As a result of the economic challenges confronting the nation, many Barbadians have taken a deep breath and are waiting to exhale; hoping for economic salvation, craving for reassuring leadership. There is an eeriness about where the country is trending.
In the aftermath of the 2008-09 global recession, the economic experiences of individuals, households and businesses in Barbados have been growing dimmer and dimmer rather than brighter. There is a lot of talk about the global recession as if it is still an ongoing phenomenon. This is part of the problem.
The Great Recession has been over since 2010; it’s time to stop the pathetic bellyaching about a now mythical global recession and inspire confidence. The real problem is that since 2010 Europe has been a drag on global economic growth while political obstructionism has contributed in no small measure to a tepid recovery in the United States.
In fact, many countries in the Euro Zone are still in recession due in part to excessive austerity and a sovereign debt hangover. In an age of global uncertainty and sluggish economic growth, what are needed are a credible plan of action and a climate of confidence that can only come from leaders in government and business, and budding entrepreneurs.
By the time you read this article, the curtains would have come down on day one of this year’s national consultation on the economy. Hopefully by now concrete proposals would have emerged along with a commitment to remedy the chronic economic challenges that Barbados has been grappling with since 2009.
Those wide ranging challenges include an unsustainably high structural public sector fiscal deficit; increasing unemployment, rising prices; anaemic foreign exchange earnings from tourism, international business, manufacturing, agriculture and foreign direction investment attractiveness; and a shrinking domestic economy. The fiscal crisis appears to be on the brink of precipitating an economic crisis of significant proportions.
Two things are required posthaste: swift initiatives to reduce current expenditure and a pragmatic economic recovery programme. Nothing should be off the table in the deliberations to determine the best course of action to take at this time. Hopefully, next week would usher in the genesis of new programmes that are designed to stymie the costs to the State of university education, healthcare, public transportation, corporate welfare and so forth (all components of Subsidies and Transfers).
With any good fortune, the Government will also unveil a programme that will ease the squeeze on private sector (households and businesses) aggregate demand. Economic recovery in Barbados will require fiscal discipline and an export led stimulus of domestic services, agriculture and manufactured goods. Holding strain and waiting for a resurgence of robust global economic growth is a failing strategy that should give way to initiative and the spirit of self determination. The world is in a period of slow growth which is likely to persist into late 2014.
The structure of Government’s fiscal deficit as oppose to its size is the real crucible at this point in time. Barbados’ economy would be in a lot better shape if the large deficit was as a result of pro-growth capital expenditure instead of current expenditure on tertiary education, healthcare, waste management, public transportation, corporate welfare and of course wages. Most people accept that an adjustment is needed, even the government agrees with this assessment.
The problem seems to be inertia brought on by decision-paralysis in the face of very difficult choices. Restructuring government and reordering its priorities is a pressing imperative in the current environment. The former is especially import to the nation’s future but change will not be seamless. Some of the adjustments are likely to be painful in the short-term. The political price could be high if the people are not taken into the government’s confidence.
Barbados needs to make the best of its circumstances. The country has the intellectual capacity to craft a better future and the resources required to do so can be harness with the right reallocation. So far Barbados’ saving grace has been its stock of foreign reserves. Thank God that those reserves were stored up for a rainy day between 1994 and 2007. The rain is now falling and it has been torrential.
A lot of heavy weather is often made about Barbados being a premium destination. This pat on the back obscures the fact that in most cases Barbados does not offer the premium services, products or customer service that ought to be commensurate with the “premium” prices. The gap between quality and price must be narrowed if the country is to regain a competitive edge.
Similarly, a modern economy and society features high quality public services which the public can access in a reasonable time. Barbados needs to step up in this regard. The criteria for access to all public services should be unambiguous and delivery of said services should be offered to the public with courtesy, respect and equity. Tax administration (or political obstruction of tax administration) also leaves a lot to be desired. A fix will augur well for good public sector financial management.
There are a plethora of other domestic economic problems begging for solutions. For example, the registration and exchange of land in Barbados is trapped in the dark ages. It takes far too long to finalise land transactions or gain planning permission. These impose undue costs on individuals and businesses.
Another one is the antiquated approach to tourism marketing. Social media and television must be much better leveraged to market Barbados’ tourism product. The competition is fierce and Barbados’ competitors (even its source markets) are sparing no effort to gain an advantage in the multibillion dollar global tourism industry.
Though the global recession ended some three and a half years ago, Europe is in a double dip recession and the world seems to be transfixed in a period of slow growth (See enclosed table showing economic growth rates of select countries/regions since 2009). However, there have been some positive signs this year, particular in the world’s largest economy. The US economy has grown by 1.8 per cent in the first quarter of this year.
Some economists estimate that it would be growing at about 2.8 per cent where it not for the crude sequester cuts to the federal budget. The US unemployment rate has also fallen from a high of 10 per cent in October 2009 to 7.6 per cent in May 2013 as the listless economy produced 39 consecutive months of private sector jobs growth. The stock market has reached records highs and there is clear evidence of a resurgent housing market and rising consumer confidence. Consumer spending accounts for about 70 per cent of America’s economic activity.
In Canada the story is similar as that country has recovered all of the jobs lost during its nine month-long economic recession. Countries like Germany have seen record high employment. Yes, it is true that unemployment rates are still elevated across the world (mainly in Europe), particularly youth unemployment but it is clear that the story is more nuance than commentators in Barbados have been letting on.
I would like to take this opportunity to express my condolences to the family and friends of Sir Richard Haynes. Sir Richard was an exemplary surgeon and formidable political titan who gave many years of yeoman service to the government and people of Barbados. May he rest in peace.
* Carlos R. Forte is a Commonwealth Scholar and Barbadian economist with local and international experience. C.R.Forte@gmail.com