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Who Will Put the Genie Back in the Bottle?

The following article by Economist Ryan Straughn has been making the rounds in Barbados and is the source of robust debate because it highlights the perilous state of the Barbados economy. This week the hierarchy of the Caribbean Development Bank also noted concerns about the weight of debt which many Caribbean islands are presently burdened.…

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Ryan Straugn, Economist
Ryan Straugn, Economist

The following article by Economist Ryan Straughn has been making the rounds in Barbados and is the source of robust debate because it highlights the perilous state of the Barbados economy. This week the hierarchy of the Caribbean Development Bank also noted concerns about the weight of debt which many Caribbean islands are presently burdened. We did not reach the current state in the last five years. Our consumption behaviour which is fed by two fickle economic drivers, tourism and foreign direct investment, will do it every time.

Dispelling Political Myths with Economic Facts
I wish to state at the outset as emphatically as I possibly could, that in a very, very, very small open economy (like Barbados) and in a very, very, very small open society (like Barbados) it is imperative that government’s current revenue always exceed its current expenditure in order to protect the social democracy to which we’ve become accustomed.

I sat down to write this article last week and got sidetracked with more pressing matters and so decided to finish it on reading Tony Best’s column in the Sunday Sun of February 3, 2013. The article shared the concerns of Charlie Skeete another Barbadian economist which are indeed very similar to mine. Elections have been called in Barbados for February 21, 2013 and the campaign has truly begun in earnest. As an economist, I eagerly wait to hear specifics from both the Barbados Labour Party and the Democratic Labour Party on how they are going to deal with the small matter of the public finances.

Read full article @Barbados Economic Society Blog

87 responses to “Who Will Put the Genie Back in the Bottle?”

  1. millertheanunnaki Avatar
    millertheanunnaki

    @ Sargeant | February 10, 2013 at 12:14 PM |
    “Was the 35000 tonnes enough to support local consumption or did B’dos have to import sugar even at that level of production?”
    The BLP was more focused on building out a services sector than being any great friend of the sugar industry. And for which it paid the ultimate price through its January 2008 electoral defeat.
    However, the DLP offered hope to resuscitate and improve the industry. The following extract from its 2008 Manifesto: “Pathways to Progress” clearly confirms this promise.
    But remember that during the rough economic times brought on by a so-called international financial recession the Commodities Markets were booming and offer great opportunities for countries like Guyana and Mauritius to benefit from their own sugar industry.

    AGRICULTURE
    When the DLP demitted office it left behind a
    carefully crafted and financed programme for the
    rationalization of the sugar industry. Its primary
    target was to increase sugar output from the current
    level of around 50,000 tonnes up to 75,000
    tonnes. This target was based on the availability
    of the European Union preferential market and
    domestic demand. It envisaged bringing land back
    into sugar production through price support and
    other incentives for farmers. Sadly, this programme
    was abandoned and the now trumpeted
    BLP alternative to rescue the industry involves a
    mishmash of elements – energy and ethanol production
    from “fuel cane”, coupled with 30,000
    tonnes of raw sugar at an investment cost of $400
    million.
    Clearly, a DLP administration must revisit the
    current plans for the sugar sector, and determine
    their viability in the light of the continuing loss
    of sugar lands, the high costs of production in Barbados,
    and the need to obtain firm commitments
    from farmers to participate in any project for a
    sugar cane industry that may materialize. The
    Democratic Labour Party is convinced that sugar
    cane production is essential to environmental and
    ecological sustainability in Barbados, and will
    apply its best efforts to ensure that the maximum
    benefit is derived from the production of all the
    products and byproducts of the sugar cane plant.

  2. ! Avatar
    !

    Word on the street is that the DLP campaign against privatisation has been resonating quite well and many BLP candidates are getting nervous. Now after the Prime Minister has catergorically stated that the DLP will not engage in privatisation of Transport Board,BNOC,etc the BLP is running around saying “Chris Sinckler was promising it too”.Please!
    The Prime Minister has made the DLP position clear. Arthur needs to tell Bajans especially after he made nearly 1 billion dollars in promises at Carlisle Bay Car Park, what is the spending to be cut.
    What the BLP is promising will lead to the decimation of the social services and charge bajans for education, health and education,garbage collection and much more. You cannot have it both ways. The BLP cannot promise giveaways and not tell the people where the money is to come from.

  3. Parent Avatar
    Parent

    David | February 10, 2013 at 12:53 PM |
    @firefox

    Have not heard your report however it was widely reported in the traditional media that Sinckler was booed at Deacons on Nomination Day. BU hastens to add that we do not support this behaviour from our primary school children.

    My brother teaches at Ellerslie he say booing Sinckler did not occur students were in class when his team arrived. Nicholls arrival cause uproar because he came during lunch period. Upset parents call my brother wanting to know who direct their kids to boo Sinckler. The media should be more responsible and not fabricate lies to curry favour with the BLP.

  4. BAFBFP Avatar
    BAFBFP

    @ David
    “developmental programs/strategies” … Please read “Fees for Professional Advisers ..”

  5. David Avatar
    David

    @Baffy

    Feeling you especially after listening to Arthur’s promise that a BLP manifesto pledge will be to setup a Business Facilitation Unit in the Prime Minister’s Office.

  6. Bush Tea Avatar
    Bush Tea

    @ BAFFY
    “Fees for Professional Advisers”……please read
    “Payback for political yardfowls…”

    @ Onions
    …..why you don’t leave Bushie and go and tear down some DLP posters or something useful nuh…?!

  7. Trained Economist Avatar
    Trained Economist

    but David forex is not money sitting down that you can spend yu know. let us be clear that forex is not money owned by the government of barbados that is lying in some account that the government can spend as it pleases. any stimulus has to be financed otherwise.

    what the BLP is saying is that they know that any stimulus will lead to a leakage of forex but because the reserves are at 16 weeks instead of the accepted minimum of 12, they have some wiggle room in terms of forex. but they have to finance their stimulus from somewhere else.

  8. Trained Economist Avatar
    Trained Economist

    but miller, the do something cannot be a consumption led growth strategy. the side effects of that treatment plan is likely to be worse than the current strategy. The put money back in your pocket may appeal to the middle class but they have the most to lose from social instability and devaluation.

    yu might get money in your pocket, but if its at the expense of policies that promote social stability then you might end up spending that money on guard dogs and security systems. A devaluation will wipe out the real value of your savings and property investments. protecting the fixed exchange rate and social stability must be the priority.

    let us work on developing a forex led growth strategy rather than this short-term, feel good consumption led growth approach, or any slash and burn austerity approach

  9. Prodigal Son Avatar
    Prodigal Son

    @The DLP
    “The BLP cannot promise giveaways and not tell the people where the money is to come from”………………………..

    Barbados’ economy would not be in so much trouble now had you lying incompetent people not promised so much in 2008 and came in and did so much nonsense for the last five years.

    By the way, I did not hear you Dems tell the electorate in 2008 where the money was coming from to give duty free cars and all the other giveaways that you lying people promised and then could not fulfill.

  10. Prodigal Son Avatar
    Prodigal Son

    The PM told the Chamber Luncheon last week that he will be looking at financing flights from South Africa. To me, this is not a good idea, a waste of foreign exchange. Have they not learnt any thing from the waste of money spent on GOL. Spend money in the sure markets and sure up the arrivals. The Brits are still travelling as well as the Germans. They are going to other countries in the region. What wrong with our product?

    We need a serious clean up of this country and some investment in attractions to beef up the tourism package.Harrison’s Cave cant be the sum total of our tourism product.

  11. David Avatar
    David

    @Trained Economist

    The BLP will raise the ceiling on their Central Bank current account, done!

  12. Trained Economist Avatar
    Trained Economist

    the reserves cannot help finance a stimulus program. are yu saying that the blp plans to simply print the money, which ishat borrowing from the central bank is. i don’ t accept that, there are too many good economists in the party.

  13. BAFBFP Avatar
    BAFBFP

    The public sector, lead by the Central Bank of Barbados, is packed to the seams with highly Certificated Economists of every shape, size and complexion. All of a sudden I am to believe that it is up to the silly few among them that have made the decision to enter public life to determine right or wrong with the policy that is to be undertaken. Why are the others then still drawing salaries …?

  14. Caswell Franklyn Avatar
    Caswell Franklyn

    To the Point

    I am now only seeing your comment posted at 10:36 am.

    You always seem to miss the point. Even if I divulged information that I gained while employed at NUPW: it is not a crime. However, I believe what Jepter Ince was tantamount to a breach of the Official Secrets Act, and if I am correct, he would be exposing himself to jail time.

    You get the point yet.

    Sent from my iPad

  15. Enuff Avatar
    Enuff

    http://youtu.be/2-7BGq2JU0U

  16. BAFBFP Avatar
    BAFBFP

    LAFF-IT-OFF has planted its feet squarely in the camp of the BLP … disappointing since I hold fast to the view that participants commercial Creative activity should be apolitical in their depictions. The crew made a mess of Thompson, Freundal, Jones, Boyce and Sealey and took major stabs at Broomes and Green Verbs of CLICO fame who they referred to interestingly enough by his initials only. Hey all of that was fine until they decided to Big Up Mia Mottley. Now that was a little too obvious and low.

    If Foo Foo was still around he would have made Arthur shite …!

  17. Observing(...) Avatar
    Observing(…)

    @baffy
    So ya telling muh dat even de comedians want ta get rid of de dems too?? Wuhlosssss. Um hot in hey!

    Just Observing

  18. balance Avatar
    balance

    ‘is it time for some means testing”
    I BELIEVE SO

  19. Trained Economist Avatar
    Trained Economist

    this video is obviously not a continuous sequence of words. It would be good if we get the date of the speech being referred to.

  20. Brian Avatar
    Brian

    I posted on the BES blog and i will post here. This article is somewhat misleading as it does not tell the true story. Yes there is a deficit since 2007 but it did not go into possible reasons that expenditure increased so dramatically.
    One of the reasons could be that government changed its method of reporting from cash basis to accrual basis in April 2007. Anyone that knows anything about accounting would know that accrual basis accounts paints a better picture in that it not only reports expenditures that were paid for but also expenditures incurred. Some of these expenses that would now be recorded that were not before would be interest expense on debt obligations.
    I would urge people to do the research for yourself on central bank website before accepting these figures thrown out by both parties as gospel.

  21. David Avatar
    David

    @Brian

    One of the reasons could be that government changed its method of reporting from cash basis to accrual basis in April 2007.

    You suggest that ‘one f the reasons ‘could’ be – are you being speculative with your comment?

  22. millertheanunnaki Avatar
    millertheanunnaki

    @ Brian | February 11, 2013 at 4:03 PM |
    “Anyone that knows anything about accounting would know that accrual basis accounts paints a better picture in that it not only reports expenditures that were paid for but also expenditures incurred”

    We would strongly advise you to listen to your own advice and stay clear of things you know little about.

    It’s only a matter of “Timing” that makes the difference. What does not show up today will show up tomorrow once spent or incurred; if you get the drift. It’s all done, in principle, for the sake of matching expenses (or even expenditures) with revenues or the other way around.

    So, for the life of Brian the messianic miracle worker’ don’t blame what was brought to book in 2007 on what occurred in subsequent years and vice versa.

    Rubbish, little boy!

  23. BAFBFP Avatar
    BAFBFP

    Rubbish indeed … Brian, try another blog. This one ain fah you …!

  24. Brian Avatar
    Brian

    I’m not going to reduce this to a name calling match nor am I going to say that i’m an economist. However, in analyzing the figures for those who cared to go look them up. Could you tell me why in the same year the method changed from cash to accrual basis, government expenditure saw a 35% increase from the previous fiscal year. The only other year that came close to to that sort of increase was 1981/82 year which was 26%.
    A further analysis of the figures also would reveal that after that dramatic increase in 2007/08 fiscal year, expenditure rose 3% the next year and 2% the year after that.

  25. Jus Mekkin Sport Avatar
    Jus Mekkin Sport

    BARBADOS TODAY!!

    ANARCHY or FREEDOM?
    an·ar·chy
    [an-er-kee] Show IPA

    noun
    1.
    a state of society without government or law.

    2.
    political and social disorder due to the absence of governmental control. Synonyms: lawlessness, disruption, turmoil.

    3.
    anarchism .

    4.
    lack of obedience to an authority; insubordination.

    5.
    confusion and disorder: Intellectual and moral anarchy following loss of faith in the Democratic system.
    Synonyms: chaos, disruption, turbulence; license; disorganization, disintegration

    DOES THIS NOT SUMMERISE OUR DAILY EXISTANCE IN BARBADOS.

    ANARCHY = SLAVERY
    SUBJUGATION OF FREEDOM

    ARE WE NOT FREE IN BARBADOS TO SPEAK AS WE WISH ?
    AS LONG AS WHAT WE SPEAK MEANS NOTHING.

    Ergo:
    Barbados Underground

  26. David Avatar
    David

    @Jus Mekkin Sport

    At least we have freedom to speak so the possibilities are endless. Why don’t you point your comment to the Nation newspaper.

  27. Observing(...) Avatar
    Observing(…)

    @mekking sport
    A spoken word has all the value in the world. Don’t underestimate the power of free speech provided here on BU. What’s needed is for real leaders to tap into that power and use it for the national good.

    Just observing

  28. millertheanunnaki Avatar
    millertheanunnaki

    @ Brian | February 11, 2013 at 8:44 PM |
    “Could you tell me why in the same year the method changed from cash to accrual basis, government expenditure saw a 35% increase from the previous fiscal year.”

    Brian, you have identified precisely the reason for the sudden jump in reported expenditure: the change over from the cash basis to the accrual system. The application of the accrual method would no longer allow the non-reporting or deferment of known or recognized liabilities to be settled or paid in the future and then reported. The debt must still to be paid and recorded or to use “accrual speak “, recorded and then paid.

    You could probably use the accounting analogy of changing the method of depreciating a fixed asset during its useful life. The amount of the periodic depreciation expense and accumulated depreciation would change either up or down depending on the method employed but the market realizable value of the asset remains the same.

    What you should seek to explain to us non-economist and armchair accountants here on BU is the subsequent increases in the current account deficit from 2008/09 to 2012/13.

    We would allow for the nominal increases due to inflationary price movements even in an economy beset by so called recession. But you need to focus on the effects of the significant increases in interest expense as a result of the associated massive increases in debt to pay for current expenditures.

    We await your response and appreciate your warning not to engage in name calling or ad hominem.

  29. Brian Avatar
    Brian

    I highlighted the change because the way in which the article was written, it would seem that that government expenditure ballooned under and because of the DLP administration.

    I already said i’m not an economist nor an accountant. But I was hoping that a real economist would say what was the primary cause for 35% increase in government expenditure in the 2008/09 fiscal year.

    I also sent a message to the author of the article to find out how much of an impact this would have on the figures.

  30. Brian Avatar
    Brian

    @miller

    You said the current account balance increased from 08/09 to 12/13. Where did you get your figures from? I’m only seeing up to 2010 on central bank website and they show a decrease in the current account deficit from 2008 to 2010.

  31. Trained Economist Avatar
    Trained Economist

    Brian, a part of it is the change in accounting method. the government moved from cash to accrual accounting, and a number of off budget entities were brought on budget.

  32. Trained Economist Avatar
    Trained Economist

    the deficit is too high, but if we debate it in a political context we should also say that part of the reason it is higher is because more itens are now on budget that pre 2008.

  33. millertheanunnaki Avatar
    millertheanunnaki

    @ Brian | February 12, 2013 at 10:36 AM |

    What are you saying here, Brain?
    Are you stating that the fiscal deficit both on the c/a and overall has been the same or reducing since 2008/09?
    If so why has the national debt moved by almost $2 billion since the DLP came to office? Why borrow from the NIS to pay salaries and to meet transfer obligations to the statutory bodies like the TB?

  34. millertheanunnaki Avatar
    millertheanunnaki

    @ Trained Economist | February 12, 2013 at 10:51 AM |

    Sorry Trained Economist, but we cannot debate the fiscal deficit in a political context by reference to any change in any public finance accounting methodology.

    Off budget financing in previous periods (pre 2008- to use your implied phrase) would only have an impact in the year the method of accounting for public expenditures was changed. Future year increases in expenditures cannot be hinged on the book-keeping adjustment or reconfiguration that took place in any previous year whether in 2007/08 or 2008/09.

    The problem is that the government has been spending on current account (including transfers to statutory and other non-central government bodies) more than it has been earning in revenues. This situation has been ably pointed out by Ryan Straughn; unless you want to say he is talking nonsense, technical or otherwise.

  35. Crazy Horse Jockey Avatar
    Crazy Horse Jockey

    Bring back Owen and the forty thieves quickly.

  36. just want to know Avatar
    just want to know

    The majority of Barbadians don’t know anything about economics, all the working class people, and those not working is how to get along day by day, to feed their families, to send their children to school, and to pay the rent, don’t even talk about the electric bill & water bill, which we have to juggle. So don’t feed all these figures to us, just help us, so we can meet our needs on a daily basis. The DEMS has made a mockery of our taxes, we want some one in there who can ease our situation, and take this little country forward to prosperity again. Things are really ” dred ” . No one even seem to be thinking of pensioners, we certainly need help, and if OAS can help us we going with him.

  37. Confidence or NO CONFIDENCE | Barbados Underground

    […] Ryan Straughn’s article “Who will put the genie back in the bottle”, gave Central Bank statistics up to the fiscal year ended 30th April 2012 and estimated figures […]

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