Many Barbadians have been disappointed that the many products of our “free” education system are satisfied to return to society and be “servants” of the system. The lack of involvement in societal issues with a view to making the system better as a consequence of their higher learning is one of the greatest disappointments which BU has experienced post-Independence. In the BU household we have always stressed the importance of giving back to the society in whatever form.
BU’s customary preamble was inspired by a letter which was submitted to the editor of the Nation Newspaper by Professor Michael Howard of the University of the West Indies. The late Wendell McClean, Stan Reid, along with Frank Alleyne and in more recent times Don Marshall and Michael Howard are the notable exceptions of academics from the UWI who have ventured into the public domain to offer perspectives on the many social issues shaped by their exposure to higher learning and research. We find Professor Howard’s letter very interesting because many of his points are coterminous with how the average Barbadian is currently feeling about the same issues.
Professor Michael Howard’s Bio for those who may want to question his authority to lecture Prime Minister on the subject of Economics.
Capital Outflows and Exchange Controls Liberalization
I HAVE BEEN AMAZED at the almost uncritical acceptance of the free market doctrine by the directorate. The preoccupation with the CARICOM Single Market and Economy (CSME) has been associated with the removal of some exchange controls. However, freeing the market for capital transactions can only guarantee growth if capital inflows exceed outflows.
If capital outflows are larger to the rest of the world, complete or substantial removal of exchange controls will lead eventually to a depreciation of the Barbadian dollar. Theoretically, complete capital account liberalisation is incompatible with a fixed exchanged rate.
Fierce loyalty to the CSME has also led to a soft policy on immigration.
It does not take a degree in economics to know that immigration in a small economy should be controlled. Uncontrolled immigration will have a significant negative impact on real wages, social services and the level of crime. Further, emigration to some Caribbean countries is not an option for most Barbadians. Migrants are normally not attracted to economies with lower real wages, destabilising exchange rates and higher levels of crime.
It also seems that we have not learnt from the colonial experience. The directorate has jumped on the bandwagon of market liberalisation and has permitted the sale of prime real estate to rich foreigners. This is one element of the “recolonisation” of Barbados. The high demand for prime real estate by rich foreigners and locals bids up the overall market price of land in fixed supply.
The unrestricted sale of land to rich foreigners, despite its short-term foreign exchange gains, can never be conceived as a sustainable development strategy. The chief causalities will be the landless members of the younger generation. The other element of “recolonisation” is the dominance of transnational capitalism, especially seen in the profit-maximising behaviour of commercial banks. In the context of market liberalisation, the excessive profitability of the banking system over the years has largely gone unnoticed. Unlike banks in North America and Europe that maintain relatively lower ratios of net income to total assets, some banks in Barbados have been characterised historically by higher profitability ratios.
Excessive bank profitability is a reflection of high gross margins. Some banks have historically extracted high economic rents from the economy, because of substantial spreads between deposit and loan interest rates. To sum up, Professor Joseph Stiglitz was correct in his argument that market failure is pervasive in these economies. The market failure approach to economics seems not to have been learnt or understood
by the directorate.
BU hopes that Professor Howard does not mind us reformatting the article to provide what we hope is easier reading for the BU family. The Professor has in our view clearly and in simple terms ventilated on key concerns which are currently resonating with a very silent Barbados public. We say silent because it is BU’s view that the Barbadians living overseas and those who have returned after many years are the individuals who appear to want to discuss and agitate for accountability from our public servants – yes indeed we wrote public servants because we often wonder if roles are not switched around sometimes.
The educated Barbadian, the product of a free education system, seems to be quite happy to continue being servants of the system. BU will continue to ask the educated Barbadian – are you satisfied to remain in your comfort zone and to remain silent, while important decisions are being made by your politicians which will have implications for generations to come?
All Barbadians should insist that we desire from our government to come and as described by the great US President Abraham Lincoln, a government of the people, by the people, for the people, so that our freedoms as we have enjoyed post-independence shall continue for our next generations to enjoy as well.
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A thorough and somewhat chilling analysis due to its indisputable veracity. For one who possesses a Masters in Economics, Owen Arthur some seems oblivious to the ramifications of his policy positions.
The BLP prides itself of having a wealth of economic talent, as even Minister Wood possesses a Masters in Economics from none other than Cambridge, however like the biblical story of the servant with many talents who buried them; all is to waste. One wonders as to the direction this country is taking, and what is to be the fate of young landless Barbadians like myself.
The struggle continues I guess, it is unfortunate that we are struggling against our own people who are supposed to be our sworn protectors.
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Economics is not a body of knowledge. It merely teaches you to think analytically on economic problems..having a research masters like 1000’s of others in the region is neither here nor there therefore, one must write theoretical contributions to be treated seriously.
It is directly related, so I recommend readers to the excellent Blog “Living in Barbados” of today’s date. It’s titled “Barbados On The Brink?”
Peltdown Man~we added Living In Barbados to the BU sidebar. Some good articles on the Blog!
justice~please expand on your comment. Are you saying that Howard needed to cloak his letter using some theory to make his point?
No, all I’m saying is that all this talk about being a great economist as a politician is a load of codswallop. If we need economic guidance, it can be had from the economists such as Howard and Downes.
Owen the criminal done sell Barbados long time ago and he has become very rich at doing so,therefore the taxpayer can continue to see increases in practically everything on this island in the years to come,so forget about buying land,cars,building houses….just forget those things because just being able to buy things from the supermarket will be our next burden thanks to this criminal.
Your children’s futures are gone,they will be modern day slaves for the rich foreign elite that own all the prime lands now e.g.maids, gardeners etc..so sending them to UWI is a waste of time unless they planning on leaving this little hellhole,but bajans like this party shite so it looking like we will take what we get and like it to,have a happy future being an indentured servant.
finally someone with the guts enough to talk and bright enough to analyze what is going on in Barbados is talking. We have an economy fully engrossed in the market orthodoxy of neo-liberalism World Bank/IMF/WTO style and the negative impact is clear for all to see.
While we boast of 3% GDP growth, and 1.5 billion dollars in foreign exchange , our external budget deficit gets worse; debt to GDP is almost 100%; inflation appears now clearly out of control as is our import bill (3.2 billion p/a). Meanwhile as foreigners buy up the country in larger chunks, our traded sectors are declining or not growing at all even as construction and distribution push economic growth. So the great economists – arthur, mascoll and wood – together with the governor of the central bank and their friends at standard and poors continue ti say what a great economy we have. Never mind the poor struggle to but food and other basic items, housing and lands are increasingly out of reach for most, and the country is being overrun by CARICOM nationals and their conglomorates, its time for everyone to rejoice feel happy and give the BLP another term of office. What a wonderful country we have indeed.
Boy light hearted,dis is a ting nah?
Your comments above are well said,and well appreciated.
Every day I try not to get my blood pressure up as I stand by and watch what’s going on in this country,with nary a word from the media.
Where is the union in all of this eh?
Has the church lost its voice?
The university lecturers – Prof. Hilary Beckles and the like – is security of tenure more important than the nation that give birth and give suck to them?
I try hard not to despair – but when I see the level of corruption and immorality and disregard for the ‘average Joe’ that is being practised by this gov’t it’s hard,real hard not to hold your belly and bawl.
The thing is I believe strongly that this gov’t needs to be sent packing – but do the in coming leaders have the guts to ‘go where others have never gone before’ and prosecute those who stole from the public purse?
I guess we have to give them a chance to prove our doubts wrong.
This topic when we reviewed our stats record has attracted hits from some interesting sources. Several UN, Universities and government domains have been reading the topic. It prompted BU to write to Professor Howard to ask for further comment. We hope that he is able to respond to clarify and expand on the downside which the current economic policies can have for Barbados and whether for a small developing country we have sensibly picket fenced the risks.
I am glad you did ask Prof.Howard – to continue the debate.
It’s like a breath of fresh air,finally having someone explain economic matters to us in layman’s term.
Prof. Howard – maintain your integrity – and speak from your heart – Barbados thanks you for it – and more importantly Sir,you can sleep well tonight knowing that you’re doing your lil bit for your country.
Thank you kind Sir.
This article and the posts raise so many questions that I really don’t know where to start. Let me start though by asking where is the DLP’s alternative development model for Barbados in all this. A major part of our problem is that our democracy is currently weakened by an inept opposition. An opposition that is so obsessed with regaining power that earlier this year, it came with a set of alternative budget proposals that would create more external imbalances and debt accumulation for this country and run it back into the arms of the IMF. An opposition that has failed to identify the real economic and development issues confronting this country, and is instead obsessed with the fact that the CWC closing ceremony was held in the dark after most major channels had tuned out.
Barbados does need an alternative development model as Howard seems to suggest, although he has not proposed one himself. Barbados has to temper the tourism-oriented model that it is currently pursuing. While we need to earn foreign exchange as a small economy with a fixed exchange rate and a currency that is not a reserve currency (that is, held by central banks around the world as foreign reserves), this model is putting severe strain on the environment, rapidly depleting the availability of housing and pushing up housing prices, and perpetuating the psyche among locals that causes them to see tourists as more important than local customers (diplomatically put).
However this is not purely an economic problem, but more national strategic planning. From my perspective, the government needs to seek out and facilitate, or otherwise encourage, the development of alternative foreign-exchange-earning activity that is consistent with our human resource configuration, and more in line with orderly social development. It could be some niche in technology that we could exploit and keep our population employed without having to bring large numbers of people here who directly or indirectly create solid and liquid waste, destroy the coral reefs, and cause pollution from the fuel that needs to be burned by bringing them here or transporting them while they are here. Whatever the alternative is, it should be an area than employs our people at all levels, provides them with high incomes, earns significant foreign exchange, has strong and sustainable demand, and is environmentally friendly. I would even propose that the government not only identifies one or two niches, but partners with the local private sector in providing the investment for such an undertaking. I know that this is not consistent with Washington orthodoxy, but it is the type of approach that helped to develop the newly-industrialised Asian economies without causing the social problems associated with heavy foreign ownership.
I have only really dealt with one aspect of Howard’s article, and that is the selling off of the country to earn foreign exchange. I think that this is the most important of his concerns, but perhaps at some later date I will deal with the issue of liberalising capital flows because I think that this is an issue that might be a bit overblown. Suffice to say that macroeconomic issues such as these are easier to manage when you have a strong economy.
Pragmatist~thanks for your pointed comment. Here is a copy of an article which we found and which I forwarded to Professor Howard for comment:
Christian Noyer: The challenges of financial liberalisation for emerging market economies
Speech by Mr Christian Noyer, Governor of the Bank of France, to RBI staff, Reserve Bank of India, Central Office, Mumbai, 14 May 2007.
I am very pleased and honoured to be here and I want to thank warmly my good friend, Dr Reddy, for having invited me to address the staff of the Reserve Bank of India (RBI).
The BIS recently announced that the RBI Vice-Governor, Mr Rakesh Mohan, will chair a new working group on “Capital flows and emerging economies”. I would like to congratulate him for accepting to explore this complex issue. I will offer some views on a related topic: “the challenges of financial liberalisation for Emerging Market Economies (EMEs)”.
This guy makes David Comissiong look like Adam Smith. He purports to be an economist but all we get is woulda, coulda, shoulda. Reference is made to the removal of unnamed exchange controls without an explanation of the negative impact these unsound policy decisions have already had. CSME is all about the free movement of capital (financial and human). Does he address the net capital flows since the implementation of CSME? That would be too much to ask. Again all we get is a lot of if’s, but’s, and when’s. Then he gets around to the DLP’s red herring, the Guyanese invasion. CSME only provides (rightly or wrongly) for the free movement of degreed or skilled professionals. The Guyanese hoards that are here are not here because of CSME. Most insulting and condescending of all is his desire for black Bajans to ignore their own self-interest and have a fire sale on land that was earned with the sweat and blood of our ancestors. If the younger generation wants to become homeowners, they had better equip themselves with an education to compete for the top jobs and be prepared to work their behinds off.
de gap~BU sent emails to Professor Howard requesting that he gives us a more detailed analysis to his letter which was published in the letter. We have given him the benefit of the doubt that his letter represents the output of deep analysis and can be supported by economic theories. We have also telephoned his desk but we get voice mail. Is he on sabbatical? Maybe our BU readership can also call to get a response even if it not via this medium.
It seem to BU that the academics on the Hill are loathed to communicate to the people via the non traditional media. It provides an interesting conundrum indeed.
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