTURE & TRADITIONSCulture enriches our world and our lives by opening our eyes to difference and diversity. Culture is a prism through which we discover the value and wisdom of our history and traditions. It reinforces our sense of identity and belonging. Moreover, culture helps us understand and celebrate our neighbours across borders defined by region, race and religion.

TOLERANCE & RESPECTAs the world moves towards one village of many cultures and traditions tolerance and respect become ever more important. The Golden Rule is to “treat others as you would like to be treated”.

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