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THE BIG PICTURE: The economy


Ralph Jemmott

THE BIG PICTURE: The economy

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In a discourse on the economy that generates more heat than light, what is a blind man in a darkroom looking for that black cat to do? One problem is the lack of full disclosure.

With so much at stake, this is not the time to be obscuring the truth for short term political gain or personal face-saving. Another difficulty is the partisan character of the debate even among those claiming to be professional economists.

One has to hack one’s way through the discursive jungle of tutored and untutored opinion to find even a small clearing in the woods. Beyond that, theoretical economic issues such as stimulus vs austerity are much in dispute.

The optimists had told us that things would begin to improve in late 2010 and be stabilised by 2011. It is now almost 2015, six years of persistent stagnation in spite of fumbling, ineffectual attempts at short- to medium-term remedy.

Unemployment stands at 13.2 per cent with less than 12 months or reserve cover and Government must plug a $174.6 million deficit by March 2015. Foreign borrowing is hazardous as markets have driven up debt servicing costs with Government currently spending 33 cents in every dollar of revenue to service the national debt.

The Minister of Finance’s news conference of October 27 was perhaps too replete with “generic assertions” and fond promises to provide the assurances his public would have wanted. Barbadians want a developed “social architecture” of education facilities, proper health services, welfare assistance for the less able and most are prepared to pay to support such.

This assumes that revenues are available, efficiently managed and well spent. But there is a point at which a high tax regime proves counter-productive with reduced, not improved, revenue earnings. Not much is left to be taxed either on persons or corporates that will not further reduce demand and slow the economy.

Ms Tracy Shuffler of the BCCI recently suggested that that body might not survive another round of taxation. It is claimed that with more taxes the economy would reach “rock bottom” by the end of the fiscal year. Revenue enhancement through increased taxation hardly seems viable.

Perhaps the focus must be on sharper spending cuts within an overweight and not terribly efficient bureaucracy. An administration that recently undertook a ten-person delegation to Samoa does not lend credence to the idea that it is conscious of thrift and frugality. Government must commit itself to cost containment and serious reforms of statutory corporations and state-run agencies. Further cuts must focus on Government fat, not essential services like health.

One writer indicts the Government for an attack on the principles of democratic socialism, an unwarranted triumph of what he calls “the pragmatism of the numbers” over “social architecture”. He ignores the fact that what Mr Sinckler called “the social development complex”, ambitious social engineering, comes at a cost.

The Opposition economist is someone who often claims to know the numbers, the raw data, better than most. What he glibly terms “the pragmatism of the numbers” is the harsh reality. Talk of “social democracy and its architecture” plays well to the gallery, but those with the actual responsibility for governing, must come up with the money to underwrite their costs.

Then there are those who would have us exit the neo-liberal capitalist marketplace altogether, but beyond the dialectics, they cannot say with any specificity what “change of course” they are suggesting.

One way of reducing debt and deficit is to grow the economy.

The Economist writer of March 2010 notes: “Growth reduces deficits by increasing tax revenues and cutting spending on unemployment benefits and so forth. As the economy grows, deficits fall, debts become more sustainable, lightening the investment burden and reassuring investors.”

The reality is that securing growth is more difficult than politicians in power, political aspirants seeking power and loquacious economists would suggest.

Given the constraints on Government spending, it seems clear that growth must be private sector driven and Government inspired. But it is reflective of our stagnancy that while Government claims the private sector is not doing enough, the corporates complain that Government is failing to provide the environment for its efficient functioning. Sir David Seale has pleaded for the Central Bank to get commercial banks to reduce interest rates as a stimulus to economic activity and job creation.

The 2015 World Bank Group Doing Business rankings would appear to lend credibility to the notion that Government is not providing a propitious climate for business development. In nine out of ten criteria, Barbados ranked behind Jamaica, Trinidad, Antigua, Bahamas, Dominica, St Lucia and St Vincent.

Out of the 189 countries studied, Barbados is now ranked 106th for ease of doing business, down from 103 a year ago.

Far from improving, things seem to be getting worse. Productivity and efficiency are key, but on the eve of its 48th anniversary of Independence, Barbados seems to be running out of gas.

 

Ralph Jemmott is a retired educator and social commentator; email [email protected]

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