In last week’s article, I wrote that Barbados has a social partnership that works and it needs an economic partnership that functions. The latter has to be anchored on a platform of state and private capital, consumption and investment and local versus foreign ownership.
Over the years, the economic partnership was implied from collective wisdom, but not formalised as is the case of the social partnership. The absolute abandonment of fiscal principles since 2008 makes a legislated partnership a requirement for the future. This is a matter for debate.
The main goal of the economic partnership is the pursuit of a sustainable growth path driven by a judicious mix of public-private sector involvement in investment, consumption and ownership. In the circumstances, it is imperative that a real project becomes the focus of such a stated partnership. This is clearly the Warrens area.
As a result, the first requirement after reaching consensus on the project is the need for physical planning. This has to be based among others on the following considerations: (1) land use policy; (2) transportation linkages and (3) economic and social concerns.
The building of the ABC Highway created an intended industrial area on the east side and a commercial area on the west side. The east includes the area towards Jackson while the west is on the Green Hill side. However, the east side has become a mix of industrial and commercial and is being extended to include the Bagatelle area to the north, while the west remains commercial and more confined.
In planning terms, the Warrens area is a node that is a redistribution point. It is also physically in a depression, which makes it ideally suited for flyovers. More importantly, on the east side there is an abundance of land to the south towards the Belle that lends itself to further development, once there is effective planning.
A major consideration in the planning has to be that the outer urban ring which runs from Rendezvous to Holder’s Hill accounts for over 105 000 of the population. This reinforces the need to link any development on the other side of the highway to the area of highest density.
Furthermore, any development must be done with reference to Bridgetown.
It may be advantageous for businesses to consider having distribution centres outside of Bridgetown, which emphasizes the need for more planning of the road network, in relation to the sea and air ports.
It ought to be apparent that the development of the Warrens area has implications for the wider economy, the greater road network and broader social considerations. The role of the state in the planning process is therefore as important as the size of the capital investment that it has to provide.
Increasing national debt
Unlike what has occurred over the last five years, increasing national debt has to be used to build out the economy through appropriate investment and not through consumption for political gain alone. This is the essence of the economic partnership so necessary to provide the basis for our recovery that will require expenditure switching.
The switch from current expenditure to capital expenditure is a must in achieving the consumption-investment relationship that has to be restored in the economy. Government’s emphasis must once again be on investing to facilitate private sector investment rather than on being the employer of first resort. The latter seems politically prudent but is economically devastating. History supports the assertion!
The largest investment for the state in the Warrens area will come in enhancing the road network. It is not truly appreciated what the current administration did to the Warrens area and the economy by extension, when it stopped the building of the flyovers for less than $200 million. A much-needed stimulus, with very high local value added in terms of employment and local materials, was denied.
Furthermore, the denial robbed the Warrens area of a head start in an economy that was known to be entering a recession from the latter half of 2007. The failure to recognise this reality and respond appropriately has caused the Barbados economy to suffer from prolonged pain and be partially paralyzed primarily by poor policy prescription.
Amazingly, the same Government increased the national debt by well over $4 billion since stopping the flyovers, without a new road or a new building to show for the whopping increase. This is the essence of Barbados’ new fiscal crisis, not the financing of university education.
A new economic partnership is needed!
• Clyde Mascoll is an economist and Opposition Barbados Labour Party adviser on the economy. Email [email protected]