According to university of the West Indies economist, Michael Howard, Barbados is faced with a number of “either/or” economic choices. He would have us believe that we must choose between “economic austerity” and “economic stimulus”, and between “economic growth” and “economic survival”! What stark and frightening choices!
But I wish to take issue with oward’s “manichean” or binary approach to economics and his concept of mutually exclusive economic paths.
In attempting to make his case, Howard uses the analogy of a sick human being who has “bad vital signs”, and suggests that such a patient has to spend his time improving and completing the restoration of his vital signs before attempting to become mobile.
But surely this is simplistic and fallacious, the sick patient in the Intensive Care Unit begins to make physical movements as an integral part of the very process of improving and restoring his vital signs.
Howard makes the point that the first order of business for the Barbados Government must be “fiscal consolidation” — that is, that our Government must bring its annual recurrent expenditure more in line with its annual revenue or income. Surely we can all agree with this proposition since it is Government that has to provide leadership in tackling the recession, and Government will not be able to provide such leadership if its own finances are in disarray.
But having begun with this self-evident proposition, Howard goes on to confuse the issue by characterising this necessary reform as “austerity”, and suggesting that it is the polar opposite of economic stimulus. I disagree!
Why must the bringing of Government’s expenditure more in line with Government’s revenue be seen as an exclusively austerity measure? Why can’t it be seen as an inherent and necessary component of a broader programme of economic stimulus?
As the Peoples Empowerment Party has said time and time again, any national plan to take Barbados out of recession must begin with measures to “re-establish the soundness of the finances and credit of our Government”, and also with concomitant measures to “restore the purchasing power of the Barbadian people”.
It must also include space for policy options that permit Government to borrow, spend and extend credit for the purpose of energising economic activity and development, provided that the loans extended are sound loans that will be repaid to the Treasury over time, and that the capital assets purchased or constructed will enhance the productive capacity of the country and pay for themselves!
I readily concede that what we are requiring of Government is a delicate economic balancing act that requires great skill in economic planning, and that must be executed with a constant eye to our reserves of foreign exchange, but this is what is expected of any political administration that asks the people for a mandate to govern in a time of recession.
Limitations of space will not permit me to outline specific policy options, but one that we feel very strongly about is the option of Barbados signing on to the “Petro Caribe Energy Agreement”, and using it creatively to free up revenue that could be used in the short term to extend loans to sound and deserving Barbadian producers at nominal (one per cent) interest rates.
The PEP is calling for a much more creative and sophisticated debate of Barbados’ economic options by the economists of Barbados.
— David Comissiong