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Time to rethink

Ian S. Gill

Time to rethink

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Every so often, a topic Barbadians are fearful of raises its ugly head and most of the time it is swept under the carpet.
Once again, a recognized economist has called for a rethink on social services as it currently exists in the nation. A thrust toward new policies now needs to be adapted, and there are models that can be utilized while staying focused on providing for the poor and disadvantaged.
Health and education account for a substantial portion of Government’s expenditure. Both now exceed more than 15 per cent of Government allocations on expenditure. This is in addition to further Government spending on necessary social services.
Barbados is, by any recognized measurement, a welfare state. Applying this term to a developing country is significant, but why is so much of Government’s allocation going to social policy while every day, the country is further burdened with debt? A serious rethink on Government’s policy and strategy is needed.
Governments have treaded cautiously in respect of budgetary allocations to the education sector.
From as far back as the 1990s, the allocation was shaped [like] an inverted pyramid in which all levels of education received a fair share of the resources.
In fact, by 1995 to 1996, the education sector was consuming the second-largest share of Central Government’s budget. Based on statements made by two of the University of the West Indies’ (UWI) outstanding economic minds, there is a necessity to look at the levels of education and determine which can be minimized in respect of Government allocation.
The country must seek out what benefits are to be gained at each particular level (primary, secondary to secondary vocational/general to tertiary level) by the use of known analyses.
Still, Government cannot make its determination by analyses alone; the poor can sometimes find the opportunity cost of attending school exceeds the short-run private benefits; therefore, continuing proper nutrition (school meals) and health products is a necessity.
With so many graduates exiting the UWI, a major problem is now the poor utilization of highly educated people. This lowers both the private and social rates of return on tertiary education compared to the return on primary and secondary education.
Of late, the “human capital flight” of our trained students (especially doctors trained at taxpayer expense) constitutes a loss of resources to Barbados and a poor investment of public funds.
In some cases – to what extent, I do not know – we do benefit from repatriation of funds (remittances) from graduates and this must be taken into account as a social benefit. Because of the heavy subsidization of education, private returns always exceed social returns on education.
When analyzed, allocations and cost figures at the tertiary level show that the social rate of return on education is low. In order to remedy this situation, Government should reduce its allocation where private returns are much higher than social returns.
This would improve the external efficiency of its investment in education by closely matching private and social demand.
An analysis of the health sector in Barbados is more difficult because of the high percentage of private sector involvement. This makes it difficult but not impossible to measure the benefits gained in this sector.
This sector accounts for the highest allocation of Government’s budget. Health sector reform continues in the interest of improving the quality of care to every citizen but as to its efficiency and effectiveness based on allocation expenditure, agitation continues.
I believe that this sector will call for some creativity in delivering a health sector that truly works. A nation that moves towards a national health insurance policy where even Government would gain substantially through its health institutions is a must. It can be done, it has been done.
Barbados is fortunate that it has been successful in creating a welfare state that has aided many citizens over the years but to continue through this generation will create havoc for our children and their children.
The country simply cannot continue to borrow to provide services, especially to able-bodied people. Reducing expenditure from both these sectors can go to much needed capital investment, especially at this juncture.
It will take some political savvy where only a small percentage of our citizens will be disadvantaged but it can and must be done for the future development of this country.
• Ian S. Gill is a member of the Barbados Economics Society.