Submitted by Looking Glass
Political systems function no better than the economy. Politicians the world over will do what is necessary to get elected and to remain in power, which need not be in society’s better interest. We are no different. The biggest sin is warning of impending danger. So it would hardly have been kosher to admit that we have been in a progressive state of social and economic crisis for much of the last twenty years or so and living on borrowed time. During that time we managed to destroy or undo much of what it had taken ages to accomplish almost to the point of social and economic unfettered ‘illiquidity’ and debt.
Today we are not much more than a service-mercantile economy with little or no financial strength and reliant on borrowing which increases the debt load. Deficits in saving, trade, budgets and leadership are now salient characteristics. Total indebtedness is very much more than has been stated and will inevitably increase. Interest payments are perhaps the fastest growing component of the budget. Foreign income (remittances) is on the wane. Economic output and job generation continue to decline. Disposable income and household saving continue to dwindle with capital accumulation close zero (borrowing is not accumulation). Plastic is the name, credit the game. Sooner rather than later this revenue source will likely be restricted to a particular category of people.
Much of the above is tacitly suggested in the IMF report of 2006 which projected debt at 75% of GDP in 2011. The report also endorsed the last PM’s intention to further privatize (including the tourism sector which resulted in the sale of Gems) and urged the identification of those assets that could be divested in the near term. It also alluded to the system’s “macro-imbalances” and noted ‘weaknesses’ in statistical reporting. And the remarkable decline in decorum has been duly noted where it really matters in the outside world. Given the above it is hard to see how Barbados will hold its own in the crisis. It is unlikely that the capital cost of the kind of stimulus being suggested will be redeemed by future yields, but will bring additional cost and greater national debt.
Our economic condition is not a direct consequence of the global finance crisis. The white man and discrimination don’t figure in the calculus. The crisis was generated from outside via the banking/finance sector. Our bank/financial sector is largely foreign owned and generally profitable. Bailout if needed will or should come via the parent companies who were themselves bailed out as evident by Clico. The dynamics of Clico’s bailout and the implications for Barbados will be addressed later. Suffice it to note that the seeds were sown a long time ago.
We don’t have a sub-prime problem and as yet no toxic assets to clean except the two-legged ones. One sure route from poverty is work with sustained productivity the means. It is likely that weak job generation and wanton consumption, moreso than the current global crisis, will fuel future down-sizing and business closure rather than any ‘illiquidity’ per se. Right now the crisis underlines the frailties of our economic system.
We must distinguish between stimulus bailout (recovery) and stimulus. We have no large scale value-added production plants where jobs are totally dependant on local consumption and, as such, no immediate need for bailout. Stimulus embracing bailout in any form is not the way to go. A stimulus package based on copy-book rational fiscal and monetary recommendations, however reasonable, is likely to be flawed and unlikely to generate short or medium term growth resumption. It may, as in the case of the USA, amount to socialism bailing out capitalism. Given the nature of our economy such a package will further afflict the afflicted and comfort the comfortable. Thus it is unwise to promise people redemption or insulation from the vicissitudes of future economic life.
We are short of diversity, innovation, production modes/products and investment needed to maintain current standards or fashion a better place. We also need to reduce the negative impact influences of the global crisis. Without these any stimulus package will not be much more than a band-aid that leaves the wounds to fester. No stimulus can temper greed and corruption, or compensate for the human factor. To be successful the people will have to confront their needs and appetites, pull their weight and make the necessary sacrifices. Among other things we need to recapture certain virtues: persistence, perseverance, hard work, frugality and decorum. Growth tomorrow entails sacrifice today.
We need to first identify the systemic causes and design a programme to correct them. We need to restructure the domestic industry in order to enhance productivity, competitiveness and employment. Most likely small enterprises, including agriculture and better land use, not big business will do the trick. In today’s world a country unable to substantially feed its population remains behind the eight ball.
It takes a nation of skilled workers with appropriate values and attitudes to create enough economic value to support and maintain a reasonable standard of comfort. This is a monumental task requiring unpleasant alternatives. The present government however well intentioned can’t do it alone. We need political foresight and economic pragmatism; qualities not as yet in evidence. Those who come to office making grand promises to solve major problems will have a hard time dealing with the vicissitudes of public life.
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