The three major agencies
There are obvious and growing differences in the approaches of Barbados’ two major political parties to the issues involved in managing an economy, and by extension, a society.
The differences are not only informed by training but more so by the study of practices over the years which have led to one absolute truth: people matter most.
Therefore, economies and societies ought to be organized with people’s well-being in the forefront. The difficulty in achieving this enduring principle is that resources are scarce, which means that choices have to be made in allocating and distributing the resources. Who makes these choices?
The answer to this simple question is the basis for establishing social, economic and political systems. In a simplistic way, it follows that the choices are made by three major agencies: households, businesses and Government. In the case of the households, the family is the agent of choice; for businesses, the agent is the owner/manager and the political party is it for Government. In each case, the individual’s choice ought to be subordinated to the large cause.
The family is the provider of labour for the firm and the Government. They both pay for the labour, which becomes the income of the household. The Government gets its income (revenue) from taxing the two other agents. The well-being of the family comes through meeting its physical needs with income as well as its spiritual needs. The well-being of the firm is met from the profit it makes. The well-being of the Government comes from ensuring that the environment is in place for the other two to fulfil their expectations.
Once the expectations are met, it may be said that the respective agents are satisfied. The difficulty with satisfaction is that it is typically relative to some other state.
The differences in the approaches of the Democratic Labour Party and Barbados Labour Party in managing the economy are founded on the simple concept of relative satisfaction, which allows for comparison. In short, Barbadians knew what they had when compared to what they have. This may be seen in terms of their real incomes, their savings, their jobs and their overall well-being.
It is impossible for any society to feel better about itself when its unemployment rate almost doubles in four years with over 16 000 jobs lost. The loss of income imposes a significant hardship on workers and their families.
There is a scarring effect associated with a prolonged period of joblessness, especially when workers’ chances of getting new jobs are diminishing over time. And finally, society can bear economic costs because “unemployment can lead to heightened levels of crime, drug addiction and other social maladies”.
The notion that any Government can separate its social objectives from its economic performance is a fallacy and more so a desperate attempt to shirk responsibility and judgement. It is a backward view of reality that deserves the sternest reprimand of any Government by the other agents in the society.
In light of the choices that have to be made to allocate and distribute our limited resources, there are obvious complexities that evolve in the decision-making process for any Government. This leads to the real choices which confront us going forward.
From the reasoning above, it is clear that income is one thing that links households to businesses and Government. It must first be earned from the sale of labour and then the earned income is spent with the same businesses. It is taxed in the process or at the stage of earning.
Since 2007, Barbadian workers have lost income through Government’s taxation, loss of jobs, higher cost of living and no increases in wages and salaries. On this basis, households are worse off and less happy. And with households having less spending power, businesses have done less business. They are therefore making less and are less satisfied. In spite of these two agents making less and being less happy, the Government taxed them more.
To turn it around, Government has to look for an immediate source of income from other than new taxation. This must come from the sale of some assets such as the Barbados Nationalâ€ˆOil Company (BNOC).
Government must reduce business costs to accommodate increases in salaries for all workers in order to boost much needed spending power in an economy that has adequate foreign reserves.
Ultimately, domestic policy initiatives must restore economic growth from which Government, households and businesses will benefit.
People matter most!
• Clyde Mascoll is an economist and Opposition Barbados Labour Party spokesman on the economy. Email firstname.lastname@example.org.