Introduction:
We are all agreed that the economic arguments which have engulfed Barbados for the last six years have now been fully exhausted and most people have taken sides. Those who believe that the government is on the right track are firm in their belief, and those of us, the vast majority, who believe that the government has no clear strategy for rescuing the economy are convinced we are right. But there is also another gap in our national conversation, and that in many ways is even more fundamental than the short-term one about the current account deficit or, in many ways, the debt to GDP ratio. To my mind, what is dangerously lacking is a vision: how we see ourselves in a fast-moving globalising world which, paradoxically, is also at the same time witnessing the growth of a countervailing inward-looking nationalism. Future
Vision:
One of the huge failures of this national conversation are our academics at Cave Hill whose role it is to explain the nation to itself. It is almost embarrassing to witness their silence, or for the brave ones who do speak, the clipped, short, one sentence outbursts that, in real terms, mean very little. Apart from ‘Professor’ Frank Alleyne, whose views on modern economics to my mind are totally irrelevant, all we are getting are statements, such as that the Barbados dollar should not be devalued. But the advocates of this position are not saying why it should not be devalued or what benefits the nation gets from continuing to peg to the Greenback, despite the global currency volatility. Sadly, the journalists whose job it is to interrogate these people are intellectually ill-equipped to do so, or are intimidated by the reputations of these economic conservatives. However, even economic professors can be wrong, and the great defenders of the Bajan/Greenback peg in the current economic climate are dead wrong. I shall return to this argument in the near future.
More immediately, the DLP government, under the uninspiring Freundel Stuart, has denied young Barbadians the right to have confidence in the future of our island home. Most of these young people, in whose hands the future of the nation lies, no doubt see their future, or at least their grand career opportunities, in some far away land, either North America or Europe, even if it is only doing unskilled work in Canada. Those lucky enough to be in jobs do not see these as having any security, they fear they could be sacked, denied promotion, or in so many ways treated unfavourably, than their colleagues if their line managers do not like them. Whether real or imagined, this lack of confidence is deeply damaging to the welfare of the nation. Despite these short-term problems, the real long-term damage to the nation’s collective prospects is a lack of vision, of framing the kind of society we would like to be in 25, 30 or 50 years’ time. This lack of vision is embedded in our political and intellectual culture, one that flatters to deceive: overstating the survivability of Barbados in a robust, uncompromising and rugged world, an intellectually inward-looking culture that discourages exploring new ideas and ways of doing things, one that falls back on the comfort of taxpayers’ paying the bills and has no real interest in the national financial architecture and a political culture that was caught on the hop when the world moved forward in the 1980s. Even the so-called big businesses are nearly all mainly dependent on the state for contracts and special favours.
Whether it is building roads, the construction of badly designed and land-wasting homes, homes, loan guarantees or special dispensations or state-funded tourism marketing, Barbados is a nation of people dependent on the state. It is a political culture that sees its policy-making illiteracy almost as a badge of honour. It is a political culture that lacks curiosity, that has no interest whatsoever in how other nations, of similar size and demographics, get along with their social and public policy-making. The real damaging feature of our national failure is that of the public intellectuals and academics who have failed to structure a proper framework for national debate. The end result is that we have drifted almost unconsciously in to a ‘big man’ politics, in which it was wrongly assumed that the big man, whether Tom Adams or Errol Barrow, was perfect and ordinary minions had to be socially and intellectually to them. One outcome was the imperceptible administrative coup in which suited men and women with their superfluous professional qualifications have grabbed the reins of state since constitutional independence, no matter which party is in control. It is power without purpose for which we are now paying a high price for that moment of democratic inertia.
Retail Bank:
Despite the evidence in the world’s biggest economies and the collective ideas of the brightest and best economists, even if we dismiss them as bourgeois, the brute fact is that all the developed economies in their own way are doing things to rebalance their economies. In Barbados, the collective wisdom of the ministry of finance, the central bank and Cave Hill, have all failed to even reach a consensus on which direction we should be going. What we do know is that our debt-ridden economy is flat-lining at best and in deep recession at worst. But all debt is not bad, it can be used to fund projects for future growth, such as infrastructural or housing investments.
We also know, Economics 101, that banks plays a central part in the creation of money and banks are at the very heart of financial intermediation. Basically, if a bank lends a customer $1000, the bank credits the borrower’s deposit account with that ‘money’, allowing the bank to hold an asset (the loan) and a liability (the deposit). Until you draw on that loan, the bank does not need to fund it in real terms until the customer draws down on it. That money is then used by the borrower to buy commodities and the lending bank uses that loan as collateral to borrow on the interbank bank system or though the central bank. Multiply this numerous times and you get the picture of how banks create money, minus what they hold on to as their proportion for capital adequacy provisions. Had local banks (even if still trying to reduce their balance sheets) had been lending to small businesses the biggest creators of jobs in the Western world, the economy most probably would have been in a different state. If nothing else, this is the powerful case for the creation of a local credit union/post office/trade union bank combined with a strategically structured quantitative easing programme. However, what we have seen in the developed economies was the public sector printing money through quantitative easing (in the US up to $470bn, in the UK£375bn) which the Federal Reserve is now tapering at about $10bn every six weeks and the Bank of England is threatening to reverse. The key in using central bank debt is that the returns cover the cost of the debt, which can be used for consumption in recessionary times, to buy existing assets such as property. Government has the option of defaulting, which nations such as Grenada, Antigua and Argentina have done in the past, inflate its debt away, and after 20 years of inflation targeting and the Great Moderation, we have the tools for managing inflation, or simply grow out of debt. To kick-start the economy, banks must start lending and the foreign-owned banks in Barbados are not lending small and medium enterprises, even though some like RBC are willing, rather irresponsibly in my view, to lend for needless consumer consumption.
Analysis and Conclusion:
It is still not clear why this generation of politicians want political power. In most cultures people aspire to be politicians because they have a vision of the kind of society they will like to see, the policies they will like to see introduced, but our politicians just seem to want power and prestige. As has been said before, the Barbados has consistently underperformed the global and regional economies. Further, our problems are nothing to do with the business or economic cycles, but rather are deeply structural. Until we face this truth, whatever we do will just be playing around at the edges. A central part of our economic failure is that most of the people joining the debate are academic economists, whereas economic policy is a sub-discipline they are not often involved in or familiar with. It is one of the advantages of US politics, in that a new president brings in a new team of policymakers, from the Council of Economic Advisers, to the Treasury and often even the Federal Reserve. So, in theory at least, the President is surrounded by some of the most brilliant economic brains in the nation, even if their views conflict. We do not have such a system, not because of the flawed but popular belief that we inherited the Westminster/Whitehall model of government, but because of the backward-looking obsession with party affiliation. In any market-driven capitalist society, no matter how compassionate, there will be winners and losers. It is the role of politics, however, to minimise the number of losers and make their inability to climb the ladder of prosperity that much easier.
This is the vision in most post-colonial societies, not to kick the ladder down once the professional middle class has climbed from the bottom, but to extend a helping hand to help those left behind. Nothing about contemporary Barbados suggests this is a mission shared by others; there is a noticeable lack of a social gospel in the church, no matter which denomination, the political parties are scroungers (just look at their refusal to even take a pay cut as a sign of empathy with those at the bottom), the business class is wringing every last penny from the public by over-charging for low-quality goods, and the state is enforcing even more draconian measure to control the people. What is true is that the general public is disenchanted with the ineptitude of our politicians and senior civil servants. People want to hear how they plan to lead the nation out of this abyss, yet all they are getting is meaningless political rhetoric, economic illiteracy and moral vacuity. This is the poverty of ideas, the lack of vision, of which the economy is but a small part. And it shows, even in this august forum, with people regularly throwing their toys out of the pram if anyone dare’s to object to what they are saying.
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