AS I SEE THINGS: Bold economic policies
How often have we heard this aphorism: “When the going gets tough, the tough must get going”? Irrespective of how frequently one might have heard that axiom, one thing is clear: this adage remains as relevant today as it was several decades ago, despite the context in which it is applied.
With those extraordinarily wise words of wisdom in mind and taking into account the existing, difficult financial and economic state of affairs in Barbados and several other Caribbean countries, it is high time that as citizens of our respective nations we stand up and demand tough action from our leaders if only to save our economies and societies from further decay.
Undeniably, in a world characterized by increasing globalization, greater initiatives aimed at promoting trade liberalization, radical shifts in economic paradigms, and the rapidly changing nature of geopolitics; small, open economies like those in the Caribbean would continue to find it more and more challenging to maintain living standards and overall quality of life for their citizens unless the creation and implementation of bold economic policies become the order of the day.
What this means at the practical level is that governments, businesses, trade unions, and other important social partners would all have to lead by example by making tough decisions for the good of the country even if a high price has to be paid at the personal level.
Indeed, that position is absolutely not a theoretical one. You see, according to a recent article carried by the Economist, the present prime minister of Japan was forced to increase a controversial consumption tax from five per cent to eight per cent, effective October 1, 2013. The fascinating aspect of this move is that a similar increase in the tax was implemented in 1997, which resulted not only in the economy heading into recession but also in the downfall of the then prime minister and his political party.
Why, then, did the current prime minister even contemplate such a bold economic measure? The answer to that question, according to the Economist, is: “Japan’s gross public debt stands close to 245 per cent of GDP. For those at home and abroad who fear the country could one day take the Greek road to bankruptcy, the 7.5 trillion Japanese yen (BDS$150.8 billion) a year of additional revenue is a small but crucial first step.
And Mr Abe is likely to take a second step, raising the tax to ten per cent, in 2015.”
Clearly, despite its massive asset base, Japan does have one of the highest debt-to-GDP ratios anywhere in the world. The servicing of this huge debt is clearly proving to be a colossal task that puts a tremendous amount of strain on the government’s revenues.
Hence, the government decided that in the interest of the economy and society, bold tax policies had to be implemented to raise additional revenue in order to address the vexing issue of its extremely high public debt and that it has done without fear or favour!
Unmistakably, the intervention of the prime minister could potentially cause him and his party the government whenever the next general election is called in Japan.
Therefore, has he done the right thing? Absolutely, because “when the going gets tough, the tough must get going” and country must always come before self!
• Brian M. Francis, PhD, is a lecturer in the Department of Economics at the University of the West Indies Cave Hill Campus.