THERE ARE several alternative policies for the Barbados economy, based on which of the following objectives to emphasize: (1) growing the economy; (2) lowering the fiscal deficit and debt; (3) creating employment in the private sector; (4) controlling inflation and (5) protecting the foreign reserves.
The process of emphasizing the objectives must fit within a public policy framework that has (a) clarity of purpose; (2) certainty of incidence; (3) consistency with the broader development goals; and (4) cost-effectiveness. No one is suggesting that rescuing Barbados from the current turmoil, caused predominantly by poor domestic policy choices, is going to be easy, but for the Governor of the Central Bank to say that there is no alternative policy is simply rubbish.
Furthermore, for the Minister of Finance Chris Sinckler to say that it will take ten years to turn around the economy is an acceptance of failure that is conditioned by the pursuit of mediocrity.
Some commentators have been using this brand of ignorance to suggest that no one has any solutions for Barbados’ current economic ills. Yet the notion that we understand the problems is not rejected. There is nothing cancerous about the economy that warrants throwing our hands in the air. Such an approach is silly because it seeks only to find an escape route that lays no blame on the Government.
The combination of the policy objectives and the public policy framework must be set within time zones that the economists refer to as short term, medium term and long term. The short term is one month to a year; the medium term is two to five years and the long term is over five years. There is a deliberate gap between the first two categories to accommodate any change that is necessary.
The first objective is to return the economy to a sustainable growth path. The greatest threat to this objective is for us not to earn foreign exchange. And the greatest weakness is to believe that the country has no alternative policy.
In the short term, tax relief has to be given to households to boost spending. This may cause an initial worsening of the fiscal deficit. While doing so, the Government has to immediately put in place a programme to partially privatize entities like the Barbados National Oil Company to get a windfall of revenue to have some fiscal space. The programme must take between a year and two years, no more than that.
In the medium term, a programme for achieving greater efficiencies from Government spending is a must and must fit the mantra “to whom much is given, much is expected”. Equally important is the need to incentivize the provision of some social services such as health care and education for that segment of population that can afford it. The poor must always be taken care of!
In the long term, there has to be a more concerted attempt to restructure the economy. In the past, insufficient emphasis was placed on getting certain prices in the economy right to allow for more allocation of our resources by the decision making of the private sector.
This approach requires the price of money to be changed through some reforms in the financial system; the pricing of energy to reflect better public policy; and greater participation of a wide cross section of Barbadians in the energy sector.
In understanding the need to effect changes to the pricing of fundamental resources in the financial and energy sectors especially, the Government is on its way to exercising some control over domestic prices.
Once these two very important pricing mechanisms are attended to, there are other public policy initiatives to pursue for sustainable economic growth relating to land, technology and labour. Given the available foreign reserves, it is time for growth.
• Clyde Mascoll is an economist and Opposition Barbados Labour Party spokesman on the economy. Email clydemascoll@gmail.com.
