WHAT MATTERS MOST: Not so great expectations
BARBADIANS ARE LIVING with diminished expectations. They are being asked to expect and accept less quantity and quality health care. They are being asked to expect access to less tertiary education. They are being asked to work harder for less money.
All of these things are being asked because of a Government that failed to understand the issues confronting it and therefore mistook a six for a nine.
The evidence of the diminished expectations is clearly seen in the country’s economic and social indicators. The numbers do not tell lies, they tell stories of mismanagement. Just as the behaviour of Government has been credited in the past for the progress of this country, it must be acknowledged as the primary reason for the country’s obvious regression since 2008.
The difference in Government’s behaviour is seen in a fundamental shift in economic management informed by a lack of political philosophy. The Government gives in to the suppression of consumption through wage restraint and taxation. It accepts and practises the politics of the fatted calf. It agrees with the notion that the public sector is the source of all economic difficulties in Barbados. It sees the printing of money as a strategy.
The father of economics, and perhaps political economy, Adam Smith, wrote that “consumption is the sole end and purpose of all production”. For almost 300 years, it has been recognised that the collective consumption decision of the people is the single most crucial factor in analysing both the short-run and long-run behaviour in an economy because of its role in economic growth.
If the Government and its advisers needed any evidence to support Adam Smith’s contention, then they got it in 2015. It was a year in which the economic gods smiled on Barbados and yet the economic indicators did not provide the evidence of improved well-being. The ultimate aim of more production must be more happiness and contentment for the people. There was no evidence of such among Barbadians, except of course for the well-connected few.
In spite of the much-advertised desire that tourism was the key to economic recovery, increased production in the sector did not produce the results to excite increased expectations.
Fortuitously, the performance in tourism was accompanied by a year of declining oil prices which saved the country millions of dollars in foreign exchange, yet the reserves at the Central Bank declined. In addition, a finely orchestrated reduction in the interest rates paid on deposits did not translate into reduced interest paid on Government debt.
In every respect, the stars lined up to make 2015 a year for a halt to be put on the sadness that Barbadians have had to endure for the last seven years. There were even economic forecasts that did not, and could not, anticipate the level of increased arrivals in the tourist sector.
Government spokesmen on economics went as far as condemning the economic growth forecast of the International Monetary Fund (IMF) for the Barbados economy in 2015. The evidence showed that not even the IMF’s forecast was met.
A local ‘Trump’
The danger ahead rests in the fact that the Government and its advisers will finally recognise that “consumption is the sole end and purpose of all production”, given the approaching big political events.
Overnight, prosperity will trump sacrifice, the present will become more important than the future and tax relief will take over from tax burden. A local “Trump” will emerge to trumpet our recovery and pending prosperity.
The obsession with protecting the foreign reserves at the Central Bank will now be seen as choking consumption and given the period of celebration, it is time to release the choke on economic growth. Suddenly, the need to increase taxes every year is no longer necessary; it is time to give the masses some relief so that they can consume. The incorrect policy of freezing wages and salaries is miraculously recognised as inappropriate, therefore there is finally reason to increase salaries in the public sector.
Lo and behold, by the end of 2016, oil prices have started to increase, international interest rates are trending upwards and the forecast for economic growth has fallen short once again.
Who cares, these things are not important; all that matters now is the happiness of Barbadians. We have been living for 50 years and notwithstanding what we have had to endure since the financial crisis, our Government intends to celebrate its failure in style.
So what has changed? Everything. The fountain of sacrifice is now filled with prosperity.
Dr Clyde Mascoll is an economist and Opposition Barbados Labour Party adviser on the economy. Email: [email protected]