Submitted by Looking Glass
In economics the standard ways of measuring, assessing and rating can and do lead to unintended consequences. Countries differ substantially in terms of human and natural resources, capabilities and position in the global marketplace. All things are neither equal nor rational. The same credit rating agency who gave us a negative rating bestowed AAA rating upon the collateral debt obligations that proved worthless and provoked the current global financial crisis. It was known for quite some time that our economy was ‘unsustainable.” So why wait until now to downgrade? There is much more in the mortar than the pestle.
We were in crisis before the current global financial crisis. (See Stimulus: more debt and dislocation; On the road to perdition). Before the global crisis we were faced with humungous national debt, deteriorating fiscal condition, large trade and budget deficits, declining production and revenue generation, high unemployment and ever increasing social costs. We borrowed to pay pensions, were without penicillin for about four months, and remain unable to satisfy basic everyday Bajan domestic requirements. The global crisis merely magnified and exacerbated our dilemma. The IMF (2006) likened it to “a breeding ground” for social unrest and disorder. Declining government revenue did not start with the global crisis. The change in outlook to negative can hardly be attributed to increases in fiscal stimulus which to date has been minimal
The problems we face today and inadequacies are not the inevitable product of the ebb and flow of world economic history. To a very large extent they were created by among other things, mis-management, inattention and reliance on external benevolence (sorry no apologies). We have not the tools and resources with which to create a genuine recovery in today’s world. Economically we were not (and still are not) structured for long term success, only decline. The IMF (2008) having reported that debt rose to “75% of GDP or a stalled high of 87%,” suggested a ratio of “106% by 2013.” Socially, ‘behaviour’ as well as hazardous morals stand in dire need of revision. We need to balance commitment with the resources at our disposal, but not by borrowing or stimulus. Until we do decline remains inevitable.
Dr. Robinson’s perspective on “How is the Barbados Economy Doing” was a welcome surprise. It was thoughtful, well presented and offered some interesting insights. I may disagree with some of the conclusions but look forward to further analyses and perspectives.
Metrics are useful but can be deceptive. They often cannot explain those realities that are not present in tabular form. In our case they simply do not explain or take into account significant ‘variables’ or factors like the overall economic growth and the total national debt. Debt data for the 2000-2009 period would have been insightful, but apparently it remains too sacrosanct to even mention.
The data disseminated may not be a true indicator if formulated to present a particular view. The IMF warned about the “weakness” of our statistics. Unemployment statistics relate only to the registered unemployed. They do not include those unregistered but seeking work, those working part-time or getting by in the underground economy. When these are factored in the average unemployment rate will surely be much greater than 10.1%. The 2009 Marxian reserve army unemployed and underemployed will likely be in the 20% range. And we know nothing of the true size of the labour force. By the way are street and market vendors included in the formal labour force?
Re foreign reserves: it is not unusual to use borrowed funds to boost or maintain standard requirements, use the money for other purposes and repeat the process. Debt increases but the same may not be true for revenue. Some of the borrowed funds are treated as revenue. An adjusted/refined GDP will likely show the fiscal deficit to be much more than the stated 5%. It is nice to know there is a 12 week reserve in place to cover imports. Higher prices and the Xmas season will exhaust those reserves. Then it will be back to square on again.
Technically the recession may be over for most countries (0.1% growth is enough) but the crisis remains. Cutbacks are everywhere. Production and trade are down and more people are in the breadline. Countries are plagued with massive debt loads along with about $64 trillion in toxic assets. And the World Bank could run out of money in 2010. When climatic problems like drought are added to the mix meaningful recovery in 3-5 years as projected by some could be wishful thinking.
Debt projected at 106% by 2013, I cannot see import dependant resource poor Barbados emerging from crisis with its fixed exchange rate intact and independent of the IMF; at least not in the near future. However, in the event of crisis I believe the Mother Country will come to our rescue if only to protect their interests. Social unrest would hasten the intervention
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