Thursday, March 28, 2024

WHAT MATTERS MOST: Where there’s no vision . . .

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The current severe fiscal crisis that became evident in the latter half of 2009 is responsible for the uncharacteristically long wait for a return to growth in the Barbados economy.  
Evidence shows that sustained periods of economic growth are associated with relative fiscal prudence in which the Government is able to pay its current expenditure bills and execute capital works programmes.
The lesson of Jamaica is very instructive. From a purely economic perspective, failure to adopt a posture of fiscal prudence is the single most important reason why growth has averaged less than 0.5 per cent per annum in the Jamaican economy over the last 40 years.
Notwithstanding its ability to attract private foreign investment, second only to Trinidad and Tobago in CARICOM, the absence of a meaningful public sector investment programme failed to create a platform for economic growth.     
There are several other lessons of Jamaica that are real and relevant for Barbados at this time. Unfortunately for the latter, not only has economic growth been elusive but the recession has been much deeper than the current official data suggest. This new reality that has to be made public some time confirms the concerns of several analysts over the years. But it is always difficult to prosecute a man or an institution when he/it is the one producing the facts.
Since it has always been important to be responsible in my analysis, it is fitting that the authorities be given the opportunity to speak to the issue of real economic growth in Barbados and level with the people on how it has been measured in the past and what the new numbers are revealing.   
The entire post-2008 period has been one of consternation. Some public commentators seemed prepared to judge analysis not on merit but on emotion. They took advantage of one’s political affiliation to suggest bias without reference to the fundamentals in the arguments. The country therefore suffered.
Fortunately, truth tends to triumph over lies, but when it happens it can sometimes take too long. This is precisely what has characterised analysis of the economic landscape in recent times. Rather than see the message, it was easier to identify the messenger.
There is no doubt that the Barbados economy will realise economic growth next year. But this must not be interpreted as economic recovery, even though it will be spun as such when it occurs. It will however take several years for the economy to return to its 2007 size.
In this regard, the catalyst has to be investment which must come from both the private and public sectors. The question is how to achieve this without worsening the fiscal deficit and the national debt. The answer is in setting targets for the only true policy variable that is the national debt. Once the initial target is set, then the next big decision is switching from current expenditure to capital expenditure.
Along with the increase in Government revenue that will result from economic growth, the Government has to sensibly reduce current expenditure to reduce the size of the elephant in the room. Creating the elephant that is the current account fiscal deficit was the greatest economic injustice done to this country in the post-Independence period.
Fancy talk about improving labour productivity, enhancing the business climate and establishing symbols of excellence – things that are not easy to quantify – will mean nothing if the fiscal crisis is not effectively tackled. It is now six years that the Government has been talking about fiscal adjustment without successfully implementing corrective policies.
As of this month, the Government is encouraging in “achieving top dollar on sales of property on our small island” to foreign investors as in our best interests. This view was espoused by the Governor of the Central Bank in his new-found way of communicating monthly to the private sector. This is a possible replacement for his meeting with the Press on the economic review for the country.
It must be understood that once the tourist winter season comes to an end in May, the economy slows down. This is accompanied by an expected seasonal rise in the unemployment rate as thousands of school leavers come into the job market in the following months.
The Government’s decision on University of the West Indies tuition will increase the unemployment rate, since as student enrollment falls, the labour force will rise.
In time, where there is no vision, the people perish.
• Dr Clyde Mascoll is an economist and Opposition Barbados Labour Party adviser on the economy.

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