Submitted by Looking Glass
Given the plethora of utterances flooding the various media, if our survival depends on the understanding of the socio-economic dynamics of the country then we are in deep trouble. It would appear that we understand little about the country and less about how the real world spins. We appear to be lacking in ideas, have a blurred image of reality and terribly short on philosophical contemplation. Here Cave Hill comes into view.
The influx of 40,000 plus foreign residents, mainly European, radically alters the socio-economic dynamics but we don’t even have an up-to-date manpower study, which means a) that analyses based on the old study will likely be way off the mark, b) social science and marketing grads will know little about the country in which they will likely work.
I raised this issue on a couple of occasions in the past and was told that it is a “teaching institution.” True but even private institutions engage in ongoing research. Except for a handful of ISER papers there is a woeful absence of even descriptive data. And much of our history appears to focus around race and colonialism. Chances are few know anything about Drax Hall, Locust Hall, Fortesque, Holborn, Holland Bay or Jew Street. It says a lot when Cricket Management takes precedence over the socio-economic and psychological dynamics of the country. Would the other cricketing nations send personnel to us for training? The money would have been better spent on a manpower study and books for the library.
The current Central Bank Governor is reported to have said that “the Island’s financial system and overall economy were not in crisis…and even though 2009 will be a challenging year the system here had certain ‘buffers’ to safeguard the island’s economic fortunes.” This after the Standard and Poor down-grade. I suspect the above was in support of an earlier statement to the effect that apart from tourism and construction which were in decline, the rest of the economy would weather the storm. I accept that the major foreign owned commercial banks are liquid and not in crisis. The Canadian ones have already been or will be stimulated when necessary and can so afford the luxury of restricting credit. But do the banks alone constitute the ‘Island’s financial system?” If not then we need to identify the other system components. The ‘buffers,’ whatever they are, also need to be explained. If external funding (loans) is one of the safeguarding buffers then the pit will be deeper. There are no barley loaves. The carefully crafted IMF and other reports and projections suggest that the buffers are at best ineffective and a less than optimistic outlook.
The goodly Lady is correct in suggesting that the word crisis “is probably not appropriate to the Barbados landscape at this time.” Ongoing or Deepening crisis would have been much more appropriate. All told one should not be too hard on the Lady whose hands, like those of the gentleman currently in the hot seat are tied.
The same cannot be said for one Courtney Blackman who had the temerity to announce that “the effect of the crash should be minimal in Barbados.” (Nation 3/5/09). And extreme case of utter folly, to put it mildly, passing for wisdom, intellect, knowledge and integrity. It is incredible that a supposedly eminent economist and former Central Bank Governor should even venture to make such a statement. Among other things it says a lot about the competence and effectiveness of the last regime. An economist with an open, inquiring mind would have caught on to the fact that a) we were in crisis before 2007, b) we have precious little with which to foster economic growth, revenue generation and to facilitate debt service, c) the impact of the global financial crisis would be severe, and would continue long after the global recession ends.
He also added that Barbados “had never completely embraced the model that posited that the market should dictate.” Well, do we or did we ever have a choice? Has any country in the embrace of the IMF a choice? Remember Adam Smith’s “invisible hand and the competitive market setting the “natural price.” Economic liberalism (free market capitalism) may not support a market economy without supporting free trade, but it demands that the market should dictate. The Good Book warned against listening to those prophets who “speak a vision of their own heart.”
The Central Bank Report comes with limited data and in a way reminds one of “convenient accounting.” It gives the impression that the economy is not in very deep trouble. There is no mention of the debt or deficit both of which will grow; and almost nothing about the saving rate, employment, revenue generation or the gross domestic product. There is no mention of deficit spending, much of which has been and will be on non-revenue generating projects. To raise money government must sell bonds, raise taxes, or borrow more.
Here it should be noted that our foreign reserves deemed ‘sufficiently adequate” today will be inadequate tomorrow. The old practice borrowing to shore up reserves, spending the money on largely non- revenue generating projects and borrowing again suggests non-sustainability and insufficiency, which is underscored by the need to borrow yet another $80m or so. The borrowed money is neither a gift nor a donation. It has to be repaid and comes with strings attached (obligatory conditions). Ditto for financial support from the IMF and or the World Bank. For one thing allocations will be curtailed to those countries that “borrow at non-concessional terms from commercial or new sovereign lenders.” Note too that President Obama at the Caribbean Summit never really got beyond offering assistance to fight the drug trade.
That retail price inflation has subsided due to falling oil and commodity prices tells us nothing about consumer prices period. People everywhere are spending less but, sales notwithstanding, retail food prices are on the rise and supermarket chains are reporting good profits. Are we to understand that consumer prices have or are falling? Huge markets are normally the beneficiaries of falling oil and commodity prices. Oil prices will rise if only because demand will exceed supply, commodity prices will rise and so to retail price inflation on the island. Local demand is too minimal to affect import prices.
All told the Report is on the vague side and unlikely to generate public confidence. Reading between the lines it suggests a protracted period of privation The IMF projected the volume of goods and services trade to fall by 12.0 % in 2009 in spite of the buoyant stock and currency markets, and the world trade picture remains bleak of 2010. This suggests that prosperity for us is somewhere in the distant future. With credit restricted and no barley loaves in sight the debt will rise and people may have to settle for a pay-cut just to survive.
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