Barbados, Slave to Debt
A report in the local press yesterday piqued the curiosity. It detailed former Minister of Finance Chris Sinckler will be working with the region, including Barbados “with the reform of the international debt architecture and issues surrounding vulnerability of small states”. His involvement is as a result of an engagement with former employer Caribbean Policy Development Centre, where he was Executive Coordinator before serving in the Thompson and Stuart administrations.
A quote attributed to Sinckler – “It is critical to see how Barbados and the Caribbean can access money and develop finance on a concessional basis”.
The news item does not interest the blogmaster because Sinckler presided over a very challenging economic period as Minister of Finance and was the face of economic policy in the former administration. His appointment reminded the blogmaster how we have become slaves to debt at the level of the individual and government, technically one and the same.
There is the text book definition what is good and bad debt, we get it. Committing to a debt which helps to develop the individual to be marketable, grow and protect earning capacity, we get it. At the government level, to borrow within serviceable limits to create opportunities for citizens to enjoy quality living, we get it. Notwithstanding the foregoing it has become obvious accumulating debt is the preferred option above revenue generation in the prevailing culture of managing our affairs. According to the 2019 Financial Stability Report household debt increased by over 200% between 1999 to 2019. In the same period government’s struggled to manage the debt to GDP increased from 60% to close to 160% has been copiously documented.
It is fair to draw a conclusion the majority of households are carrying significant debt- acerbated by a deep haircut by the government in 2018 on some domestic debt compounded by the 18 month pandemic. It is also fair to describe Barbados’ economy as trapped in a vicious debt cycle given its highly leveraged state. The correlation between rising household and government debt must not be ignored. Accumulating debt has become a ‘fashionable’ first option by individuals and government alike.
In a world where debt financing is the preferred option, financial institutions as the owners of burgeoning individual and government debt have grown in importance. Something has got to give. The conspicuous consumption model to which Americans and others in the West have become addicted will not work for Barbados. We simply have no sustainable export earning options available in the short to medium term. Our problem is the exponential debt accumulated in the last 20 years has broken the back of the camel. We have sown the wind and it is time to reap the whirlwind.
As a people we have to demand better from our policymakers. Tired narratives and warm over policies must be unequivocally rejected. As individuals the time has come and gone to take ownership of home affairs by making smart decisions. Getting fat from debt financing is not the recommended way. Unfortunately if we are unable to correct, it will be done for us. In fact it has already started.
The government is you, you are the government.