Central Bank of Barbados: Political Tool or Facilitator of Economic Development?

Submitted by the Mahogany Coconut Think Tank and Watchdog Group

We are not a bit surprised that former Governor of the Central Bank, Sir Courtney Blackman is blaming both the Barbados Labour Party and the Democratic Labour Party for the current financial woes. We are also not surprised, that the current Governor, Dr. DeLisle Worrell, is saying that the existing financial sector stymies or does not support innovation and creative enterprises. In layman’s terms it really means, that those citizens with startup enterprises, cannot get them financed.

These two statements show beyond a shadow of doubt that the current crisis, is not going to be abated by the noise coming from the apologists of the government and opposition. When stripped of their diplomatic sheets, they convey a bankruptcy rampant in both of these political dinosaurs (BLP and DLP). The simple truth is that both parties have paid nothing but lip service to creating a new entrepreneurial class and have bogged themselves down in economic models that are no longer relevant. We are left with ego based arguments from economists, who are merely singing for their political supper.

Both Governors have failed to admit that the Central Bank itself is a model of a decaying economic management structure that can scarcely move beyond collecting data and regularizing the commercial banks. The Central Bank itself can do little to facilitate any radical changes in the economy. Indeed, it was Dr. Blackman himself, who once stated that the Governor of the Central Bank is “a creature of the Minister of Finance”. We believe that his statement justifies our position about the relevance of the Central Bank in economic planning. The Minister of Finance is a politician first and foremost, if Dr. Blackman’s position holds true; it means that Governors of Central Banks are actually political creatures!

Recently, while addressing the Barbados Association of Insurance and Financial Advisors, the current Governor of the Central Bank, Dr. DeLisle Worrell, suggested that the Barbados financial system is “failing” innovators. Dr Worrell told his audience that he did not have the answers for filling “gap” which exists between traditional financing and that for new business in such areas as energy and culture. Such an admission from the Governor would not have been good news for the hundreds of citizens trying to get their businesses off the ground.

When we examine the two positions of the Governors, we are forced to ask: What is the real function of the Central bank. Is it merely a political tool or is it incapable of assisting with the emergence of the new economy?

We believe that a $100 million Fund should be immediately set up, to jump start small businesses. We also believe that the establishment of at least six Entrepreneurial colleges, with rolls not exceeding 200 each will assist in developing present and future business persons.

It is time for political gymnastics to end and real progressive policy changes to be made. It is also time for the role of the Central Bank to be revisited.

0 thoughts on “Central Bank of Barbados: Political Tool or Facilitator of Economic Development?


  1. “NEW business” in areas such as “Energy and Culture”
    He ent even got answers for filling “DE Gap ” in he teet.
    ENERGY and CULTURE???


  2. Nobody in Barbados has the ability to run a Central Bank in the interest of Bajans. While we have some respect for the current Governor, personally, we judge that he recognizes the limitations a post-colonial Central Bank of Barbados faces as all its major policies are determined by the Bank of International Settlements in Basel. Given these circumstances we are restraint in our critique of the present Governor.

    Courtnay Blackman on the hand pretends to be some international financial expert. An expert who raises his head every now and again to make utterances that are not dissimilar to those we’ve heard him make for more than 40 years. How could this be? Does this man live in a bygone era? Is he connected to current events? Can’t he see that the lies of his generation are coming home to roost? Does he not understand the limitations of what he calls management? And therefore the impossibility that any ‘manager’ anywhere could have increasing ability to solve existential problems.

    While we agree that Barbados has been saddled from time, with bad management surely it can’t, by itself, account for the current global conditions. Bad management then, for Blackman, is but a panacea that attempts to hide the real causation of current economic maladies. Balckman is still talking about Peter Drucker – a leading management thinker of his time. We have learnt a lot from him and may he rest in peace. However, Drucker’s thinking has been exposed by circumstances that neither he nor Blackman are willing to account for.

    Blackman refuses to consider the internal contradictions of economics on which current policies are based. The Drucker-Blackman thinking locates management within a sterile environment untouched by real world occurrences, the military domination of most of the world by ruthless thugs, the imposition of an unfair parity in the currency markets, the sovereign right of one country to print useless paper and force other to accept it as legal currency. A useless currency that is the medium of exchange. We could go on and on talking about other limitations like the exhaustible of resources, the possibility of a global climate disaster, and so on …No management nowhere know how to deal with these, and they never will, until we transform the underlying structure.

    The Central Bank of Barbados is virtually useless when other determine money supply policy, exchange parity, insist on the abandonment of national interests for ‘global’ interests. We can say that the Bank has not been an instrument for ‘development’ but certainly it has been a perennial political tool.


    • @Pacha

      Agree with a lot of your comment. Many criticized Dr. Worrell for having the cheek to ‘answerback’ Christine Lagarde, managing director of the IMF, when he forcefully suggested that IMF wholesale policies as proposed will not help small island economies like Barbados. Like everything else in Barbados these days it was made a political issue.


  3. Translate “real progressive policy changes”
    into “Streetspeak”
    ONLY SIX entrepreneurial colleges of 200 persons????
    1200 people.
    That is about 1 person in every 229 people counting Children ,,women , men pensioners,disabled.
    You think 228 other people can make a business person successful and maintain that person in a salary and pay all outgoings and staff and exspenses.
    I got news for you.
    You DREAMIN!!!!


  4. We believe that a $100 million Fund should be immediately set up, to jump start small businesses.

    Fund Access, RDC, UDC, EGFL and guarantee schemes in the Central Bank add up to? Small businesses in what? Entrepreneurial colleges?


  5. Not trying to take away from the contributions of the older generation of PMs, central bank governors, etc. etc, and the knowledge they might still be able to impart, but it really is time for them to go quietly into the night…..the game has changed, the needs of the public has also changed, the world has changed, the players are younger and we need to move on.

    All those governors of the central bank were aware all along that they are/were never really in control of anything, they were managed from Europe and were just used by successive administrations as political tools to lie and deceive, just like the media, cbc, etc, etc.


  6. @enuff

    The issue is not the availability of Funds but the criteria to lend to actors in the Cultural Industries which make those funds relatively easy to access given the nature of the business.


  7. Exactly…………there are hundreds of thousands of dollars sitting in the central bank for businesses wanting to export, that most citizens know nothing about, however, the hell and paperwork you have to go through to access those funds as one banker told me, is not worth your sanity……….so the money just sits there.


  8. Agree with you Enuff but it calls for the MoF/government to amend the legislation which govern the available vehicles. In fact it is some thing our venerable Governor of the Central Bank can recommend.


  9. A rose by any other name will smell as sweet.I can see the political hacks and vultures waiting to access the funds with no intention whatever of repaying and the usual writeoff and severing of staff and john public will forget over time until the cyclical conundrum rises once more;Thesis,antithesis,synthesis.


  10. The amount of grants that have come out of Europe in the hundreds of millions to billions for small island states to develop themselves over the last 50 years has helped along the way…………….i am sure some of that free money found it’s way into the pockets of politicians and their yardfowls………..this is probably the best time to have grants available for ailing businesses, cause i know money still comes out of Europe in the form of grants.


  11. Barbados has no natural resources.

    Concurrent with developing small businesses supplying goods and services to the local economy must be an equal push to develop products for export.

    It is time to copy what the Jamaicans are doing. mainstream supermarkets in Canada sell Jamaican pumpkin,hot peppers and yellow yam to name a few.

    The best coconut water sold in Canada is from Jamaica.Sold frozen solid.

    Take this as a hint to the possibilities.


  12. Jamaicans and Trinidadians have cut out niche markets for themselves in North America, exactly what are bajans waiting for again??


  13. “.i hope the money is still sitting there, and no one has made off with it”
    **********
    LOL Ha Ha Ha. Rofl…hee hee

    Wunna folks does really mek a lotta sport hear…?

    How on God’s earth would it be possible for there to be MILLIONS of dollars sitting in available funds in Barbados for wont of someone completing paperwork…?

    Look! That money is ‘there’ because it was loaned/ granted/ advanced by various international agencies for various noble purposes which all sound good enough on paper……things like
    – alternative energy
    – educational development
    – small business development and support
    – greening and solid waste management
    – water mains replacement
    – gender equalization

    ….and such sweet sounding projects.

    THAT IS WHAT YOU HAVE TO SAY TO GET THE MONEY.
    Wuh wunna think that world Bank or CDB gwine lend we $M 10 so Freundel could hire a lotta folks to weed bush hall, or pay salaries to a bunch of do-nothing government workers, or fuh a AX commission of inquiry into miserable women?

    Um is just like a lot of those folks who went shopping for reggae on the hill…a lot of dem tell the Credit Union that they want to buy school books for their children, fix the flooring in the kitchen or tile the shower….dum ain’t say that they want Remy… and ringside tickets..

    Of course as soon as the loan funding is paid to govern it is immediately spent on something REALLY important ….like luxury SUVs for everyone from government messengers to every statutory senior staff…
    ….Wuh obviously they HAVE to pretend that the approved projects are still on, …after all they will be applying for new loans for “alternative energy” shortly….Ha Ha. 🙂 …let Bushie see the fella who could qualify for a small business loan LOL Ha Ha … BAFFY ya joke!!

    Wait fuh dat money….


  14. I could not believe my eyes………..saw messengers driving ML or MP luxury SUVs high end and stupidly expensive, that is why government should not be given a pass for all those dumb decisions they make while not focusing on pushing exports and less dependency on imports.


  15. Did I just read that someone, was it you Bushie, No it was Well Well, asking what Bajans were doing about exporting, and pointing out the Jamaican products that are sold up here? I have been pushing this, arguing with people back home, cajoling and encouraging our people to get into the export market. Up to yesterday I went into Harry’s and bought a couple packages of Eclipse Biscuits (except these are now produced in Trinidad). Our sugar can be packaged in small bags and sold here. Having bought and experienced (using it is an experience) Demerara Brown Sugar, and the Tastless “white sugar” I have no doubt that Barbados sugar caqn be sold as a specialty sugar. It is the best and should be marketed as such. We can enter the export market but our products have to be marketed aggresively.


  16. Alvin…………………yes, but they continue to do nothing to push the products that would do very well in North America……..


  17. My nose bitin’ me… somebody talkin’ my name…

    Let me just clear one thing up about the self employed… there two types, TWO TYPES;

    – one that is forced to be entrepreneurial as a result of the nature of his offering
    – the other that is just plain entrepreneurial by nature, and would do just about anything to turn a dollar.

    The two are NOT to be lumped together under ANY circumstances.


  18. Those who have designed developmental policy over the years were not stupid ppl. Chances are they simply copied what existed in other territories. The problem has always been in the IMPLEMENTATION of these grand schemes, and the mindset of the invisible faces that are charged with this responsibility..

    My pet peeves are the Enterprise Growth Fund and Fund Access ppl. These institutions exhibit the clearest examples of what I am referring to. Both are lead by individuals who can simply BLOCK applications for funding from reaching board level consideration… Yes Block, and there really is nothing that the ‘client’ can do. These tenured individuals no longer think of themselves as public servants, and Cabinet Ministers have NO power when it comes to dealing with them (read High Court judgement as per the NHC Ex-CEO)


  19. The Central Bank keeps academics employed … what else are they supposed to …? Bre’k in people’s houses? I say right on to them (after all I know alotta dem and I only want for them the best 🙂 )


  20. In light of some very outlandish figures, statistics and other concoctions that have come out of the Central Bank of Barbados and that have gone out for public consumption in Barbados and beyond, at various times in the recent past in the country, and of reports of clashes between the Central Bank of Barbados and the Barbados Statistical Service over some of those same figures, statistics and other concoctions, and which have had the illfortune of bringing the Central Bank’s research and data information processes into disrepute, and which have – from those times until now – led to the questioning by some members of the public of the entire integrity, credibility and reputation of this once very important public institution, the PDC will again ask many members of the Barbadian public to demand of the government that it – without haste – sets up a Commission of Enquiry into some of the Central Bank’s operations and administrations.

    PDC


  21. @Baffy

    Would appreciate if you expand on your claim. Are they not very clear application procedures to follow at EGFL and Fund Access?


  22. David
    here is the process. The client is expected to provide the usual… you know, business plan, spread sheets (projections and sensitivity) and interfaces with very nice accommodating field officers. These officers are proficient to the point of advising where the client may be deficient and how improvements can be made. I like them all, they are sincere operatives (the same is true of ALL the small business units of the commercial banks). These operatives are charged with packaging the proposals for presentation to the Boards. The presentations are done by the CEO’s, not the field officers, and most certainly not the client until he is invited. The of the CEO’s comes into play as it is they and they alone, that determine which projects go through for board consideration, and which ones don’t.

    With the commercial banks neither the branch manager nor the small business manager has the power to authorize a business loan of ANY size. They can authorize Personal loans of up to $400,000, but not one cent towards business development. These types of decisions now done by invisible faces behind closed doors.

    Is the problem clearer?


  23. @Baffy

    Clear,,,so far.

    After the CEO or some higher authority decides which project should be presented what happens at this point?


  24. @ David
    Consolidated Fund?
    …you mean the treasury? ….that illusionary place where we money is kept? …the one managed by politicians like O$A, Thompson and now Sinckler?
    Ha Ha LOL

    Skippa, what do you not get about hand to mouth?…..pay check to pay check?

    The ‘consolidated fund’ is like the fellow who can only write a cheque when his salary goes on the bank……often the cheque beats the salary to the bank…
    Those international loans and grants are like loans from the credit union to a small man for “debt consolidation”.
    Any ‘development’ scheme funded by the Barbados treasury is a sham.

    @ BAFBFP
    Pray tell us why you would expect that foreign owned banks would facilitate locals investing in BUSINESS? …you think the people foolish?
    Shiite man….that would be like asking the old Plantation owners to provide free education to the slaves…

    Wunna people does can’t take a hint though…? Those put to administer these funds are there to PREVENT wunna from humbugging the foreign people – while making it look like um is wunna fault…and at the same time harvesting any good ideas that wunna may freely provide from time to time….

    THEY RIGHT! ….wunna Brass Bowls!
    Wunna got over a billion dollars in savings in Credit Unions and in the same foreign owned banks which wunna HAND OVER to the same foreigners to manage….and then gone back begging them to borrow some…

    The very epitome of ignorance….


  25. David
    the board members sit around a table and decide on ‘viability’ and ‘sustainability’. The few members of the boards that I am aware of are able people in their respective fields, but the problem of course, is that they are drawn from disciplines with strong conservative traditions wrt decision making.

    Bush
    If it is that you seeking a response from me, I am not so sure that you are going about it the right way


  26. The main issue is with the two CEO’s. They CANNOT be moved, even the boards lack the necessary courage that it will take to challenge them. The Boards see that the bottom lines are always in the black and that is sufficient, everyone is happy, (save for the types of ppl that the Cabinet Ministers and Central Bank Govs frequently refer to in public as to what is needed)


  27. @Baffy

    Understood and it explains Governor Worrell’s point that players in the Cultural Industries and start ups especially will struggle in this space which is traditional in mindset. This is where the bottlenecking occurs and this is where government must play a proactive role in FACILITATING the SMEs. And especially those who are export leaning.


  28. What is there to respond to Baffy?
    ..you are clearly awaiting the day when outsiders see it fit to facilitate our just demands for developmental loans… Hell will freeze first..

    Caswell too…
    He awaiting the day when the authorities recognize that Credit Unions can operate as banks and get involved in such developmental areas rather than just consumer loans.

    Pushy Bushie would have started a local Credit Union Bank long time ago and taken control of this whole scam….


  29. David
    The GoCB is very aware… but again powerless to do much. Make no mistake, the public personalities are well meaning and, believe it or not, sincere, but they are not the ones making the key decisions. The Fed Reserve in the US is expected to break even every year… ie NOT show a profit. Why the hell should Fund Access and EGFL not be treated likewise?


  30. @Baffy

    Again understood, the critical KPI for EGFL, Fund Access and the other must be how many business funded in predetermined time frames, % export oriented, how long in business.


  31. To be honest I am so opposed to the two CEO’s that a comment that points to their inability to operate in the environment as defined by you is very easy for me to make. Barbados may fare better with them off the scene but then one will be faced with the appropriate replacements.


  32. Why is it we have shifted the issue raised by Dr. Blackman that both parties are to be blamed? I believe he is right as we have some fundamental problems with our problem solving in Barbados as well as the way we see management. Our selfish self-serving approach to managing the country has lead to many problems. Many do not want to face up to the above reality.


    • @Reverp

      Has Blackman said anything that many on this blog have not been preaching in the last 5 years?


  33. Pachamama | April 29, 2013 at 6:47 PM |
    “Nobody in Barbados has the ability to run a Central Bank in the interest of Bajans.”

    Mark Carney is the Governor of the Bank of Canada. Carney spent thirteen years with Goldman Sachs in its London, Tokyo, New York and Toronto offices. His progressively more senior positions included co-head of sovereign risk; executive director, emerging debt capital markets; and managing director, investment banking. He worked on South Africa’s post-apartheid venture into international bond markets, and was involved in Goldman’s work with the 1998 Russian financial crisis. On November 26, 2012, the British Chancellor of the Exchequer, (MOF) announced the appointment of Mark Carney as the next Governor of the Bank of England. Carney is expected to assume the position on July 1, 2013 for what is officially an eight-year term.

    So, if the British can look beyond its shores and hire someone from one of the colonies to head up its Central Bank, why can Barbados not look beyond its shores for a qualified person to head up its Central Bank without political interference.

    This may seem a foreign concept to the Government, like “the tail wagging the dog”; but surely it beats having a “lapdog”.

    Hants | April 29, 2013 at 8:35 PM |
    “It is time to copy what the Jamaicans are doing. mainstream supermarkets in Canada sell Jamaican pumpkin,hot peppers and yellow yam to name a few.The best coconut water sold in Canada is from Jamaica.Sold frozen solid.”
    Where do you find the frozen coconut water, Niceys? I stock up on the Grace coconut water (a product of Thailand) in cans when they are on sale for 99 cents at the supermarkets.


  34. The whole principle behind venture capital is risk – a word that is anathema in Barbados. EGFL and Fund Access are government-run operations, a fact that renders them dead in the starting blocks. In order for a business to start up, it has to take a risk, and that risk has to be financed by someone else ready to take the risk with them. The whole thing about risk, is that somebody stands to lose, and it happens often with new business start-ups. That is why venture capital has to be private, where wealthy individuals or firms risk part of their fortunes in the chance that their fortune might be considerably enhanced if the business is successful. BUT they are also prepared to lose and walk away if it doesn’t work. No person working for government on a fat monthly pay check will be prepared to take that risk, and in some cases, they are not prepared to see someone more successful than them. So they invent an unscalable paper wall, which eliminates risk, because no one is prepared to take it on. So they’re safe – and the next fat paycheck is there at the end of the month. And that’s the way it is in Barbados 2013………


  35. peltdownman

    I am with you on most of what you say up to the part where you claim that the Fund needs to be private sector in origin… wah dese is the wussest when it comes to understanding risk taking. The monied class in Barbados today are the beneficiaries of service based utility type operations which are basically safe in design. Few will be courageous enough to venture into an environment that is unsettling to them. They are more likely to stick with the bricks and mortar and blue chips. Look, I will be frank with you. The model that is required is that of a Government underwritten Development Bank with APPROPRIATE STAFFING. Tax payers wealth must fund true development schemes to private funds… that is an idea that is best suited for large developed financial markets and so on.


  36. Of course; every other territory in the region has one. This right of centre model that has been embarked upon by the Owen Arthur administration is imploding. The issues with original designs have every thing to do with staffing. I really do not care where the people are brought if from, as long as they are the right people with a long term ENTERPRISING view on development. One is unlikely to find such people from within the ranks of our present domestic accounting, finance, economist, legal and MBA fraternities. I say import the f#ckers …


  37. Puerto Rico will soon be the 51st state in the United States union; this is imminent. Trinidad and Tobago will soon take over and control the Barbados island; this too is imminent.


  38. @ Bush Tea

    “like luxury SUVs for everyone from government messengers to every statutory senior staff…

    @ Well, Well

    “I could not believe my eyes………..saw messengers driving ML or MP luxury SUVs high end and stupidly expensive”

    Bush Man & Well, Well, you guys got this thing wrong. The central guv’ment does get them SUVs duty free, while statutory departments have to apply to the Ministry of Finance to get duty free concessions; so these vehicles don’t be that expensive …….lol, lol.

    That being beside the point, the guv’ment got nuff SUVs fuh true. This administration took a woman from a bank, give her the general manager pick at the Transport Board and a blue Hyundai SUV, and the bus service has gone from worse to worst; took the man from the union, give him the Director job at UDC and a Nissan X-Trail SUV, but he can find time to go on the DLP campaign x-trail to inform supporters how many BLP representatives did not apply to the UDC on behalf on their constituents; Judy at DEMS got a Toyota SUV, but complined that the government continues to neglect that depertment; Dr. Donna got the director job at NCF along with a Nissan X-Trail SUV, but Lashley and Monique took care of that; Stanton has a SUV, but continues to be acting general manager at the SSA; Dr. Leroy must also have a SUV included in the sweet deal at BIDC [he also found the time to be on the election campaign platforms…I was wonering if the general orders don’t apply to him and the union man….Caswell?]. DLP Jolla Barrow got a SUV as the director of the drainage division. Could go on and on, but you are correct, Well, Well.


  39. LOOK | April 30, 2013 at 2:48 PM |

    Puerto Rico will NOT be the 51st state in the United States union that position has already been filled by Great Britain …!


  40. Art………………I tell ya, SUV mentality.

    From what i know the head of EGFL was placed there by Arthur, so if you want your application approved by the board, you better be close to this guy……..Cabinet can approve a small grant, and the board at EGFL cannot overturn the decision, but they can make you wait, a gentleman lamented this…………they need to get the political hacks out of these jobs where people’s futures are left to their discretions………i am for bringing in broad-minded people who are in no way connected to the small minded political landscape


  41. Well Well

    There is really no way around it, both CEO’s have done sufficient to dismantle the intent of BOTH political parties. They really serve no useful purpose in a development focused environment. These posts should be like that of the NCF, renewable contracts (even with the inherent deficiencies). Is it too late? How much is it going to cost the tax payers to rid themselves of these two dinosaurs …?


  42. Is Timothy simmons still at Fund Acess.Tell me what does he know about business.

    So many complaints about obstacles in the way of small and micro business approaching Fund acess and the other organisation.Can’t remember who heads up that one,I think it used to be a short guy with glasses.

    Useful comments by BAFBFP.


  43. If memory serves Hammie Roach was at BDB which should have prepared him for the job at Fund Access. Simmons is the MBA boy who we must admit is a little puffed up. Is Terrence Thornhill still the Chairman of EGFL Board?


  44. The boards have remained unchanged. There is nothing to be gained by dragging a Clico official into this. We are faced with two dinosaurs who are still relatively young men. There is NO retirement on the horizon … this is NOT good …! BTW the Chairmen of both boards are also even younger, but again, the boards are a collective.

    Thanks for the support


  45. @ David
    “Simmons is the MBA boy who we must admit is a little puffed up.”

    Sir, you are being a bit disingenuous about Mr. Simmons. He is not at all a little puffed up, he takes the whole cake. Became this way after entering UWI and obtaining his BSc Accounting; know him very well. However, he does have experience running a business, being a partner in TNT Barbeque Hut.


  46. @ Baffy

    For sake of preventive embarrassment, you should know facts BEFORE uttering and publishing information. Puerto Rico, following the Spanish American War (1898) became United States territory; its residents, since 1917 are United States citizens. Puerto Rico is yet United States territory, unincorporated but still United States territory. Unincorporated, this means, the area (Puerto Rico) is controlled by the United States government but not part of the United States union of fifty states. Guam also is United States territory, unincorporated but still United States territory.

    Puerto Rico is United States property NOT Great Britain


  47. @ Baffy

    Nothing humorous about you, not anymore. . . . The joke is on who. . . . dumb jackass!!!!!


  48. Look

    You sound like a sissy and pun this blog the last thing that I is do is get in a pissing match wid de women … so ga long hear, unless you feel a need to defend two dinosaurs …


  49. @ Baffy

    Seriously, you don’t want to rumble in the jungle with this lady LOOK. I will verbally hurt you, much more than I have already.


  50. See wah I tell yah … Look is a woman … Not my concern wah ever it is that you feel you could do… Women and me is luv … not fight


  51. I found this New York Times article interesting reading,

    NEW YORK TIMES
    Economists Agree: Solutions Are Elusive

    By EDUARDO PORTER

    Published: April 23, 2013

    Last week the International Monetary Fund hosted a conference of some of the world’s top macroeconomists to assess how the most intense crisis to have shaken the industrialized economies since the Great Depression has changed the profession’s collective understanding of how the world economy works.

    http://graphics8.nytimes.com/images/2013/04/24/business/PORTER/PORTER-articleInline.jpg

    Shawn Thew/European Pressphoto Agency

    Olivier Blanchard, chief economist of the I.M.F. He said economists don’t know “what financial stability actually means.”

    Two things struck me about the conclave. The first was hearing George Akerlof, a Nobel-winning economist from Berkeley, take to the lectern to compare the crisis to a cat stuck in a tree, afraid to move.

    The second was realizing how, after five years of coping with the consequences of the disaster, there is still so much uncertainty about what policies are needed to prevent another financial shock from tipping the world economy into the abyss again a few years down the road.

    “We don’t have a sense of the final destination,” said Olivier Blanchard, chief economist of the monetary fund. “Where we end I really don’t have much of a clue.”

    In determining what is a sustainable level of government debt, or whether central banks should focus on anything other than inflation, or what should be done to prevent further bubbles from destabilizing economies, he argued “we are still very much navigating by sight.”

    If you are one of the nearly five million American workers who have been unemployed for over six months, or one of the six million Spaniards, three million Italians or 1.3 million Greeks without a job or a clear prospect of finding one, this amounts to a tragedy.

    Considering that the large and complicated financial institutions that set off the crisis five years ago have only gotten larger and more complex, the gap in knowledge is downright scary.

    It is scarier to consider how politicians have chosen to ignore much of what the profession has learned from the experience.

    Berkeley’s David Romer counted six shocks that hit the United States in the last three decades alone. The economy dodged the bullet in two — the Latin American debt crisis of the 1980s and the Russian default in the 1990s, which led to the bailout of a hedge fund, Long-Term Capital Management.

    It took a hit in three — the collapse of much of the savings and loan industry in the late 1980s, the 1987 stock market crash and the dot.com implosion. But it got hammered in the last one.

    Economists used to think it was obvious how to contain such shocks. No point trying to stop a bubble from inflating, they thought; it would be impossible to identify in the first place. The best a central bank like the Federal Reserve could do is stand ready to cut interest rates after the bubble burst, patch up the financial system and set the economy back on track. In terms of budgets, governments should aim for a prudent level of debt to retain space to borrow and spend when it was needed.

    Now, interest rates have been near zero for years, and growth has not been restored to acceptable levels. And few if any of the economists gathered at the International Monetary Fund’s headquarters in Washington would venture a guess about what level of debt would be prudent these days.

    On the eve of the financial crisis, Spain’s net debt was just over 25 percent of its economic output. The ratio of net debt to gross domestic product in Ireland hovered around 11 percent. Martin Wolf, chief economic commentator of The Financial Times, said that Britain’s debt ratio was close to a 300-year low, way below its level during the Industrial Revolution.

    It wasn’t low enough, apparently. Five years later, Ireland’s bailout of its banks took its net debt to 102 percent of its economic output. Spain’s debt hit 80 percent of G.D.P. And Britain’s reached 86 percent — the highest since the 1960s.

    This is of enormous consequence. One lesson from the crisis — first learned in the 1930s and corroborated in several contemporary analyses — is that when interest rates lose their power to stimulate the economy, additional government spending can help generate real growth. Still, the fear of “excessive” debt has led many governments to cut spending even in the face of economic stagnation.

    Countries like Ireland and Spain have pretty much lost their ability to raise money in financial markets. They are now struggling to reduce debt with little success: cutting public spending in the midst of severe downturns only makes economic performance worse, adding to the debt burden.

    Yet even in Britain or the United States, which can still borrow at near-record-low interest rates, governments have taken to cutting public spending at the expense of growth and jobs.

    Perhaps this is natural. After all, the crisis upended a consensus. Economists and policy makers bred to think that all that was needed to run a prosperous economy was to keep inflation low, strive for fiscal balance and deregulate have found themselves in a more complex world. In this world, financial bubbles matter, capital flows are of dubious merit, low interest rates fail to stimulate growth and government spending becomes the only tool with real traction to spur economic activity.

    And there is reason to be cautious. With total government debt in the rich world stuck at around 100 percent of its combined economic output, there is a legitimate fear that a rise in interest rates could tip off a financial death spiral. Moreover, if countries with debt levels well under 50 percent of G.D.P. were so devastated by the crisis, it is hard to imagine what might happen to them if another were to hit them.

    Still, the argument against debt is often overstated. Disagreement and uncertainty among economists have given the political systems in Europe and the United States ample license to engage in austerity policies that frankly are proving counterproductive — making recovery more difficult and painful.

    In his assessment at the end of the conference, Mr. Akerlof argued that the response in the United States had been reasonable. From the bank bailout to the fiscal stimulus to zero short-term interest rates, “the economic policies postrecovery have been close to what a good, sensible economist doctor would have ordered” for the stranded cat.

    But other economists were not quite as sanguine. Indeed, one take-away from the economic conclave is that it may be a fantasy to think that the world’s economies can be steeled to withstand a shock like those the financial system can provide. If so, the urgent task is what kind of limits should be imposed on banking and the rest of finance to temper its propensity to careen toward disaster.

    Financial regulation is being tightened around the world. Banks are being required to raise more capital than before. Bigger banks face tougher rules. Still, there is no consensus on which new institutions might be needed to monitor and temper finance, or how tough the rules should be.

    What good does the modern financial system do, for the rest of us? What determines financial fluctuations and shocks? How do they affect the broader economy? What can governments do to make them less disruptive? Economists have few answers.

    “We don’t have a clue of what financial stability actually means,” Mr. Blanchard confessed.

    Mr. Romer said, “Five years into a crisis of this magnitude, we should be, ‘Oh my God, the cat has been in the tree for five years, it’s time to get the cat down out of the tree and figure out how to make sure the cat doesn’t go up the tree again.’”

    E-mail: eporter@nytimes.com;

    Twitter: @portereduardo


    • @Observer

      It appears from the article you posted the government of Barbados is in deep doo doo and by extension Barbadians. If we read his position correctly he is saying that if reduced interest rates is not acting as a stimulant to the economy the way it has in the past then we have to spend to stimulate economic activity. The problem we have is that we have been fixated on guarding forex which is important BUT as important is not allowing the economy to stall. As Bush Tea would say ‘we goose seems to be cooked’.


  52. Bushy…………………….you have some explaining to do about the ILO debacle now exploding………….i thought you told me they were a fly by night operation with no teeth, well that world wide body with no teeth are about to put the bite on the government of Barbados.

    Observe………………..i like the cat stuck in the tree that can’t move description, that cat may be stuck up there for another 50 years, having outlived all it’s nine lives while there before dying, is there anyway you can get this current administration to read this article, as i said those boys do not keep up on foreign news.


  53. And local economists (soothsayers) will have us believe they know what the hell they are doing, and what will happen in the future………….they must be psychic hotlines.


  54. As a member of the public following these issues in the local and international media I have concluded that Barbados and the western world are in uncharted waters in terms of economic policy and answers are elusive. The much maligned Central Bank governor seems willing to use his brain, think through issues and articulate a view based on his own thinking.

    Now from where i sit how do things look.

    What are your key macroeconomic performance indicators again:

    From listening and reading I think they are:

    Growth In real GDP;
    Employment;
    Debt to GDP and Fiscal deficit to GDP;
    The state of the currency;

    1. As I understand the current Central Bank governor, the state of the currency as measured by the foreign exchange reserves is the most important measure in BIM.

    Dr. Worrell seems to have been arguing that in the weak global economic environment and the structure of the barbados economy, growth in real gdp that is compatible with maintaining adequate reserves is challenging at best. Mr. Arthur , Mr. Mascoll, Mr. Hoyos and others seem to differ and appear to be suggesting that we can find growth from domestic sources and still maintain adequate reserves. For me, the burden of proof lies with Mr. Arthur, Mr. Mascoll and Mr. Hoyos on this one. The trend in the reserves is a downward one so i am with the guy who says be careful with the reserves.

    2. The government remains committed to maintaining levels of employment and social services. As I understand it weak growth has impacted revenues and that combined with maintaining employment and social services has led to higher deficits and an increase in debt levels. Mr. Mascoll, Mr. Hoyos, Mr. Straughn and a number of others have been calling for an urgent if not immediate program to reduce the deficits. I may be wrong but Mr. Mascoll seems to be calling for more of a switch in spending from the current to capital account rather than a reduction in spending per se. The government and the Central bank leadership seem to be arguing that if you have enough reserves, if foreign exchange led growth is unlikely and the commercial banks and the NIS have adequate liquidity, there is no need for a crash austerity program such as 1991, due to the likely negative impact on growth and social stability.

    To my simple mind they seem to be saying that in the current global economic environment fixing the deficit in the near term may lead to the mother of all recessions because there is unlikely to be adequate private spend to replace the reduction in government expenditure. This in turn could actually lead to lower revenues and bigger deficits as seems to have been the experience in the UK, Spain and Greece for example.

    For me this is a tough one, there seem to be some complex tradeoffs involved, but I think its unfair to paint the CBB as a political tool because there is a strong economic case against austerity and rapid budget balancing in a weak economy. its not clear to me that the deficit hawks are outlining the tradeoffs at all.


  55. @Observer

    That is some heady analysis there BUT we always come back to the unsettling question – how long can government sustain current strategy given the current trajectory.


  56. David, stimulus spending will increase the deficit and debt in the near to medium term. Also the amount you can spend as a government is determined by how much financing you can raise. The local consensus seems to be that we must balance the budget now. My previous post was way too long but my simple mind is trying to say that I find that the tradeoffs are absent from the arguments locally.

    What I take from the NY Times article is that we are in uncharted waters and old rules may not apply. The Credit rating Agencies and the financial institutions that use ratings as god given guidelines have effectively forced many governments into austerity programs. We got downgraded because we did not cut expenditure fast enough and we could not grow fast enough in this weak global environment. As a result of the downgrade the lack of access to financing or higher cost of it could force us to cut expenditure even more and grow even slower.

    Dr. Worrell seems to be saying to us lets think for ourselves and not be bound by rules and guidelines for a normal economic environment. He may be wrong on a number of things but at least he is thinking.


  57. The underground economy is thriving, many trades people are working. I have been trying to get someone to repair a gutter and do some carpentry and several of them are busy. The recession is hitting the retailers, my suggestion is to those clerks and sales associates is to get a skill. Plumbers, electricians, masons carpenters are in demand as well as agricultural workers and gardeners. Survival is for the skilled and the fittest.


  58. David boy when the wicket bad sometimes all you can do is occupy the crease and eke out some ugly runs.


  59. but Islandgal the Elites screamed bloody hell and continue to scream as the government tries to build a case for scaling back the spend on university education and a shift to the polytechnic and bcc.

    read the 2012 budget


  60. Islandgal what I would like to see is some of the artisans link up with the uwi graduates and take the services they offer to a higher level.


  61. a 24 hour plumbing and other services with an online infrastructure, payments being made online or via cell phones maybe too much to dream of


  62. @Observer

    Maybe so but there must still be a sound tactical plan even on a bad wicket with all the playings doing their damnest to execute.

    Has government been exercising optimal fiscal discipline?

    Has the leadership from public and private sector synchronised on the plan which we need to execute to go the full five days?

    Is there the opportunity to execute transformational strategies even in these conditions ie. Match winning innings. Bad wicket or not we have to play to win.


  63. David, to me the answer is clearly no. Large parts of the society are wedded to their current business models and practices, and have not even begun to envisage a new normal. The various interest groups are dug in and are defending their traditional interests.

    Lets see the response to the revised strategy and the budget.


  64. Dr. Worrel, Mr. Sinckler and Mr. Inniss are showing leadership, the push back from the elites and interest groups is most interesting to watch.

    The private sector leadership seems fixated on stimulus and deficit reduction. Not sure both are compatible in the medium term.

    Lots of properties are on the market for sale, but offer prices still seem high, how will the market clear at these prices? Maybe a change of government or some policy initiative will bring back the building boom.

    These are complex and unpleasant tradeoffs and the administration itself may be quite divided on the way forward, while the opposition is not articulating a clear position either. If we take the lead from their chief economic spokesperson and switch to capital spending do we build highways to nowhere like Japan did. will the banking sector locked into investment guidelines based on credit ratings offer the financing? If we go full austerity as per Mr. Straughn what is the channel for private led growth to replace the lost public spend?


  65. In this scenario leadership as a KPI can only be measured if government gets buyin from the private sector. It is not leadership because you or the next person opines. In the final analysis the Prime Minister must exude the leadership to which we speak.


  66. We are up the creek, what sources of paddling do we have:

    1. Adequate reserves (don’t lose that);
    2. Surpluses in the banking sector and NIS (how are these best utlized):
    3. A good brand name in the high end tourism, hospitality and real estate market (how do we leverage: Four seasons maybe, support apes hill, almond restart, energy efficiency drive in sector)
    4. Good name in international business (improved business facilitation)

    what sources of paddling do we need to develop:
    1. means testing for some social services;
    2. Revamping and/or elimination of statutory bodies
    3. Reduce energy costs across the economy;

    maybe some statutory corporations should be brought back into the civil service where their spending can be better monitored or be foreced to operate with a maximum subsidy which could for e them to be more commercial in orientation.

    None of this is even nearly easy to do


  67. the government deserves it share of the blame, but I think we miss the point that in an economy and democracy like ours institutions and organizations outside the state are major actors. I think we have focused so much on government and not asked enough questions of the other key actors.

    For example, companies and organizations have a hard time changing and adjusting to new environments. take LIME for example, the change will have to come from FLOW. has the private sector really come under scrutiny?


  68. @Observer

    The government needs to do a better job bring partners together in the national interest. While you have focussed on economic/monetary issues there is the justice and law and order systems which must be managed in parallel. It is a bad situation which demand that leaders must lead.


  69. @ David
    The very FIRST thing that we need to do is identify what SUCCESS looks like. We will never make any progress when everyone have a completely different and often diametrically opposite idea of where we want to be.

    THAT is the first leadership step, and it calls for VISION.. (Without which we all will perish).

    Some want nuff FOREX
    Others want growth
    Others looking for austerity
    Some just want money (stimulus)
    Bushie want Islandgal…
    ..and a lot don’t even know what they want

    No wonder we are going nowhere. SOMEONE needs to lead the discussion of what we REALLY want and then perhaps we could move on to how we can possibly get there.


  70. Observer | May 1, 2013 at 10:53 AM |

    “Islandgal what I would like to see is some of the artisans link up with the uwi graduates and take the services they offer to a higher level.”

    I totally agree and have been saying this for many years. We need UWI to get real and offer these people courses that will help this country. Many colleges and universities offer degree courses in Furniture design, Electrical installation, plumbing and fixtures installation. Check out what the University of Trinidad and Tobago is offering. What is presently being offered are basic courses and that is why there is so much mediocre being done. Tradesmen need to further their training. The problem is the mindset is that when you have a degree you can charge exorbitant prices.


  71. Islandgal………………..very sound advice, when one sector of the economy is mired in recession it opens doors for other sectors to prosper………..skills training is paramount and recession proof.


  72. Young people are not putting up with the old mentalities and the crap anymore…………the world has changed, and people’s needs have changed, someone needs to pass on that info to Caribbean leaders.

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