The Barbados economy is in trouble and Trinidad and Tobago is “looking over a precipice”.
This assessment today from former deputy governor of the Central Bank of Trinidad and Tobago, Dr Terrence Farrell, as he engaged members of the local business community attending the September luncheon of the Barbados Chamber of Commerce and Industry (BCCI).
The economist argued that regional governments had no business offering services that could be better provided by the private sector. He said governments should only intervene in the market if a case existed for some kind of rescuing to be done.
Dr Farrell singled out telecommunications, the news media, insurance and banking as examples of services where governments should not be involved today. In cases where governments have started businesses, he said, they should hand them over to the private sector once they were free of risks.
“All of those things should be in the hands of the private sector, unless you want to use the media to promote your political party. So you have no business being in those things,” said Dr Farrell, in response to a question from the audience.
He said it was common in the Caribbean for “the business to lose focus and go off mission” under state ownership. “And all of that comes back to the treasury, it comes back to taxpayers who have to foot that bill,” he observed.
Farrell added: “The second thing that happens is that even when they are making money, governments like to hold on to these things for reasons of patronage. I could put my people inside there, this person wants a job, this person wants to become chairman and so on and so forth.”
“So governments need to be disciplined when they do own the industry, they need to be disciplined about keeping that business on mission and then making the critical decision about when are we going to release it and privatize it and put it into the private sector.
That is what our governments are failing to do. They are holding on to businesses that they should let go. Profit-making businesses, they should let them go and the loss making businesses they keep them,” suggested Farrell.
“When economies get into trouble…and in those circumstances governments need to retrench, the question
of the privatization of state enterprises and utilities tends to resurface because governments get themselves into a situation where they need revenues,” the Trinidadian economist noted.
“It is also the case that when that happens, the private sector pays attention because privatization represents in many respects, an opportunity for those of us in the private sector to make some investment,”
He said the trade union movement was generally “opposed to privatization” because of the fact that governments generally did not oppose unionization of workers in state enterprises and statutory corporations.
“But the real reason why unions love state ownership is that featherbedding becomes the norm,” said Farrell, who also urged regional authorities to carry out careful research when seeking to get involved in private public sector partnerships.