Warning for MSMEs as gov’t seeks another IMF loan
A University of the West Indies economics professor cautioned people in the micro, small, and medium-sized enterprises (MSMEs) that the Barbados government may find it more difficult to help the sector when the island moves towards the International Monetary Fund (IMF) for another external fund facility (EFF).
Director of the Sir Arthur Lewis Institute of Social and Economic Studies (SALISES), Professor Don Marshall told the Barbados Small Business Association (SBA) state of the industry conference on Tuesday that the logics that are often brought by even the new-age IMF run contrary to what other countries are doing in their economies and to stimulate small business.
“The IMF’s lending comes with restrictions on your public policy manoeuvre,” Marshall said. “I have no quarrel with any government that says, ‘based on the options before me, I shall go to the Fund to seek to protect for and correct for my public finances’.
“However, I ask after the conditionalities because austerity ties conditionalities, which is they are engaging in expenditures, subsidies, and research and development, they are sponsoring it deeply and this is the kind of state intervention that the IMF decries.”
Earlier this month, Prime Minister Mia Mottley announced that Barbados will be seeking a new loan agreement with the IMF, telling citizens “these are indeed rough waters”.
Marshall said while it is necessary for the government to fix and sustain its public finances, it also needed policy space to help the MSME sector.
He said that the prime minister was known for “arguing quite well on the international stage for greater fiscal and developmental policy space”, suggesting that the same was needed for the MSMEs here to thrive.
“Policy space is critical, but the Prime Minister has a free hand,” the university professor said. “As Minister of Finance, she is surrounded and denuded by a coterie of individuals, so steeped in a particular reading of development that they start off with the fiscal and end with the fiscal.”
Marshall told the event, which formed part of the activities for Small Business Week 2022, that while other countries were engaged in deficit spending in an effort to dig their economies from “the deep economic morass we find ourselves in”, Barbados continued to speak a different language.
“The advising is against the swing of the pendulum,” he said. “The advising is that we are to get into the business of achieving a surplus of one per cent, and in the previous BERT, it goes up to six per cent – which is great if we are running a corporation…
“But it is completely at variance with what is demanded now if you are running a country, particularly a country that needs to move in the direction of engendering a value-added ethos, and it needs to diversify and so on.”
Marshall questioned whether similar consideration was truly being given to the “transformation” aspect of the BERT programme.
“I always remind them what about the developmental, what about the T in the BERT – Transformation?” he asked.
“Transformation calls for a level of state intervention, a level of partnership with the private sector elements … that is never contemplated by IMF teams then and now.”
The political economist said while there are opportunities for small businesses to cement their place in the global market through the use of technology without relying on any government, he argued that culture was still a major setback.
“At some particular point, you come from culture, you come from attitudes and you come from merchants of doubt and contrarians, and you ask yourself, ‘where is this coming from’?” he asked.
“Whereas your counterparts in other spaces are not surrounded by contrarians and merchants of doubt. This explains why global capitalism does not present neutral space for all firms and all countries to succeed at the same time.”
Marshall said that while the emphasis seemed to be on innovation, there was a seeming lack of need to pursue “some kind of value-added ethos”.
“When I look at Barbados, I am not so sure that we can speak of a society and economy reflective of that value-added ethos,” he said, adding that businesses and countries that were doing well were those where there was a “value-added ethos that drives innovation, that thrives on creative disruption, that thrives in creating greater value for customers”.
The University of the West Indies professor said the time had come for Barbados to move beyond the status quo of finance, import trading, insurance and real estate prospecting for its development fortunes if small businesses were to thrive.
“I think we are very good at reproducing the status quo,” he said. “We become excellent at it, and this is a cultural thing.
“This is nothing you can treat to in any straight policy sense unless we are talking about a social transformation venture that begins with education, that begins with revaluing how we see entrepreneurship, revaluing how we see education across all fronts.”