AS I SEE THINGS: Institutions and economic performance
At a time when Barbados and most member states of the Organisation of Eastern Caribbean States (OECS) are under severe economic and financial stress, with growing incidence of poverty, shrinking middle classes, lack of any real and sustained rates of economic growth, huge public debt and massive fiscal deficits even on the current account, it is rather frightening to see at the same time clear evidence of a lack of accountability and transparency in public affairs at key institutions that are supposed to aid in the reconfiguration of our economic landscapes.
What baffles me is that under such conditions, we still pretend as though our inability to perform economically as small and highly vulnerable societies is the result of “bad luck” or adverse conditions in the global economy.
Unless we as a people are prepared to embrace the idea that the quality of the institutions we create is of utmost importance in ensuring enhanced economic performance, our countries will continue to languish in states of economic depression and all hope for a dazzling and affluent future will die slowly.
Let us put this issue of institutions and their crucial link to economic performance in proper perspective. In an appealing article entitled Access Orders and the ‘New’ New Institutional Economics of Development published in the Journal, Development and Change 47(1), Hazel Gray, in reference to the work of Dani Rodrik, said: “…There is a distinction between the function and form of institutions, thus maintaining the view that the main elements of good governance – secure generalised property rights and accountable transparent political systems – are the critical ingredients for improved economic performance in developing countries….”
Further, the World Development Report 2002 entitled Building Institutions For Markets, says: “This World Development Report is about building market institutions that promote growth and reduce poverty, addressing how institutions support markets, what makes institutions work, and how to build them.
This theme is a natural continuation of last year’s report, which demonstrated that markets are central to the lives of poor people, that institutions play an important role in how markets affect people’s standards of living and help protect their rights.
This report identifies how institutions can promote inclusive and integrated markets, and ensure stable growth and thus dramatically improve people’s incomes and reduce poverty. It is about equal opportunity and empowerment for people, especially the poor.”
If we accept the message contained in the extracts above, then, we all must be very troubled by the report in the SUNDAY SUN two weeks ago of problems between the members of the board of directors of the Central Bank of Barbados and the governor of the bank who is also the chairman of the board.
After all, the Central Bank is considered the leading institution in Barbados when it comes to providing “independent” analysis of the Government’s economic performance and making projections of the future direction of the local economy. If the quality of that institution ever comes into question, how can the public feel comfortable with the economic reports we get so often from the bank?
But, does anyone think this breakdown of relationship between a board and its chairman exists only in Barbados? What about our regional institutions such as the OECS?
I am convinced that if we continue to allow those charged with the responsibility of leading key institutions to behave in high-handed manners while the people who are appointed as gate keepers sit idly by and allow all of the “madness” to continue, then, I am afraid, our economic performances will remain in a state of perpetual despair. And that clearly avoidable scenario would be rather unfortunate, to say the least.