WHAT MATTERS MOST: Government trading off for loans
AT THE START OF THE YEAR, an economist and a political scientist observed that politics will take priority over economics in any attempt to understand matters of political economy in Barbados going forward. For the latter, economic analysis is never enough and for the former, there is simply a time to go beyond the numbers.
As far back as April 1972, Arthur Lewis presented what William Demas described as an oversimplified model for managing the Caribbean economies. The oversimplification did not come from what was contained in the model but rather what was left out.
According to Demas: “He assumes no institutional or structural rigidities in the economic system and he mentions only in passing the basic cultural, social and political parameters which lie behind his economic variables and which are always more important for policy than the economic variables themselves.”
The more I delve into the economic history of the Caribbean and particularly that of Barbados, the more disappointed I become with the current political leadership in this country. It is not yet obvious how the aspirations of the average Barbadian have been set back by the myopic leadership that the country has endured in recent times.
There has been inestimable damage done to Caribbean integration through silly posturing. The traditional progressive role of the Barbadian state has been compromised by inappropriate economic policies that will take years to provide meaningful results.
As a consequence, the Government is unable to use traditional paths to borrowing and has found itself having to find alternative ways to stretch out its hands, in the domestic and international markets.
The Barbadian psyche is so damaged that Government spokesmen are literally boasting about the terms and conditions of a loan approved recently by the Chinese government. Until the details in the fine print are known, it is never wise to follow the words of these spokesmen. This loan cannot be seen in the same light as one that is secured from the private international market.
The interest rate on such a loan would not reflect the same kinds of risks. It is coming from a sovereign state that has trillions of dollars in foreign reserves and its concerns are more of a political economy nature. The same concerns that would inform China’s increasing role in the financing of development across Africa. What are the basic cultural, social and political parameters that lie behind the economic variables to which Demas alluded?
Recent loans from the private international market have attracted much higher interest rates and far less favourable conditions. In short, any comparison of loans from these two distinctly different sources is akin to comparing apples with oranges.
Of greater interest is the mindset of the current Government. Contrast it to the Government prior to Independence that secured a loan for the building of the Deep Water Harbour at the end of the 1950s. The bond was oversubscribed within a few days.
Perhaps, I am alone in my view but there is a declining self-confidence in this country that is in direct contrast to what our people would have experienced since the end of the 1930s. The journey from colony to state defined by Sir Hilary Beckles as the period 1937 to 1966 is still the richest and most intriguing period in the shaping of the Barbadian self-confidence.
In his speech to the Barbados Constitutional Conference in London in July 1966, Errol Barrow noted: “In our view, there can be no question whether Barbados is ripe and ready for independence. Three centuries of history answer that question in the affirmative. You have never had to shore up our finances; you have never had to maintain or preserve public order among us.”
There is a growing need for the Barbados Government to find cheaper sources of shoring up its finances. This makes one wonder whether we are forming genuine relationships based on mutual interests and respect, or whether we are simply becoming increasingly hand-to-mouth. Not so long ago, we were hurrying to join the Development Bank of Latin and Central America simply to get access to a cheaper source of financing.
Unfortunately, quite a bit of the loan funds will remain offshore. On January 9, 2015, a Government spokesman revealed that Chinese workers will get six out of every ten jobs in the construction phase. It is known that the construction sector employs a great variety of skilled local workers and to give in to such a foreign to local employment ratio is indicative of where our leaders are psychologically.
• Dr Clyde Mascoll is an economist and Opposition Barbados Labour Party adviser on the economy. Email: [email protected]