Notes From a Native Son – Imposing Prices and Incomes Controls as a Fiscal Tool

Hal Austin

Barbadians are feasting in the last chance saloon on a bloated Titanic, too inebriated with massive debt and an artificial ‘developed’ lifestyle to notice the vessel is fatally holed. As Martin Weale, a member of the Bank of England Monetary Policy Committee, has said, it is deleveraging now or passing on a punitive debt to future generations. But, as yet, it does not seem as if policymakers are even aware of the extent of the Barbadian problem; no one is prepared to tell the emperor he is naked.

It is quite clear to anyone with a searching eye that Barbadian consumers are having a tough time. Prices are going up by leaps and bounds, private employers are resisting any calls for increases in wages and are in fact making people redundant. In fact as they make more and more people redundant, government is hopelessly trying to bridge that gap by giving pay rises to the public sector, which, in the long term, is socially divisive.

There is not the slightest sign of any fiscal discipline, and it is not clear what monetary responsibilities, apart from holding on to ‘returnees’ pensions for an extra week and being cheer-leader in chief for the almost religious, but misleading, dogma of foreign reserves. In the meantime, a number of professional and academic economists and policymakers are giving intellectual cover to the government by trying, vainly, to explain away the incredibly high inflation as just imported food and energy prices which will ‘pass through’. The theory is right, but the reality is totally different. Commodity prices can in fact pass through and have very little medium-term impact on real inflation.

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