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Middle class crisis surfaces

Clyde Mascoll

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Even though Barbados’ fiscal crisis is worse than in the early 1990s, it would be an act of economic suicide to consider cutting basic wages of public sector employees by eight per cent or trimming 3 000 people from the payroll as happened back then.
Though these measures assisted in restoring fiscal health, the much bigger issue at the time was the blatant inadequacy of the country’s foreign reserves; this is not now the case.
Indeed, in the presence of a most adequate stock of foreign reserves the current administration foolishly embarked on an economic programme to stop Barbadians from spending.
Since an economy is just the sum of total spending, it was easy to forecast that economic growth would be compromised by Government’s foolish economic policies.
Contrary to what is being suggested, the spending of Barbadians accounts for 76 per cent of the total spending in this economy. The strength of the spending of tourists lies in its contribution to the country’s access to foreign exchange which is extremely vital.
The lack of access to foreign exchange explains why Barbados had an economic crisis in the early 1990s, whereas it now has a fiscal crisis.
Furthermore, notwithstanding all of the old talk, the current fiscal crisis has been self-imposed and is not the result of the international environment. But the latter will be increasingly promoted as the reason for Barbados’ economic woes.
Fundamental difference
As I have argued for the last three years, Barbados has a fiscal crisis not an economic crisis in the mold of the early 1990s.
The fundamental difference is that there is an accompanying middle class crisis which is the first in our post-independence history. The reason for this “middle class” characterization is simply that Government has had to borrow from predominantly domestic sources to feed its appetite for excess spending. Borrowing is only possible from those with the resources.
 Apart from borrowing, it has imposed taxes – such as the tax on allowances – on those who have the income. Other than taxes on allowances, do not forget that Government increased professional fees substantially.
It has been a deliberate assault on the middle class; supported by a most irresponsible statement by Senator Irene Sandiford-Garner with respect to the reaction of the group which is not worthy of repetition in my limited space.
The middle class, which is predominantly on fixed incomes, pays a disproportionate share of income taxes because of the use of the tax threshold. This class carries the bulk of the electricity bill among households. This class owns the majority of cars and bears the rise in gasoline prices not to mention the cost of insurance.
Given the tremendous rise in food prices, the galloping utility bills and the overall increases in living costs, the financial statistics support the obvious outcome that the middle class is dis-saving, that is, drawing down its savings to keep up the image.
Turning over the dollar
Contrary to what was said by the senator, the middle class needs to be able to hire a maid or gardener or other service providers to multiply or turnover the dollar in the economy.
This basic principle of turning over the dollar is the basis of economic activity; a simple principle which the current administration does not understand.
It is shameful when a Barbados Government does not understand its role in managing the economy. Rather than stimulate economic activity through capital works programmes, Government embarked on a course of stopping Barbadians from spending and instead made them lenders to the Government.
This course of action has reached the point where even the commercial banks no longer want to lend to the Government. This course of action has reached the point where the NIS is trying to avoid lending to Government. This course of action has reached the point where the middle class has become the major victim.
If truth be told, the country’s economic fabric, so carefully woven over the last 45 years, has been torn to threads by a misguided group over the last four years.
 The misguidance was compounded by the failure to adhere to the most basic tenet upon which success rests: if you fail to prepare, be prepared to fail.  
• Clyde Mascoll is an economist and Opposition Barbados Labour Party spokesman on the economy. Email [email protected]