WHAT MATTERS MOST: Economic growth strategy
IN BARBADOS, the size of the Government is not too big; the economy is too small. By now, most of us believe that Barbados is going in the wrong direction. We believe that things can get better. We therefore believe that fresh thinking is needed to put us on the right path.
Contrary to the notion that Barbados is just a society, it must be understood that it takes a bigger economy to deliver social goods and services in a sustainable way.
When the economy grows, the Government gets more revenue from the growth. Therefore, there is less need to tax and tax the households and businesses.
Taxation compromises spending power. Income taxes do so directly, while expenditure taxes do so indirectly. Apart from raising revenue for Government, taxation reduces aggregate spending either via its effects on consumption and/or investment. Since these two account for the majority of spending in an economy, it ought to surprise no one that taxation is anti-growth.
Over the last eight years, taxation was used to generate more revenue for the Government. The evidence shows that it did not work. However, it worked to make the economy smaller, which prevented the raising of revenue.
By now, Barbadians must understand that economic growth will deliver better garbage collection, access to reliable health care, availability of quality water and education from primary to tertiary level, among others. These services require money for them to be delivered. It requires money to buy garbage trucks. It requires money to keep the hospital clean and in working order. It requires money to replace pipes and build desalination plants.
Once a government understands such basic housekeeping, the next step is to prioritise its spending. A new headquarters cannot be a priority, if water is scarce. This is where leadership is vital. A new headquarters cannot be a priority, if garbage collection is unpredictable.
The new buildings are simply monuments to the egos of ministers looking for legacy, that is, the permanence of their names on a plaque. In the few limited cases of the erection of buildings, the Auditor General has had a lot to say about the execution of the projects.
The focus of a government has to be on making it easier to find work, nicer and safer to live, and friendlier to do business. We have to be able to live with pride and industry, not just gloat about them. This begins with an honest assessment of where we are.
In the process of assessing where we are, we must ask the most fundamental question: why is economic growth important? The answer is because it is the means by which we maintain and improve on a quality of life for which the previous generations fought so hard. We must believe that industry is the main basis for our pride.
Having philosophised about the “why” of economic growth, it is crucial that policymakers understand that such industry has to be encouraged by appropriate policies. They must inspire us to give of our best. They must encourage us to work for our country andnot just ourselves. They must promote that togetherwe are better.
Once we put the why in place, it is necessary to determine: how is the economy going to grow?
There are some fundamental conditions required to encourage workers and entrepreneurs in howto grow the economy. Workers have to be given a fair wage for fair work. Entrepreneurs have to access finance at affordable interest rates. The entire society must have access to clean energy at competitive prices. These three fundamentals must be wrapped in the latest technology.
What is the strategy for economic growth?
Encourage private-public partnerships that utilise local and foreign finance to invest in sustainable projects, with job creation for locals and profit generation for all businesses as the objectives. The relationship between the private and public sector does not have to be filled with suspicion.
In fact, the Leader of the Opposition, Mia Mottley, yesterday spoke to a project to make natural gas universally accessible to Barbadians. In addition, such clean energy must be used to generate a greater proportion of our electricity. By utilising more natural gas, local and imported, there is an opportunity to have a private-public partnership that is doable.
In essence, the partnership makes the use of clean energy and alternative energy in general financially viable. This results from the increased demand for natural gas and reduced electricity prices that benefit the investors and the people as a whole.
• Dr Clyde Mascoll is an economist and Opposition Barbados Labour Party advisor on the economy. Email: [email protected]