Introduction:
Once more the government has promised to announce plans for the nation’s great economic escape then on the day of reckoning it all came to nothing. Tuesday was a political and economic blow out. But by now this should not be a surprise. Barbados is a nation living on its collective memory, of time when it was great nation, when a simple 166 sq mile island was highly valued throughout the world.
However, times have moved on and, sadly, our political masters have not; they have left us drifting without a moral compass. After years in crisis, the government and its advisers are still like a ship at sea without a captain; our prime minister continues to remain silent, while loudmouths like Donville Inniss continue to hog the public space. And, worst of all, prime minister Stuart continues to show a loyalty to the gross incompetence of Chris Sinckler which boggles the mind.
By now it is obvious, even to Mr Sinckler himself, that he has been promoted beyond his competence; he is out of his league and leaning on a former professor who has lost touch with modern economics only goes to expose his ignorance even more. Tuesday’s circus in parliament was only the latest of this merry go round, of blister and bluff and gross incompetence. What had begun as an unfortunate but manageable economic crisis has, through inertia and ignorance, grown in to a massive meltdown that not only threatens intergenerational relations, but will continue to stagnate for decades.
Programme for Chance:
By now any government, even this one, would have had a programme for change in place, even if it could not implement all its plans. Had the DLP government acted within days of its first election the problem would have been reduced to manageable proportions within two to three years and the economy would have been a good place now. Even if it had acted positively since the recent general election at least they would have had the benefit of the doubt.
This delay, however, is a manifestation of its collective policy inertia, of an ability to think through, far less put in place, policies to resolve the nation’s economic problems. By now, ideally, government should have prioritised youth employment, making all entry-level public sector non-specialist jobs part-time and targeted at 16-25 year olds. Further, it should have incentivised the private sector to offer new jobs to the same cohort, provided they were not related to the business owners, and back this up with a programme of training and further education. It should have raised the school leaving age to 18, and in the process reduced the age of majority to 16, shifted the focus of state-funded education to the pre-school and five-to 16 year olds. At the same time it should have upgraded entry level teaching recruits, compel all teachers aged under 44 to improve on their qualifications and expand the life-long learning sector along with new ways of delivering education, from classroom to the internet.
Instead of tackling the problem of youth unemployment, government chose to listen to former economists who had learned nothing from the global crisis, both in terms of theoretical understanding of macro-economics or in terms of policy-making. One terrible part of this economic ignorance that passed for advice was that the government/central bank should not introduce a policy of monetary stimulus. In fact, government should have embarked on a strategic and prudent money-printing programme, to fund infrastructural developments which would not only provide jobs, but would have benefited the nation enormously once the recession was over. The threats from money printing were mainly inflationary and this could be managed through tight controls of banks’ capital liquidity through putting the breaks on consumer loans and compelling the banks to lodge higher deposits with the central bank, the lender of last resort.
After nearly 20 years of inflation targeting the management of inflation should be the one skill that the central bank has. There are also other ways of controlling inflation, including putting restrictions on the rampant consumer credit that is infecting the nation, such as cheap loans from Canadian-owned banks to buy expensive cars and have them polished. In all this the central bank and ministry of finance have remained silent, when in reality they should have acted immediately to impose restriction on such irresponsible lending.
Further, tougher controls on capital ratios and capital adequacy would have been most appropriate, given that the Basel 111 proposals only stipulate minimum reserves. It is economic lunacy to stockpile nearly Bds$1bn, pessimistically expecting some external shock to hit the economy plunging the nation in to an even deeper crisis. Such a fanciful expectation is not based on rational historical data; in fact, actuarially such an event takes place once every 200 years. Of course, this does not mean that there should be no sound planning; but this should be based on reasonable assumptions.
Government should have used half the foreign reserves to fund infrastructure and use half the remaining reserves (bds$250m) in the derivatives markets while keeping the other Bds$250m as reserves. The government should also encourage the national insurance scheme to upgrade its investment strategy in line with national development, including investments in food security and funding small and medium enterprises.
Government should also use planning legislation to extract trade-offs from big developers, either true demanding that 20 per cent of all big hotels and property developments be allocated to social housing, or, conversely, that the value of the 20 per cent be handed over to the NHC to fund social housing. Smaller developments, such as supermarkets, should be encouraged to fund the building of youth and social clubs for villages and small towns.
Infrastructure Developments:
At the very core of the dash for greater tourism should be a broader leisure and tourism policy. This could be achieved by asking simple question: what is the demography of our target market? What are their interests, once out of the water? It is generally agreed that we are looking for the high net-worth client, mainly from the UK and the rest of Europe, but also from North America, in particular Canada. So with a mature clientele, our offerings must go beyond ragga music and the vulgarity of much of what passes for popular music. Older tourists like to know the history of the place they are visiting, so a historical walking tour with trained guides, will appeal: heritage sites, with the guide explaining why they are of interest; Oistins, and explaining why it is not just the Friday night free party, but a long history in the middle 17th century with the Cromwell and the Commonwealth, and how this contributed to early American democracy. There could also be a train line tour, with a proper explanation of the rise and fall of the Barbadian train companies. The list is endless and there is no shortage of local experts. Government should also have given serious consideration to the construction of a fun fair bridging Ragged Point and Culpepper Island, rather than allow an Irish-Canadian to turn that prized area in to more luxury homes for wealthy foreigners. The BLP/DLP governments (they are both culpable) should have stepped and compulsorily purchased the land in the name of the national interest. And, to top that, I would like to see a monorail running east from the airport to Codrington College in the first phase, stopping off at the Ragged Point funfair.
Analysis and Conclusion:
The economic crisis in Barbados is worsened everyday by the decoupling of real wages and rising price inflation from the easy availability of cheap debt. Ordinary households are trapped in a well of debt and instead of sending them a rope to help them out, we are piling on more weight to keep them down. And, in desperation, they are grabbing at the very straws that will eventually bury them. With a payroll of over 30,000, productivity in the public sector is very hard to measure and with a bullish trade union sector, headed by the BWU and NUPW, and the moribund Social Partnership, industrial relations with civil service unions are often a Faustian deal. These are the deep structural barriers top economic recovery, which government is doing its best to avoid. Any reforming government must sort out the trade unions; the reasons for their creations both sides of the Second World War are not the same now. Society has moved on and the interest of the nation have superseded those of any small sector, whoever they are. Any ethical government must sort out those big businesses that avoid their fair share of taxation and wider social responsibility. This policy and administrative incompetence and conservatism is a recent development.
In the decade from 1954 to 1964, the Adams BLP and Barrow DLP introduced some of the most radical policies in any post-war democracy.
Apart from the introduction of universal suffrage, Adams built St Margarets’ School, the Parkinson, St Joseph; he built the QE Hospital, Grazettes and the Pine Housing areas to clear some of the city slums; most spectacularly, he built the Deep Water Harbour, transforming trade in Barbados, within a year of the invention of container shipping. Yet, for all this, Grantley Adams is the single most ignored of our national leaders, the man who changed our social history. For those young people masquerading under the DLP banner, the 1961 Barrow Administration moved with a monetary stimulus programme that remains as fresh as day light in my memory, even if some have turned out to be less interesting than they seemed. He filled in the Careenage and got rid of the lighters that transported sugar out to the ships in Carlisle Bay and returned with other groceries; he made radical changes to education, expanded the public sector, turned tourism in to a significant industry. Barrow introduced CBC (a much better broadcaster in those days than it is now), and much more. One thing Grantley Adams and Barrow had in common was that they did not fear big capital projects. Our modern politicians do, they are terrified of anything that is not a hotel.
Finally, the economic crisis was a good opportunity to fine-tune our model of democracy and governance, by reducing the age of majority, introducing a recall of members of parliament in certain cases, an annual declaration of assets by all elected officials, government departments to publish annual reports, decentralisation of power and authority, in particular for head teachers. The senate is crying out for reform, transforming it from an institution which simply rubber stamps government business in to a proper revising chamber made-up of a good proportion of experienced people with the knowledge to challenge government proposals. This is a government that is comatose, caught napping on the job. While they prevaricate the nation is declining.
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