…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.”…’
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 said – The 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.