The credibility of the Government’s economic team has reached a new low. The deafening silence of Minister of Finance Chris Sinckler is being traded for the contradictory noises of the Governor of the Central Bank and the chairman of the Economic Advisory Council.
It was remarkable to learn that the recent announcement by the governor, endorsed by Prime Minister Freundel Stuart, should have come as no surprise. This observation was made by chairman Sir Frank Alleyne.
Pardon me, but in March of this year, when the Minister of Finance announced a $600 million stimulus package, the two leading advisers gave it, the thumbs up. That came as a surprise to the public, since the same two individuals had rejected a $90 million stimulus proposed by the Opposition in the previous month.
In the circumstances, it was a surprise to everyone but the Government economic team that the large stimulus would be replaced by an equally large package of cuts in expenditure in the twinkling of an eye. The combination of the stimulus and the cuts represented a billion dollar turnaround in policy in three months. And it did not come as a surprise to the adviser!
But an even larger contradiction came when Sir Frank spoke glowingly of the governor’s competence in one breath and then in another breath said that any economist worth his weight in salt would not recommend such a short and sharp adjustment in spending. This comment was in reference to the governor’s recommended cuts in Government spending of the magnitude of $400 million.
There is total confusion in the air with respect to where the Government’s economic programme is going. The workers and taxpayers in Barbados do not deserve what they are about to receive. For sure, they deserve to see the back of the Minister of Finance. The advisers are at least trying to save face!
Since the Government has argued for the last four years that its economic problems are the result of the international economic environment, the question is why does the Government have to cut its spending and cut it so dramatically? The chickens have simply come home to roost!
The international economy did not cause the excessive spending of the Government. The post-2007 period was used as an excuse to indulge in the philosophy of the fatted calf without reference to the economic reality. One thing was on the mind of the newly elected Government in 2008 and it did not spare any effort in increasing the ranks of the public sector.
No matter what the circumstances are in life, there is always a need for balance. In the economy, balance becomes even more essential as its genesis is rooted in scarcity. In a recession, resources by definition become scarcer, which requires more balanced management.
When the private sector is experiencing difficulty, a little more government spending is understood but it is targeted. The intention is to provide some balance to offset the fall in private sector spending. But the historical scientific evidence never suggested that the government should become indifferent to the need for balancing the country’s finances.
Contrary to all the old talk about whether or not economics is a science, there is an even bigger concern that politicians are the ones left to implement economic policies. The objectives of the policies, as defined by the economists, are not always in tandem with those of the politicians.
As this relates to what our beloved country has gone through in the last five years, there is no trained economist who would have encouraged the Government to borrow $40 million per month to pay civil servants. When this was being said years ago, the author was accused of preaching doom and gloom.
Yet, in more recent times, Minister of Finance Chris Sinckler admitted that he was borrowing every month to pay 7 000 civil servants. The lowest paid worker in the public sector gets more than $2 000 per month. If this amount is treated as a basic salary, then the minister would be borrowing at least 14 million dollars per month.
Over the last three years, Government’s deficit was more than 40 million dollars per month and this has increased this year, so the minister had to be borrowing to pay a lot more civil servants than he disclosed. There is a pattern!
A rooster is home-grown by definition!
• Clyde Mascoll is an economist and Opposition Barbados Labour Party spokesman on the economy.
