WHAT MATTERS MOST: Issues at last!
Just three years after the last general election in which the major issues were salacious and filled with invective and innuendo, and had nothing to do with the management of the economy or the advancement of the Barbadian society, there is now a heartening call to discuss serious issues in the political arena. This call is fascinating in both its timing and its importance.
It is my contention that current economic difficulties which are yet to be fully appreciated will assist in changing the face of politics in this country.
The fiscal crisis confronting Barbados is unprecedented and is not the consequence of the international economy which started to recover over a year ago. The fiscal crisis is the result of very poor policy options.
The poor management began with the imposition of heavy taxation in the Budget of 2008. By 2009, the economy contracted more severely as a result of the taxation that reduced the spending power of the consumers and were it not for the private sector’s reliance on its savings to keep employment levels, then things would have been worse.
The single largest indicator of the damage done by the Budget in November 2008 was the contraction in imports in the following year. The Barbados’ economy is described as open which means that total imports are a fundamental component of total expenditure in the economy.
It is the “spine” of the economy and therefore our ability to pay for imports is the most critical indicator of the health of the economy – foreign exchange availability.
The second most critical indicator is the health of the fiscal accounts of the Government. Fortunately for Barbados, foreign exchange availability is still healthy, but the fiscal position is the worst in our history.
In response the Government produced a Medium-Term Development Strategy (MTDS) that has as its heart beat correcting the fiscal crisis which started in 2008 because of the excessive spending of the Government, not because of the international recession.
The Development Strategy Document published in December 2009 stated that “. . . given the current fiscal constraints [crisis] it is expected that many of the major policy initiatives contained in the MTDS will have to be vigorously pursued after the fiscal year 2010/11 . . . when growth is expected to resume”.
In these circumstances, Government must be made to defend its several failures with respect to the broad objectives outlined in the MTDS: (1) making Barbados more capable of competing globally; (2) generating more foreign exchange; (3) creating employment opportunities for Barbadians; (4) keeping down the cost of living; (5) attracting investment to Barbados; (6) doing less borrowing to keep down the national debt; (7) alleviating poverty; (8) managing a sustainable external current account position and (9) seeking to have a more manageable fiscal position.
The country’s national debt has increased by more than $2 billion under the current administration. This has been accompanied by the worst fiscal crisis ever. The cost of living has risen by over 20 per cent with food prices rising by over 25 per cent.
Workers’ spending has declined because of higher prices, higher taxation and little or no increase in their pay packets.
Though poverty is a social condition, it is impossible to alleviate it in the absence of proper management of the economy. It is therefore impossible to separate the horse from the cart and expect the two to move together. There is an obvious lack of leadership in the Barbados economy.
Let us hope that an era of politics has passed and with it the invective and innuendo. Issues at last!
• Clyde Mascoll is a professional economist and Opposition Barbados Labour Party spokesman on the economy.