Small Open Economies Sailing On The Global Seas

…When America broke the dollar’s peg with gold in 1971, it ushered in a decline that continued until Paul Volcker re-established confidence in the currency in the early 1980s. As Joseph Schumpeter, the great Austrian economist, once wrote: “The monetary system of a people reflects everything that the nation wants, does, suffers, is.”…’

The Economist

There was a time when the world would not be as concerned about the gyrations taking place in many many of Europe’s once thriving economies. The interconnectivity of the world’s financial markets – driven by globalization –  has created a world economy. What happens in any of the economies of G7 or G20 for that matter has global implications. The saying, the more things change the more they remain the same holds. In the global economy a few continue to control the resources at the expense of the majority.

The EU is the common market which the Caribbean has held up as the model for integration. Isn’t it noteworthy that despite an EU parliament and a mature governance infrastructure EU governments are divided about how to manage the problems? Reminiscent of the actions of Jamaica and Trinidad which led to the disintegration of the West Indian Federation, France and Germany described as the two leading economies in Europe are expected to to accept a larger role in any bailout of the PIGS. True to man’s design to protect self first there has been push back from Merkel and Sarkozy to the idea of a wholesale bailout plan..

If we are to believe the position of The Economist that  at the root of Europe’s problem is how  “should  [Europe] respond to a world that is rapidly changing around them. What will it do as globalisation strips the West of the monopoly over the technologies that have made it rich, and an ageing Europe starts to look increasingly like the western peninsula of a resurgent Asia?”  then the problem can’t be fixed by debt rescheduling, forgiveness, Central Bank intervention or undercapitalized banks. The systemic issue has more to do with Europe’s inability to build an umbrella vision that would serve to harness the will and resources of a wealthy bloc of countries. Unfortunately for the rest of the world – as the EU wallow in its indecisiveness – the rest of the world continues to be dragged along. Bear in mind the rest of the world has its own problems.

In light of the economic turbulence the question for Barbados and Caricom is what learnings can we take on board.  An address by Minister of Finance Christopher Sinckler to the 18th Annual Conference of the Institute of Chartered Accountants of Barbados (ICAB) has provided insight to how government’s medium to long term strategy may play out.

We therefore need, not only to shift, but to diversify our export and investment focus, to emerging economies such as China, India, Brazil, Chile, Argentina, Vietnam, South Africa and yes Guyana to name a few. But our goal, must not just be to attract them to come to our countries to play and invest, we too must seek strategic opportunities to invest directly in their economies and industries. So as to earn profits and transfer technical knowledge to further build our own domestic economy,” he saidThe Barbados Advocate

The reality is that Sinckler is correct. To mitigate against economic shocks which are as inevitable as rain in an increasingly volatile global market, there must be an urgency by Barbados and small economies to better align with the emerging and non traditional economies of the world.  To some extent we have seen increasing flirtations with China, Brazil, India, Botswana to name a few. The problem for Barbados is that the benefits of shifting traditional lines of business will take time to bear fruit. Barbadians will want to know how can their individual hardships be buffered in the present circumstances. Who said the job of government in these times would be easy?

How Caricom/CSME continues to rollout its strategy to integrate the region in the current environment makes for riveting stuff.

0 thoughts on “Small Open Economies Sailing On The Global Seas

  1. WHY would this not interest Barbadians??
    IS it that we are more concerned about which party wins the next election ??

    IS it because the next election will be the mother of all elections in recent times 80s-2000 s ??
    WHERE is Freundel Stuart ???

  2. WHERE is Freundel Stuart ???
    WHO is the deputy Prime Minister of Barbados ??
    IS it Donville Inniss , Chris Sinckler, Denis Kellman or Ronald Jones ??
    IF Denis Kellman was elected leader of the opposition that time , would he now be Prime Minister ??

    you vex because I -JUST ASKING ?

  3. Well, that is a long trip and can be trying for most people. Not to mention for someone not 100%, hope he is okay, I really mean that.

  4. David

    You asked who will be next to resign. Might I suggest Chris Sinckler: he does not have a clue. Reading a speech that someone else had written is not ability to manage this economy.

  5. @ Caswell Franklyn | November 12, 2011 at 8:53 PM |
    I wish to share your view on this one!
    What is written in the speech is nothing new. The scenario outlined by the Minister has been discussed by various commentators from both business and academic circles (Harry Russell and Prof. Howard fro examples).
    A re-wording of the description of a challenge does not confront the challenge. Action does! He can start by the non-politisation of the public service and institute the desperately need restructuring to meet the changing economic times.

  6. the minister made some salient points as to how it is necessary for barbados to grow economically and compete in a global market and all “haters” come out of the woodwork with nothing of importance to add .

  7. @ ac | November 12, 2011 at 10:48 PM |
    Yes, salient points, indeed!
    But these are crucial times! What we want is action, man, action! We have heard so many discussions about the restructuring of the Barbados economy. From OSA to Clyde Mascoll! From Peter Boos to Harry Russell! From Michael Howard to Port Restructuring Tony Marshall! And now it is the turn of the newest kid on the block!
    Stop the lot of long talk and produce some results or else keep silent like the PM!

    • @Crusoe

      It is known both Arthur and Stuart suffer from diabetes.

      Given the public outcry about the cost of ministers and public sector officials traveling one would hope the PM plans to hold a press conference.

      Is it not try to say that strategies to balance the economy will not take affect over night?

      This is especially so in the harsh economic times?

      Yes there is nothing new under the sun so what is the point about others making the same suggestions?

  8. One thing missing that should have been implemented ages ago is accountability and responsibility on public projects.

    This does not require agreement by persons and partisan sides to agree on disclosure of private status in positions of influence, as does the while integrity legislation, but only requires a committment from Government to literalkly disclose and make available all information and costs for public prjects on an continuing basis.

    What has me bothered is that the status quo has not changed, such that we ‘hear’ that a company has been appointed to develop the Marina project, at an allegedly greater cost than another bidder. Allegedly winning company has no previous experience in these matters.

    Then we hear that a new hospital is to be built for 800Million.

    Where are the facts, figures, details?

    Can any of us on this Board go to GIS and ask to see the papers or view a screen and print (even if at a cost charge) the documents at will?

    As citizens we have the RIGHT to know and see how our money is being administered.

    This was a major beef with the former administration, but the status quo maintains today.


  9. how can one overlook the role of government in reducing the deficit In the 2011 Budget government has focus and implemented policies which have been frowned upon by many in an effort to restructure the economy isn’t that “Action” with action comes hard choices and they are no quick fixes and short term answers.The economy is weak and fragile and the government is being cautious and deliberate in an attempt to keep the country on stable ground. What more do you want then to do Miller Spending Spree of the days of OSA is over the bills are due and somebody have to pay them and all this have fallen in the hands of the present government. .

  10. There are many in the public sector with innovations and bright ideas which are being ignored and being denied financial supports in order get their projects off the ground, We have look too much to outside resources and have easily forgotten that this country was built by a generation of people whose ideas were borne out of self survival The same ideas which brought the country to the brink of prosperity are the same ones which we have shelved and are now looking to outsiders for help. The private sector is doing what it does best”Wait and see” until. But in the meantime the government should be scouting feverishly among the people and recruiting those with entrepreneurial skills to retool our marketing industry.

  11. David wrote “No innovation or creativity.”

    Barbados has an extremely conservative business culture. That will not change anytime soon.

  12. @ ac “recruiting those with entrepreneurial skills to retool our marketing industry.”

    Please explain what you mean by marketing industry.

  13. @Hants | November 13, 2011 at 9:58 AM |

    I was just about to pose the same question to ac!
    What the heck is a marketing industry? Is he referring to the wholesale and retail distribution sector or advertising & promotion agencies?
    Seems we can no longer take guidance from ac!

  14. ac | November 13, 2011 at 9:44 AM |
    “how can one overlook the role of government in reducing the deficit In the 2011 Budget government has focus and implemented policies which have been frowned upon by many in an effort to restructure the economy isn’t that “Action” with action comes hard choices and they are no quick fixes and short term answers.”

    Who created the deficit in the first place? I am not saying that some of the increases in expenditure were not for a worthy cause. But please don’t try to pin the deficit on the BLP past expenditure commitments. If Barrack was paid maybe I will listen to you. If the CLICO settlement was made I would still listen to you. .Maybe if all the people (tax refunds, ordinary creditors and people whose properties were compulsory acquired, etc) that government owes money to were paid I would continue to listen to you!
    But the marina redesign payments, the DT memorial football tournament, the constituency councils can’t be put on the BLP doorstep, ac!

    You tell us one action undertaken by this administration that can be considered as going in the direction of seriously restructuring the economy. Imposing heavy taxation? Giving away more so-called “freenesses” e.g free bus fares for school children! Don’t you realise that under this administration contributions to GDP from FDI and the int’l business sector have contracted and we have lost out significantly?
    We all know that there are no “quick-fixes” but alt least start doing something meaningful. This word of advice about “no quick-fixes’ to economic problems should have influenced, informed and guided the promises made in the DLP 2008 general elections manifesto and their subsequent commitments and promises to the people of Barbados.
    Your turn to defend the indefensible, ac!

  15. Oh so you angry because the government made promises which they haven’t kept. So you angry that the government let Clico get out of hand and the people lost their investment, So you angry because little children are getting free bus rides . so you angry about VAT, So you angry because BArrack hasn’t collected his million.
    How much money was left in the coffers by the BLP government after 14 years of rule . ,Sir can you answer me that. Before you go off frothing at the mouth let me know and while you are at it see how much of it would be enough to run a government and paid off outstanding debt left behind by the previous government. which indeed left the government having to go begging and borrowing to keep the country stable and furthermore the citizens have had to share the burden.

  16. @ AC…….How much money was left in the coffers by the BLP government after 14 years of rule . ,

    Do You have a figure AC? To tell the truth the piss poor performance of this present administration would encourage me to vote them out. I have lost all confidence in them.

  17. thge money was about 400million not enough to put gas in a fleet of transport board buses and pay govt workers and run a staggering economy.

  18. WHY dont you people seek to answer the very incisive questions that I have asked ???
    ARE you just about talking crap and not finding solutions ???
    DONT you think it is time that you come with some solutions ??

  19. ac what dwindling trade are you referring to. seems like mileranu suggests that you do not live in barbados because your comments on the barbados socio-politico situation unlike your verall erudite commentary do not suggest a grasp of what happens or is happening here.

    • A revamp of the political system has been suggested at the core of repositioning the competitiveness of Barbados.

      Another hot potato issue is education. If we do not intend to export the many we are annually graduating from soci at UWI, how do we intend to place them? There is the argument we shouldn’t direct people what to study and there is the other which says there must be some intervention/strategy which seeks to build a knowledge pool which is aligned to the national interest.

      In today’s newspaper we read the head of BNB suggesting emphatically that as a country we cannot continue with the level of entitlements. As a banker he sums it up easily, our expense line is leaving the revenue behind as wages skyrocket.

      In the same newspaper we have PM Stuart stating with question that his government will not touch education which along with health forms a significant slice of the national budget.

      Finally we have Dr. Ronnie Yearwood suggesting we can’t leave anything on the table as re check and do a reassessment of where we are and where we want to go as a nation.

      We need to have the urgent discussion!

  20. do you know what you are saying when you say that the former govt left 400 miilon in the coffers when they were thrown out of office for the illusion of corruption wikileaks us embassy quote not mine as preached on the opposition platform leading up to the elections? and you say it wasn’t enough to buy a seems that you are really out of your depth as ruth srnetta suggests. anyhow for the serious economic commentators on the forum to expand on: according to information, the last time the country saw positive growth was in 2007 when an expansion of 3.8@ was recorded. the blp to their credit despite their other deficiencies managed to leave office in 2007 with a surplus on current account of 116 million and by the end of 2010 the country was borrowing 538 million to meet day to day expenses after collecting on accession to office in their first year the highest amount of taxes ever collected by a govt of barbados in a single 2007, the fiscal not physical deficit stood at 254 million; 2009 at 396.9 million; 2010 at 712.9 milion.

  21. ‘ BNB suggesting emphatically that as a country we cannot continue with the level of entitlements. As a banker he sums it up easily, our expense line is leaving the revenue behind as wages skyrocket. ”

    So, he is saying we pay people too much, is that why some are against educating people?

    Has anyone checked BND’s profits for last five years? Have they been losing money?’

    Anyone notice former Ambassador Anrew Young’s comment that the basis of Barbados’s success is the high level of education, a comment which supports PM Stuart’s stance?

    I would agree however, that we need to direct better i.e. where are the product designers, pharmaceutical experts (who may be able to build an industry in cloning brand name drugs i.e. generic drug industry) etc?

    Hundreds of management degrees, which good per se, HAVE to be exported.

    We all know that Barbadians who go overseas end up in good positions in short shift, even those who have not gone past CXC.

    There is nothign like a sound education to open opportunities.

    However, you rightfully point to direction and focus.

  22. @ balance | November 15, 2011 at 12:47 AM |

    And don’t forget the $2.6 billion in foreign reserves that are currently saving this country’s ass from the IMF loan sharks.

    I like that “roundabout” slap across the head of the DLP! Imagine taking advice from Mr. Physical Deficit! No wonder the country’s Fiscal Deficit is so massive! Imagine that individual being appointed Minister of Finance should he win a seat and has to represent Barbados at the international level on matters of Finance & Economics!

  23. miller it makes no sense giving ac factual information she sweems unable to grasp.her reasoning is at its best when speculative comment rears its ugly accessing a loan from the bnb , mr thompson was high in his praise of the management of the country’s foreign reserves. and it couldn’t have been by him.

  24. Greetings BU Bloggers
    @JUST ASKING | November 13, 2011 at 10:29 PM |

    “WHY dont you people seek to answer the very incisive questions that I have asked ???
    ARE you just about talking crap and not finding solutions ???
    DONT you think it is time that you come with some solutions ??”

    The “crap” keeps on coming because the solutions are simple and these intellectuals don’t do simple. they need to exhaust their brain cells to justify their titles attached to their name and the paper stuck on their walls, acquired to them by their indoctrinating masters.

    But allow me to drop a truth pill in their cool-aid.
    It is still not succinctly clear to them that a less spending government is the best government. Stop taking our money from us and then spending it wherever you like. That approach has now blatantly failed. It is an imposter to EQUALITY! And don’t go on about Taxes are needed for infrastructure that old chestnut. tell me when my car hit a pot hole can I get a refund? Just asking. we now know that most of our money goes towards paying off debt and further money is borrowed with interest to deal with infrastructure and on and on it goes with perpetual in-sustainability. Modern day politicians can’t even manage a paper round. Politicians are not EXEMPLARY so they can’t face up to the wolves who they are supposed protect us from and enforce them to act exemplary when they step out of line. The credibility is loss. By the way has anyone met a broke politician? Just asking

    It is time to keep your hands out of our hard honest day living and lets us spend our money the way we choose. I am sure I can do a better job at spending all my money on my family’s well being. We can no longer argue that it wont work because it has not been tried. Give us fifty years and see. That is much less than the time given to all the other isms that have been tried. How about adding another -family-ism. I keep all my resources to protect, educate and provide for my family. Encouraging kindness to those who are really less fortunate. I would certainly have a lot more to spread around to viable charities, community projects and Samaritan churches -believe you me. I would save wisely and live within my means and see the tangible value of my labour.

    As for the need to build a $800million hospital by any government, why?
    Because people are overwhelmingly sick because they are either ignorant, dumb or stupid!

    As for the money system that I born into.
    Anyone with a thread of integrity can see it is fraud. I thought Fraud was supposed to be BAD why do we ignore the findings. In persistent clarity it has been documented to the fact that in a DEBT focussed monetary system there will be winner and losers -always. So why do we continue to debate when the inevitable happens. I tell you why the debate, because you never consider yourselves to be losers. As long as you are on the winning, tough everyone else. But if the monetary system was a clever idea gone bad then you would accept it as such. But it was a deceptive design from the start to finish -oh yes it is finish -if mankind collectively have any balls left. Get rid of this FIAT corrupt imposter and the value of money and goods will return. Inflation will decrease, economies will revive, Right now the opposite is what’s happening. And the reason/s are no longer hidden
    To Greece and all the Egotistical; Narcissistic and self preserving politicians and your Me Too economist……This is for you….You morons of earth destruction! Wow when did politics become so blatant the enemy of the people of the Majority? When they transferred PRIVATE debt on to PUBLIC responsibility.

    @Just Asking. I hope I haven’t stolen your thunder. I have been in asking mode for a long time. Thanks for keeping it simple! In deed when the masses start asking questions then we will know they are awake and thinking. At the moment most seem to be dumb and asleep! Still we try to educate and wake them up! with Love and Light!

    Take care of yourselves and each other!!

  25. “Your comment is awaiting moderation”.
    Hmmm that’s new!
    The Good The Bad and The Blatantly Ugly has had its SUNSET on BU? Lol KIKI beware!!
    ” I may not agree with what you say, but I will defend your RIGHT to say it”
    Love and Light too you all.

  26. Interesting what one finds on the internet, here is an Irish writer, a letter to Sarkozy ‘the Great’ (my emphasis)…


    An open letter to French President Nicolas Sarkozy,

    Also, to the additional attention of:
    Herman Van Rompuy, President of the EU Council and
    Jose Manuel Barroso, President of the EU Commission.

    My name is John Hyland, I am a citizen of Ireland. I am an independent TD candidate for the Dublin Central constituency in the upcoming 2011 General Election in Ireland.

    I have read in ‘The Irish Independent’, an Irish newspaper “French president Nicolas Sarkozy raised temperatures last night by calling on Ireland to consider “moving closer” to EU rates on corporation tax, which are far higher than the Irish rate. He was speaking at an EU leaders’ summit.” (and…) “Mr Sarkozy has made several inflammatory statements about Irish business taxation since the €85bn bailout deal was agreed in November, effectively warning the Government that it can’t expect to undercut its paymasters on business tax.”

    Mr. Sarkozy, before you start casting a critical eye on my country in relation to tax issues Sir, may I remind you of these facts:

    There is in the neighbourhood of 11.5 trillion (U.S.dollars) held in offshore accounts across the world, according to Tax Justice Network, a grouping of economists, accountants and academics. Because tax authorities cannot touch any of this money, they are effectively losing 250 billion (U.S.dollars) per year. A significant portion of this is undoubtedly EU citizens and EU corporations depriving EU countries of much needed Euro revenues.

    There are many notorious tax havens located right here within the EU area, or on the overseas territories of its member states.

    These include the ‘City of London Corporation’ (the separate ‘city-state’, ‘The Square Mile’… the financial district of London), the Isle of Man, Jersey, Guernsey, Luxembourg, the Cayman Islands, Gibraltar, Switzerland, Liechtenstein, Monaco and Andorra.

    The ‘City of London Corporation’ (EU?) ranks as a political power within itself, without rival in Britain and possibly in the world. It has used its power to exert enormous political influence to resist regulation and extract tax exemption. Many are of the opinion that it fosters criminality by ensuring that ‘The Square Mile’ or ‘The City’ ranks amongst the least accountable of financial centres on the face of the earth.

    Isle of Man (non-EU), a tax haven off the British mainland, along with Jersey (non-EU) and Guernsey (non-EU) the two Channel Islands, operate a similar tax regime including a zero rate of corporation tax for many companies.

    Luxembourg is also seen by many as a place to harbour dirty money. Banking secrecy is used as a shield against the European authorities to control what is happening within its borders.

    Other countries such as Gibraltar and Switzerland (non-EU) will levy taxes at pretty high rates but will offer a restriction on the amount of income that they actually subject to tax, provided you qualify under one of the special immigrant schemes (e.g. the Category 2 or High Net Worth Individual scheme for Gibraltar or the fiscal deal for Switzerland). Again strong banking secrecy.

    Liechtenstein (non-EU), bordered by Switzerland to the west and south and by Austria to the east has been identified as a tax haven. It is a member of the European Free Trade Association and part of the European Economic Area but not of the European Union. Liechtenstein is one of the few countries in the world with more registered companies than citizens. It is one of the remaining uncooperative tax havens, along with Andorra and Monaco, as identified by the Paris-based Organisation for Economic Co-operation and Development in 2007.

    Getting ‘closer to home’ Mr. Sarkozy, the French government has been supportive of tax havens in both Monaco and Andorra. In terms of low taxes, Andorra and Monaco are probably the top two countries. Andorra doesn’t levy any taxes at all, and whereas Monaco does levy a limited inheritance tax and business profits tax, for most people neither of these will impact significantly.

    Despite Monaco (non-EU) being independent, its national defence is the responsibility of France, and thus, the EU. It is partially governed by the French. Until 2002, the Minister of State was a French citizen appointed by the prince from among candidates proposed by the French government; since a constitutional amendment in 2002, the Minister of State can be French or Monegasque. However, Prince Albert II appointed, on March 3, 2010, the Frenchman Michel Roger as Minister of State. Monaco is not a member of the European Union. However, it is very closely linked via a customs union with France, and as such, its currency is conveniently the same as that of France, the euro. The absence of a personal income tax in the principality has attracted to it a considerable number of wealthy “tax refugee” residents from European countries who derive the majority of their income from activity outside Monaco. Nearly 80% of Monaco’s population is ‘foreign’. The largest proportion of foreign residents are your own French nationals (28%), followed by Italians (19%), Anglos (7.5% UK & 1% USA), and Germans, Swiss, and Belgians (2.5% to 3% each); another 15% is labelled as “other”. Monaco prospers specifically as ‘a tax haven with strong banking secrecy’.

    Andorra (non-EU), a small country in south-western Europe,is located in the eastern Pyrenees mountains bordered by Spain and France. It is the sixth smallest nation in Europe having an area of 468 km2 and well known for its status as a tax haven. It is not a member of the European Union, but the euro is the de facto currency. The role of monarch is exercised jointly by the two ‘co-princes’, the President of the French Republic (that’s you Sir) and the Bishop of Urgell, Catalonia, Spain. This peculiarity makes the President of France (that’s you Mr. Sarkozy) in his capacity as Prince of Andorra, an elected reigning monarch, even though he is not elected by a popular vote of the Andorran people. Defence of Andorra rests with Spain and France, thus, with the EU. Andorra is not a member of the European Union, but enjoys a special relationship with it, such as being treated as an EU member for trade in manufactured goods (no tariffs) and as a non-EU member for agricultural products. Andorra uses the Euro for currency, has one of the world’s lowest unemployment rates and longest average lifespans. Nice benefits.

    As someone running for a position in the Dáil here in Ireland Mr. Sarkozy, it is not only my intentions to work in the interest of my Dublin Central constituents, but equally, in the interest of my nation. I intend to do so with strength, clarity and honesty. During this period of economic crisis, I feel your intentions not in the best interest of my nation.

    Ireland at this point at least, is still very much a sovereign nation. As an Irish citizen I take offence to outside forces attempting to dictate our national policies or self-determination in any manner detrimental to our economic and sovereign well-being.

    It is my contention sir, that both yourself and the EU would do better to focus on the elimination of secretive banking and tax havens, many of whom enjoy both EU benefits and EU military protection, than Ireland’s 12.5% corporate tax rate. Perhaps you should focus on legislation outlawing the holding of financial or corporate accounts or entities in these ‘tax haven’ regions for EU citizens (most especially EU politicians).Legislation demanding all senior bank holders be publicly identifiable, traced back through any chains of corporations, banks, or subsidiaries to the actual real individuals would also be a welcomed initiative.

    In fact Mr. Sarkozy, I think most regular everyday working class citizens, not only here in Ireland, but right across the EU, would find the concept of your being the ‘(co)reigning monarch’ of a ‘non-EU tax haven’ at the very least, ‘questionable and disturbing’.

    Please bear these facts in mind before again making “inflammatory statements about Irish business taxation”.

    Thanking you,

    John Hyland
    Independent TD Candidate for Dublin Central
    Dublin 1, Ireland

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