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The privatization divide


The privatization divide

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The debate about privatization is gathering steam – and generating heat – in the country, so much so that you would think this is some new problem which has just come up.
Both sides have kicked this can of worms down the road for years because they have feared the backlash at the next elections. The topic of privatization comes up when you are looking for ways to reduce the amount of money taxpayers have been putting up over the years to pay the bills of Government-owned or supported entities, all of which provide needed public services. Sometimes it is done through transfers and subsidies, and other times by guaranteeing bank loans.
In “normal” times, it would be unusual for the party in opposition to talk about going the privatization route, because it would be exposed to the familiar retort we are hearing now – that what you’re really saying is that you will “send home people”.
Perhaps, then, the incumbent Democratic Labour Party administration was blindsided by the decision of the Barbados Labour Party to not only place privatization on the front burner in speeches over the past year, but to take it even more to the public by way of “people’s forums”. Like it or not, the topic is now on everyone’s minds.
According to the Central Bank of Barbados (September review of the economy, page 11), transfers and subsidies cost the taxpayer almost $1.2 billion in the 2012 fiscal year, which ended last March 31. Contrast this with $716 million at the end of March 2005.
Speaking last week at the launch of the City of Bridgetown/Guardian Life of the Caribbean agency, Minister of Finance Chris Sinckler said that his Government was trying to meet the targets of the Medium Term Fiscal Strategy (MTFS) while maintaining the social safety net. He admitted that the recession had shown that the Barbados economy was “weak” and would not be sustainable until it was restructured. “But we have to take our time, and do this properly,” he said.
A couple of weeks before, at its first public forum, Opposition Leader Owen Arthur saw the problem differently, saying that the crisis in public finances was assuming “calamity status” and the “breaking point” was in sight.
In order to meet the targets of the same MTFS, he claimed, the Dems would have to cut another $150 million out of its budget in addition to cuts already made to the very public enterprises which Mr Sinckler was trying to maintain as part of the safety net – the Queen Elizabeth Hospital, the University of the West Indies, the Transport Board and others.
Therefore, said Mr Arthur, his position was that a new regime be created under which both the private sector and all citizens be provided with “incentives” to buy into activities that up to now have largely been the province of the state. Government would in turn, he said, “get out of the space”.
And while some would call it privatization, his party saw it as “social empowerment”.
According to Central Bank Governor Dr DeLisle Worrell, the economy is in a make-or-break position and will need a very good tourist season if a new round of fiscal tightening is to be avoided.
But even if we have, as we all hope, a great season and a resurgent tourism industry, we will have a lot of catching up to do. Those revenues will have their work cut out for them without being required to also cover the red ink being produced by our transfers and subsidies problem.
The electorate will therefore have to decide whether Mr Sinckler’s current cautious approach is the better one in the long run – that is, wait for the economy to start improving and then tackle the red ink – or whether the red ink, if not dealt with now in a progressive way, will undermine any slow but steady gains the economy may make in the coming years.
It is the wide divergence between these two philosophies of public administration that makes this current election season (which has started long before the starter’s pistol has been fired) perhaps the most critical we have had in many years.
And on that challenging note, may I wish everyone a very happy Independence Day this Friday.
• Pat Hoyos is a publisher and business writer.