WHAT MATTERS MOST: Lay ground for growth
Barbados needs a viable economy to be able to deliver a sustainable social programme. It is, however, clear that the option of industrialisation of the kind contemplated in the past is beyond us and so too is the plantation economy. This leaves the services economy that has to be driven by human capital and information technology.
The viability of an economy that is becoming increasingly consolidated must be based on its ability to adapt to challenges in order for it to be able to compete. The competition has two dimensions: (1) internal that is being threatened by business consolidation and (2) external that is confronting dramatic changes from the South, especially Africa, Central and Latin America.
In light of the changing face of capitalism, where finance is becoming more and more flexible and its ownership more difficult to determine, the real issue is in identifying the new viable economy.
As it stands, the Barbados economy no longer has the comfort and promise that the agriculture, manufacturing and international business sectors once suggested in providing support for the tourism sector in the pursuit of the much desired economic viability.
The failure of the current political leadership in understanding the relationship between the real sector that includes those sectors identified above, along with the domestically focused sectors, and the public sector is responsible for the recent prolonged instability in the Barbados economy that threatens its viability.
Perhaps the best example of the leadership failure is recognised in the lack of attention paid to the international business sector by the current Government at the start of its first term in office. Not to appreciate and understand that the sector’s contribution to the Government’s corporate revenue was one of the main reasons for the tax relief given to Barbadians under the Owen Arthur administration is a travesty of common sense.
The travesty is compounded when the breakdown in the relationship between the real sector/economy and the public sector is falsely masked by the excessive printing of money at the Central Bank. Amazingly, something that was so wrong during the Sandiford era, and is now being done in much greater proportion, is being promoted and condoned by the very opponents of this money printing strategy – and rightly so then. What has changed to make it so right now?
The importance of understanding the relationship outlined above cannot be overstated if the Barbados economy is to be repositioned to cope with the issues of internal and external competition. In each case, the role of the Government is vital. Both the size and structure of the public sector are crucial factors that have to be addressed as prerequisites to the recreation of a viable economy that is relevant to the modern times.
Contrary to what the recent report of tax reform is portraying, the tax system is as critical to efficiently and effectively allocating the country’s scarce resources as it is in raising revenue for the Government. In fact, in small economies, there is no harm in using tax policy to encourage investment in particular areas of the economy or in giving low-income consumers access to critical goods and services. This is the essence of good public policy.
Unfortunately, time does not permit the full resolution of our fiscal crisis before the groundwork is laid for the restoration of economic growth. In fact, the latter is a necessary condition for the former; and since this is not yet understood after seven years, it is fair to conclude that the Government is “duncey”.
This is not the time to pussyfoot anymore with the growth and fiscal issues in the Barbados economy. The time has come for all and sundry to have the conviction to speak openly about what is before us. The arena of politics allows some of the “speak” to be personal. The public, however, does not have to engage in such but the notion that silence is golden has long passed.
In the circumstances, the Opposition Leader’s call for a change in government as a precondition for change in the country’s economic management cannot be deemed as impatience; it’s apropos. Furthermore, the Government has used every opportunity in the past to play politics with the economy and not truly address the pressing issues. What will change in the foreseeable future? Nothing.
However, while the Government continues to ignore the real issues of fiscal stability and economic viability, Barbadians’ financial and social vulnerabilities are being more exposed. Hopefully, one day coming soon the people will wake up.
Dr Clyde Mascoll is an economist and Opposition Barbados Labour Party adviser on the economy. Email [email protected]