Arthur speaks out
FORMER PRIME MINISTER Owen Arthur has broken his silence for the first time since the ministerial statement on December 13 announcing Government’s plan to lay off 3 000 workers in the public sector between January 15 and March 1 this year.
He gave some advice on the economy as he spoke to Associate Editor Ricky Jordan at the weekend. The following is an edited version of that interview.
THE IDEA of an eminent persons group to look at Barbados’ economic woes has been suggested in political circles. What is your view of it?
Arthur: The notion of having an eminent persons group now to try to recommend policies to avert what the Government has already effectively agreed to do is not a very practical matter for a number of reasons.
There have been eminent persons groups, for example, the one led by Sir Shridath Ramphal to develop the Time For Action report. I also headed one for the Commonwealth and the World Bank. In my case, around the turn of the century, I was invited by the Commonwealth and World Bank to head a special team to create a development agenda for small states.
I chaired it, and you had ministers of finance and the foreign minister of New Zealand who eventually became secretary general of the Commonwealth.
We were supported by the best technical teams from the World Bank and the Commonweath. Studies were commissioned, we evaluated reports, special consultations with stakeholders were held in the Caribbean and all other areas of the world where small states were located, a report was prepared and submitted to the Commonwealth for their approval, and then on behalf of the eminent group I went to the spring meeting of the International Monetary Fund (IMF) and World Bank, presented the report and got it approved.
Every year now there is a thing called the small states forum that is giving effect to the recommendations of that eminent persons group.
Similarly, out of Sir Shridath’s group has come the Caribbean Court of Justice, CSME [CARICOM Single Market and Economy] and so on.
An eminent persons group cannot just be convened as a serious initiative to function within a week. Someone would have to commission its work and be able to act on its report. It cannot exist in a vacuum. Who would it report to and who would be responsible for implementing it? So the notion of having one now in January 2014 to report and avert what is happening in Barbados now is not a practical idea, and it should not be put out there because it would give a false hope that there’s something that can happen right now.
So should we throw our hands in the air?
Arthur: Let me be candid with you. The Government of Barbados has already more or less made up its mind as to what it has to do. A lot of what it has to do will be dependent upon its Article IV Consultation with the IMF because a lot of the loans which the Government is seeking now to raise – and they need to raise loans – will carry the condition that people will want to know what is the Article IV Consultation report before they even lend you money.
That is now a recurrent theme. The Government has met with the IMF and I believe it has given certain commitments, so that those things are really what will become the main policies. The unions will come now after the fact and try to influence things, because the unions have a constituency that they must appease and they must appear as though they’re militant, but the Government has more or less made up its mind as to what it is going to do.
Now three years ago in my Budget presentation, I suggested to the Government that the time was right to have a task force drawn from some of the best minds in the country to be able to make recommendations to the Government as to how it should manage the expenditures. Nothing was done. What is before us now is a situation that has been allowed to spiral out of control, and a lot of the Government’s policies are just now going to be intended to correct some of the excesses that the Government has committed.
Remember Chris Sinckler went on record as saying he had to borrow to pay the salaries of 7 000 public servants, and the answer to that was to employ more. And that is what this is about: the Government policies are less now about creating conditions for growth than trying to correct the excesses.
Did you speak to those who proposed the eminent persons group?
Arthur: I heard about it, and I made my position very clear. Right now, Barbados does not need gimmicks, and an eminent persons group to be created now, given what it takes to function, to report by the 15th because the Government is making its decision by January 15, it would be just a gimmick; that you’re trying to find some quasi-patriotic way of trying to save the country but that moment has passed.
The OECS [Organization of Eastern Caribbean States] countries created an eminent persons group and there’s an expenditure review commission. This group comprises some of the best minds in the OECS, including Justin Robinson. I don’t want to seem as if I’m being unpatriotic but you have to be practical. What can you do within a week now?
The Government has also made it very clear that it doesn’t want any advice. Chris Sinckler said he wouldn’t even meet with us in a dark room.
So what’s the point? The Government has not said let us come and cooperate.
If the Minister of Finance were to call you tomorrow for advice, what would you do?
Arthur: I would not recognize his voice because he has never called me, neither has [Prime Minister] Mr [Freundel] Stuart. In 2007 when I gave my last Budget speech, I said Barbados had a deficit of 2.5 per cent and the time had come when we would have to revise our deficits and have deficits of no more than 1.5 per cent of GDP [gross domestic product]. I also said the time had come when Barbados must have no more entitlements. We can’t create any more social programmes that we can’t pay for. Those would have been our policies: maintaining a deficit of no more than 1.5 per cent of GDP and introducing no new entitlement programmes. You don’t run the country into the ground and then try to dig it out, and that’s effectively what has happened to Barbados.
The core of managing the Barbados economy was that you have a fixed exchange rate. In order to maintain a fixed exchange rate, you have to have fiscal discipline, so you cannot have large fiscal deficits, especially financed by the printing of money. That is the cardinal rule. Every time you depart from it, you get yourself in problems.
Now what this Government has done is departed from the cardinal golden rule. Its policies are now intended, driven by the IMF, to try to cure the excesses. You’re going to see a period of convulsions.
This country has been put through excesses by this administration and what you will have now are convulsions; a lot of things like uprisings, not in the social sense. A large part of our recent problems has been with printing of money by the Government to finance its deficit.
So explain Barbados’ situation bluntly.
Arthur: It’s not something that has been popular but we’re now in a situation where there have been five years of bad government. The Government’s policies are purely now to correct its excesses. The point though is, it’s not prepared to deal with the part of its programmes that have been for purely partisan purposes. The Government seeks to control its expenditure but there has been no announcement, as far as I’m aware, that it is going to cut things like the David Thompson football competition, constituency councils, and all those things which it used to spend money for partisan purposes.
There is no shared sacrifice. This country has to go through a period of sacrifices. It’s important that when a nation has to make sacrifices, they should be comforted by the leader of the country, being the person who expressed the nature of the sacrifice that has to be made. That’s what Barbados doesn’t have right now, and I know people speak harshly about Mr Stuart, but he himself has to lead.
We are possibly in the valley of failure, and people are fearful. The worst thing that could have happened to Barbados quite frankly is to announce around Christmas that people are going to go home. There are people who have jobs and were sure their jobs were safe and the first thing they did was go to . . . the credit unions and borrow money.
President Theodore Roosevelt told the United States in the Great Depression that the only thing you have to fear is fear itself. Those words comforted a nation. You’re not hearing anything like this that would give us the assurance that there’s a sacrifice that has to be made or the nature of the sacrifice. You’re not getting that from the leadership. You’re getting little spasms of “cut this and send home this and so on”, and they’re adding to the lack of confidence by creating this climate of fear.
The people in this country want their country to succeed. They want to be able themselves to contribute to the success of the country but you have to lead them, you have to now take the people into your confidence and talk them through it.
Are you now saying “I told you so”?
Arthur: No. I led a country for 14 years and tried my best to do what I could for my country. I led a World Bank Commonwealth task force to prepare a development agenda for small states, and the global society is acting upon it. I tried to create a regional single market and economy. I’ve fulfilled and I don’t gloat upon the conditions which the country faces. The last thing I told the people of Barbados at our public meeting in Bay Street was that if I had the chance to lead this country again, I would have to see it through the eyes of my children. I didn’t have any grandchildren yet, but I would now have to treat it with a grandfather’s love.
I want my country to be a better one for my children and grandchildren than the one I grew up in. And therefore saying “I told you so” is not helping them.
Right now I must tell you my great concern is that after five years of great difficulties, we’re in danger of becoming a society that doesn’t have a viable economy. And whenever that happens, we’re in serious problems. I lived in Jamaica in the 1970s and there’s a remarkable similarity between the two. You had five years of decline in Jamaica and it hasn’t come back in a generation. In our case, it started with a recession, it then became a fiscal problem, then it became a problem where no sector of the Barbados economy is functioning, especially tourism. It has now become a balance of payments problem, and the enterprises are no longer viable.
You can’t have an economy where the macro economy is in recession, you have a public sector crisis with deficits that are unmanageable, a balance of payments crisis and a situation where most enterprises are not viable; you have to deal with all of them together. The Government policies are largely now to deal with the fiscal situation, but you have to bring it all together with a package of measures. We have five problems that are colliding together – let us have policies that deal with some in harmony.
It’s not about a global recession anymore. Global recessions can’t cause a fiscal problem. There have been excesses and we have to correct them.
What area can be fixed quickly?
Arthur: Fix tourism. Government increased water rates by 60 per cent, electricity by 65 per cent; the sector can’t recover those things. Then they increased the excise tax by 50 per cent, VAT rose by 2.5 per cent, and then they increased property taxes and decided to do price discounting. The sector now is not viable. The Government needs to review its slew of policies in relation to the sector as a whole . . . .
A lot of the things they said they were going to do they have not done. We heard about a tourism development act and a tourism master plan, but every time Barbados plays the fool with its leading sector, it collapses.
The sugar industry was brought to its knees by the Sugar Industry Act of 1971 when the then Government mandated that there should be a five-day week, wages should be legislated, and profits taxed. By 1980 it was on life support.
If you therefore take your leading sector and pummel it like how tourism has been pummelled . . . you can’t have a viable economy if your leading sector is not viable.
Barbados must not be made to feel that getting Sandals here is a magic wand, because there’s Sandals in Jamaica but Jamaica has not come back. This nonsense about we got a Sandals! so what?