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When Will Barbados Rollout Economic Stimulus Package?

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Prime Minister of Barbados David Thompson
Prime Minister of Barbados David Thompson

The BU household continues to struggle to understand some of the tactics being used by some developed countries in the tizzy of the prevailing global financial crisis.  The United States remains the mother of all free markets and in the thrust to sustain its thirst for profits it created the trade phenomenon, globalization.

BU family members maybe aware that there is an initiative on the way in the USA to entice Americans to buy local which Obama intends to attach to his stimulus plan: how ironic!

Among the world’s financial analysts there is the majority opinion that the USA is responsible for triggering the economic tailspin the world finds itself, yet they seem so willing to implement protectionist measures as a strategy to stimulate homespun industries. Conversely developing countries like Barbados and others have had to expose themselves to the brunt of WTO policies, EPAs and all, by dismantling national trade boundaries.

Where is the logic?

Where is the equity?

If the USA moves ahead with its Buy American program will it trigger a response by world nations? If there is a response by world nations will it threaten the concept of free market as the USA has practiced?

The impact of the global crisis is beginning to take root in Barbados as pre-bookings promising tourist dollars for the treasury dwindle. BU family member Bush Tea has been consistent  in his cry for LEADERSHIP to be demonstrated to lead and sustain Barbados morally and economically. The current global economic crisis which will present the sternest test for Prime Minister Thompson does not remove the pre-existing requirement to effectively manage the day to day business of government.

It is against the foregoing that BU joins with others who are asking Prime Minister David Thompson to detail the economic plan which is to be rolled out to cushion the impact of the global financial crisis on Barbados. A national debate on such a plan is important to invite the opportunity to fine-tune such a plan. The BU household believes that that the signs are very visible that a structured response is warranted, the time has come to LEAD. From the snippets we have had from Prime Minister Thompson it seems that he will be going the route of expanding government spending i.e. reflation. The economists say that there is always a lag effect when economic initiatives are rolled-out.

Is the Prime Minister waiting to introduce the measures in his early budget presentation?

Prime Minister Thompson has done an excellent job so far to engage Barbadians on the issues compared to his predecessor. However, on the issue of a Barbados economic stimulus package  many Barbadians are concerned and fearful that we may have gotten the timing all wrong.

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  1. Equity Avatar
    Equity

    The EU has already protested US protectionism…and does BU really think that a local stimulus package can ward off the effects of a global financial crisis? Do we have the wherewithal to combat this?

  2. David Avatar
    David

    @Equity

    We used the word cushion and not ward off.

  3. Equity Avatar
    Equity

    But David, we depend on the rest of the world, a world under siege for our sustenance. Can we make tourists come to a high priced destination? Can we make investors invest what they don’t have? I know a stimulus package sounds exotic, but in our context, what can it mean?

  4. David Avatar
    David

    So we play dead?

    Here is an opportunity to allocate internal resources to grow indigenous industries. The success of such a program would help with import substitution if we believe foreign exchange will become a premium.

    If we had listened to Dr. Delisle Worrell many years ago we would have been better placed.

  5. JC Avatar
    JC

    @ David who is Delisle Worrell and what die he say or suggest!

  6. ROK Avatar
    ROK

    David,

    I do not think that the PM rolling out a package is enough. We have to seriously look at our education system and examine the fruits which it is making.

    How can we talk about industry if people merely looking for a job? There are too many niche areas and general production which we can engage in. However, the biggest problem is that we don’t work together.

    Take for example, there are a lot of persons trained in making soaps, who would have graduated from a series of classes more than 5 years ago.

    Each one of them tried making soaps on their own and had to sell them so expensive that the industry folded. Now if ten or more of than had gotten together, the result may well have been very different.

    We graduate a lot of scientists and doctors every year that do not contribute their research and expertise to industry. We have engineers and all types of skilled professionals who simply seek work in the traditional areas.

    Until we reach the stage where we begin to use our skills and education tocreate, innovate and produce, our economy will be forever at the full mercy of outside influences.

    The PM cannot do it alone. Let’s wake up. Pool our resources and make some money. If the established private sector is making money from our spending, then we can make money too. C&W $91M in profit is what we as a country stimulated and generated. Let’s do it for ourselves.

  7. Global Voices Online » Barbados: Stimulating the Economy?

    […] to take root in Barbados as pre-bookings promising tourist dollars for the treasury dwindle”: Barbados Underground wonders when the government will announce an economic stimulus package. Posted by Janine […]

  8. David Avatar
    David

    @J

    Delisle Worrell is a former deputy governor of the central bank of barbados. He was a big proponent of developing strategies to lead to import substitution in the 80s.

    @ROK

    Couldn’t agree with you more. Couldn’t the stimulus package include resources to educate and ready the minds of our PEOPLE? If we had started from the 80s we would have been well advanced. Instead in the last 14 years we have embarked on totally relying on a service economy.

  9. reality check Avatar
    reality check

    It is really quite ironic that the almost complete deregulation espoused by the Republicans has led to quasi nationalization of the US Banks and many businesses—the very thing they supposedly abhor.

    I guess their “hairbrained ” philosophy didn’t work as all the lessons of the Great Depression and Savings and Loan debacle went out the window in favour of corporate greed.

    Barbados was almost self sufficient in the 1950’s and Barbadians need to return to some basic concepts of self reliance and hard work. The ideas of a simpler life, quality of life, sharing and love they neighbour need to be instilled from the top.

    We are still waiting for the long promised ITAL and FOI that would signal this new leadership approach?

  10. ROK Avatar
    ROK

    @David
    I agree with that. The only problem will be content. We will probably be telling ourselves that we can’t teach African History in classrooms, for example, when in truth and in fact as an independent country, we have every right to. It boils down to a question of political will.

    One of these days I am going to come up with a more acceptable definition of political will.

    @ reality check
    Nice observation… but are all the people who have this knowledge exercising it? We need people to get up and demonstrate their ability to lead.

  11. anon Avatar
    anon

    Oh mighty leader and omniscient ROK

    Can you tell the forum how teaching African History in schools
    1- will help us to allocate internal resources to grow indigenous industries.
    2- will help with import substitution if we believe foreign exchange will become a premium.
    3- will help us to develop and fill the so many niche areas and be engaged in the general production in which you say we should be engaged
    4- will help us to work together as you desire
    5- will help us to make nuff and cheaper soap
    6- will help the lot of scientists and doctors that we graduate every year to every contribute their research and expertise to industry
    7- will help the populace to to use our skills and education tocreate, innovate and produce

    I only asking questions. Cause I don’t know, and I know that I don’t know, and willing to admit it.

  12. David Avatar
    David

    ROK based on what you have commented last should we conclude that our educational system has failed us?

  13. ROK Avatar
    ROK

    David,

    That could be a bottom line but I want to put it another way. Our education system is not serving us to the extent that it should and is not being crafted according to social and economic needs or based on national priorities, to realise its potential for building wealth and achieving sustainability.

  14. livinginbarbados Avatar
    livinginbarbados

    A small country and small economy such as Barbados is, will be hard pressed to develop a true import substitution policy. If with the benefit of hindsight we look at what Barbados imports and think about whether the country could have produced these goods, we will see that it would have been difficult to substitute for:
    1. foreign oil; domestic oil production could only have covered a small fraction of needs; in the past oil prices were too low to make it viable to explore and exploit offshore oil; and
    2. cars and machinery; both of which would have meant developing a large industrial structure that was competitive.

    Food imports were/are the area where Barbados stood/stands better placed, but even that had/has problems.

    Instead, Barbados developed a source of earning foreign exchange to be able to pay for imports. Those sectors, tourism and financial services are sustainable in/by a small country and economy, and also exploit abundant natural resources (sun, sea, sand), and good human ‘capital’ in the form of a reasonably well educated work force.

    As implied above, substituting for imports only really makes sense if you can do it more competitively than goods/services that can be imported, otherwise, there is always pressure to go abroad for cheaper/ better goods. If you do not care about that then sure go ahead and substitute, but it’s a fragile bargain to convince people that somehow they are better off living with inferior products, and it’s not clear that that will come with a better overall economic environment. That is one of the lessons of central planning and the failure of the former Soviet Union.

  15. HOODWINKED Avatar
    HOODWINKED

    I’ll tell you what needs doing:

    1. the clock to be put forward one hour thereby giving an hour longer daylight on evenings.

    2. Businesses to be allowed to open/operate 24 hours a day, 7 days a week.

    3. USA COINS to be made legal tender at par value with Barbados coins.

    4. the bureaucracy that stymies business in the Customs Dept and at the Bridgetown Port to be streamlined.

    I suppose I should explain exactly how these 4 measures will perk up business (there are at least 6 more points I could add) however I’ve found it’s usually a waste of time trying to detail to peeps who have no vision. Those who are out of primary school and out of the box, will immediately see.

  16. David Avatar
    David

    @livinginbarbados

    Forgive us if we say that we understand your comment but it has a text book flavour. Import substitution does not have to be designed to be a 100% solution. Why can’t we give incentives to eateries if they use ground provisions and other local products in their businesses? Why can’t we via the School Meals Department use local food products to wean our youngsters off KFC/Chefette? What about the hospitality sector? Can’t we give them incentives to list more local dishes on their menus?

    The objective of all these little initiatives is that it would enable the agriculture environment. It would create jobs. It would help to change behaviours. It would create opportunities for self-employment.

  17. General Lee Avatar
    General Lee

    Is Barbados not a net foreign exchange user?
    Any stimulus package that does not seek to reverse this will only delay the inevitable.

    BTW, I do not even pretend to understand the fundamentals of economics.

  18. Jukecheckedeyskirt Avatar
    Jukecheckedeyskirt

    Forget economics let us talk commonsense. Barbados the small and vulnerable does not have the economic muscle to go into and sustain industry in a big way. In fact we cannot even keep business before we do not sell of to Trinidad.

    With all our education and training in research capabilities, our endeavours have never been creation, innovation, invention or generation. Our sustainability and the ability for us to earn our keep has always been dependent, borrowed, import, foreign consultancy and quick fixes. No amount of day light saving time or 24 hour shopping, will erase the fact that Barbados is an overpriced, high inflation country that offers inferior service and on a regular basis, inferior products.

    Like all other things being equal ,we have shown our procrastinated bare butts now that tourism is threatened by the advent of economic recession which will lead to retardation, if not stagnation and annhilation of our service sectors and a slowing of economic growth (because tourism is now suffering our businesses)

    We have failed to diversified because our references to engaging in big enterpreneurial endeavours is afflicted by our narrow visions and small island-isms. We have no plan B outside of tourism. Why the heck do we need economist to tell us that our sorry asses are going to suffer under the myopic prognostications of blinded leaders.

  19. Bush Tea Avatar
    Bush Tea

    @David

    Man What stimulus package what?!!!?

    Surely the enlightened BU household realizes that this is just a case of clueless leaders clutching at straws.

    When no one knows what to do, some joker comes up with an attractive sounding gimmick and off we go…

    Just like CSME was … idiotic and a waste of valuable resources, so is the concept of a ‘stimulus package’.

    Tell me how it can make sense to pump Billions of dollars into a system that has been losing billions under normal circumstances and somehow expect that something will be different.

    The only result will be a slightly extended period while the stimulus funds find their way down the toilet…

    What we need is a re-evaluation of our lives and of our priorities.

    This rat race to which we are all addicted has been totally out of control, while we care NOTHING about each other.

    We need to determine what is REALLY important, and how we can best rely on our OWN resources to achieve these goals.

    The coming difficulties could actually be the catalyst that leads us to a RATIONAL analysis of how we have been (mis)focusing our resources, our lives and our country…

    …AND WE MAY ACTUALLY MAKE SENSIBLE CHANGES…

    …yea right!!! Bush tea won’t hold breath…

  20. General Lee Avatar
    General Lee

    Who will redefine what it means to be successful in Barbados for the average citizen?

    Who will say to the young people leaving school and university tomorrow that the current materialistic view of success is flawed?

  21. Micro Mock Engineer Avatar
    Micro Mock Engineer

    David,

    Here is a link to the latest draft version of the US economic stimulus package… 1,588 pages so far:
    http://readthestimulus.org/index.php?doc=hr1_s98&page=1

    I’m sure we could find a couple 100 pages in there that we could throw together in a rush for Barbados… we could use the same team that threw together the pre-election draft ITAL documents. LOL

  22. Bush Tea Avatar
    Bush Tea

    But General, maybe the young people have already determined that…the current materialistic view of success is flawed.

    Maybe we all have – to a growing extent.

    Perhaps the challenge is the first one that you posed… who will define true success..?

    ..could we not collectively and logically derive a ‘Bajan’ answer to that question? Right here on BU?

  23. David Avatar
    David

    Wow Bush tea based on the plane which current leaders are operating:are you saying that there is no hope?

  24. General Lee Avatar
    General Lee

    While they may recognize that the current value system is flawed, few have realized that they have been
    enslaved by their insatiable consumption and need to always have the best and latest.

    The current standard used to define success will only change when a major catastrophic event, causes all men to once again, become equal and dependent on each other for survival.

  25. livinginbarbados Avatar
    livinginbarbados

    @David

    Call it text book if you want, but you need to be able to make economic of financial sense of what is done. I did not mention 100%, but for a small country to try to do a small amount the problems of cost effectiveness bite harder (economies of scale, etc. come into play).

    How much ‘incentive’ you are prepared to give/pay? Look at it in a different context and see how much countries pay to get enterprises to prefer them over other locations. When the incentive is not enough or runs out, they often relocate. That’s very expensive for a country.

    Incentive alone does not get you want you may want, you may need compulsion–then you have to deal with other issues. It may be worthwhile for an industry (say tourism) to forgo the incentive to still continue a practice that makes economic sense to them, and it’s ultimately taxpayers who have to put up the money for the incentive. If you compel, you still have to deal with the questions of quality and taste: is the local product ‘good enough’ and is it what the customers want? Let someone from the tourist industry answer that one.

    If you have health or social issues (as is implied with reference to KFC/Chefette) then someone has to review the conditions under which they are allowed to do business. Sure, change the terms, but make sure you dont kill off the calf. On KFC/Chefette, last time I looked they were not forcing anyone to buy/eat their food. If Bajans do not want to eat that food they are free to go elsewhere and eat other things.

  26. David Avatar
    David

    @Livinginbarbados

    We hear you but the argument about economies of scale, how does it factor if we examine the high cost to produce sugar when weighed with its foreign exchange earning capacity?
    When looking at cost of production shouldn’t one factor the importance to a net purchasing foreign exchange earning country like Barbados?

  27. livinginbarbados Avatar
    livinginbarbados

    @David

    I never said the choice of foreign exchange earners was good, and I did not mention sugar, deliberately. The region has not been competitive in that product for years and should have got out of it into something else rather than living off European subsidies and quotas.

    I’m not sure what your 2nd sentence says, but I think you mean we need to look not just at cost of production but the net foreign exchange earnings of an activity. If you do that, you may find that some of what you want to push for as import substitutes are net foreign exchange drains (eg to produce the amount of local vegetables desired may need more foreign inputs–say fertilizers, so you have FX saved by substitution less FX paid on imported inputs, and if that is negative you may want to reconsider). But you cannot theorize about that, it has to be calculated.

  28. Donald Duck, Esq Avatar
    Donald Duck, Esq

    At the Barbados Chamber of Commerce luncheon at the end of Jan, the PM responded to a query on the stimulus. he said that his government was going to construct 2 office buildings in the warrens area ( which is already congested) and improve the roads and schools. I inferred from his response that if a worker in the hotel sector gets laid off because of the downturn, he or she must become an artisan!!

  29. peltdownman Avatar
    peltdownman

    I have a feeling that livinginbarbados is one of those World Bank or IMF economists who see everything in terms of the most efficient allocation of resources – one of those guys who think that it’s “impeccable logic” to send toxic waste from the U.S. to Africa. But there are other factors to consider. If Barbados had gone out of sugar years ago, how would the change in our landscape have affected our major industry, tourism? Already, the decline in the production of sugar has turned large areas of the country into unsightly bush. Could this policy come back to bite us, or should we instead indulge in agricultural activities to save the look of the countryside, even if it has a net foreign exchange loss?
    The current economic crisis has debunked many of the free trade, free markets, deregulation myths that have dominated the world economic landscape for the past two decades. Remember when deregulation of the U.S. airline industry would produce more competition and lower fares? Instead the large companies swallowed the small companies and we are left with mega-airlines, poor service, and high airfares. Surely, it is now time to find another way, and that way may not necessarily involve the most efficient use of assets, people, or land. I think that the policies in trade, agriculture and industry followed by Barbados over the past 25 years has left the country in a better position than most to weather the current storm. Unlike other Caribbean countries, and even th U.S and Europe, we have not sacrified our manufacturing and agricultural sectors to the point that they cannot be rescussitated. They are still here to help us get through this crisis, and they will. Pity our neighbours who are totally dependent on one industry – either tourism or oil, and feel good about livinginbarbados.

  30. Green Monkey Avatar
    Green Monkey

    Financial Coup d’Etat

    By Catherine Austin Fitts (formerly Assistant Secretary of Housing in the GHW Bush Administration).

    In the fall of 2001 I attended a private investment conference in London to give a paper, The Myth of the Rule of Law or How the Money Works: The Destruction of Hamilton Securities Group.

    The presentation documented my experience with a Washington-Wall Street partnership that had:

    * Engineered a fraudulent housing and debt bubble;
    * Illegally shifted vast amounts of capital out of the U.S.;
    * Used “privitization” as form or piracy – a pretext to move government assets to private investors at below-market prices and then shift private liabilities back to government at no cost to the private liability holder.

    Other presenters at the conference included distinguished reporters covering privatization in Eastern Europe and Russia. As the portraits of British ancestors stared down upon us, we listened to story after story of global privatization throughout the 1990s in the Americas, Europe, and Asia.

    Slowly, as the pieces fit together, we shared a horrifying epiphany: the banks, corporations and investors acting in each global region were the exact same players. They were a relatively small group that reappeared again and again in Russia, Eastern Europe, and Asia accompanied by the same well-known accounting firms and law firms.

    Clearly, there was a global financial coup d’etat underway.

    The magnitude of what was happening was overwhelming. In the 1990’s, millions of people in Russia had woken up to find their bank accounts and pension funds simply gone – eradicated by a falling currency or stolen by mobsters who laundered money back into big New York Fed member banks for reinvestment to fuel the debt bubble.

    http://solari.com/blog/?p=2058

  31. Adrian Hinds Avatar
    Adrian Hinds

    What are the areas of the economy that are retracting or are set to retract as a result of the global economy, and that would need government initiated sitmulation?

    Where would the money come from? The US feds are stimulating the US monetary sytstem (printing money) and this will have more of an affect than the current 900 billion stimulant package. Can the GoB print money? credit is a global issue, our reserves and the NIS cannot sustain any significant draw down, where is the money going to come from? Tourism reciepts are likely to suffer, Remittances will also. American cities with the population size much larger than the island of Barbados are facing bankruptcy because they can’t print money and do not have the resources to keep things the way they are, and their locol unions do not want to cooperate. NY city just told the Unions to work with them or face 20,000 job cuts. The City of Vallejo in California filed for Bankruptcy in 2008. What are the options facing Barbados, should this credit crisis continue? Can we continue at current wages, and levels of employment, honor existing wage agreements with the unions etc?

  32. David Avatar
    David

    @Adrian H

    May your friend LivinginBarbados can answer better that we can but Barbados has always run a small budget deficit but the PM has previously stated the government will be running a deficit this financial period.

    Also remember Barbados has a healthy foreign reserve. A couple months ago the Governor of the Central Bank suggested that Barbados external rating is excellent and the government intended to go to the capital market to pad its position. Also she indicated that the local banking system is still very liquid so watch out for the government to soak it all up by bonds and debentures.

  33. Adrian Hinds Avatar
    Adrian Hinds

    Ok David I forgot that deficit spending is not against the law in Barbados as it is in many cities in the US. But deficits can hurt bond ratings not? And that can hurt your chances in the capital markets no? But aren’t the capital markets at near lock down becuase of fear of what lurks on the balance sheet of consumers, companies, corporations and Countries? I am not sure how debentures work, but would it not require a willing citizenry both public and corporate to BUY the Debentures? I wouldn’t want to attempt to stimulate the economy with my reserves. no way.

    Haven’t seem much in the form of solutions from LivingInBarbados, todate he is very detail on explaining a lot of the economic jargon, and critiquing others points of view, but solutions? and or approaches in dealing with this issue? not much.

  34. Green Monkey Avatar
    Green Monkey

    SEC Officials Can’t Find Their Own Backsides: Lawmaker

    Rep. Gary Ackerman (D-N.Y.) attacked SEC officials testifying before the House Financial Services committee for failing to detect Bernie Madoff’s $50 billion Ponzi scheme on Wednesday.

    “What the heck went on? Your mission, you said, was to protect investors and detect fraud quickly,” he said. “You couldn’t find your backside with two hands if the lights were on.”

    http://www.cnbc.com/id/29017683

  35. David Avatar
    David

    Believe it or not Antigua and St. Vincent have announced stimulus packages:-)

  36. miller Avatar
    miller

    i suggest bring back owen arthur!!!!

  37. crocs Avatar
    crocs

    Miller i agree with yourself…thats the first best thing anybody has said on this…..

  38. J Avatar
    J

    Dear crocs:

    Why don’t you you go jump back in your swamp?

  39. Adrian Hinds Avatar
    Adrian Hinds

    Owen Arthur made a lot of mistakes but he still has currency, with the people. Mia has none. A BLP under her isn’t likely to recapture power.

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