A noted professor of economics has raised concern that Barbados’ heavy reliance on services, especially tourism, is hindering its overall development.
“The problem is that tourism’s success created a strong tendency towards Barbados’ total factor productivity dead end. Obviously it is not itself a high tech industry. But more importantly it limited the country’s productivity because it was not a source of personnel, who on the basis of their industrial experience, could bring potential new industries to life,” explained Professor of Economics at Colgate University Jay Mandle.
He pointed out that the skills learned and utilized in the tourism industry were of limited use in new sectors of economic activity.
“To make matters worse, tourism in Barbados is a mature industry. Its future growth will not replicate that of the past. With that being the case, the tourist industry will not be able in the future to fill the role of the leading sector in a growing Barbados economy like it did in the past,” he added.
Mandle, who was at the time presenting a paper on the topic Barbados Between Growth and Development, further explained that over the years productivity and economic development had been masked by economic growth; therefore it was time for the island to consider a new “economic modernization”.
“Over time, Barbados has experienced economic growth, but it has not experienced development,” said Mandle.
“The conundrum in which Barbados finds itself – a history of economic growth but productivity decline – stems from the same source, ironically, the success of tourism,” he added.
However, despite the lack of productivity, he acknowledged that tourism was responsible for the relatively high standard of living in Barbados as a result of its significant contribution to the island’s Gross Domestic Product.
Mandle was delivering the third annual lunchtime lecture put on by the Faculty of Social Science at the University of the West Indies (UWI), Cave Hill Campus this afternoon.
He said despite ranking favourably in terms of human development over the years, since 2008, the country had “suffered economically”, largely because it remained a “one-crop” tourist economy. He added it was in need of investment that was directed toward improving quality and productivity, as outlined by Governor of the Central Bank DeLisle Worrell as early as 1994.
He further stated that the tourism industry’s success “may also have produced a policy formation dynamic that militates against diversification”.
To support this argument, Mandle highlighted the Global Competitiveness Index by the World Economic Forum, pointing out that “buried in the long list of variables included in the index are issues that do impede economic diversification.
“For example, Barbados is not an easy place in which to set up new business . . . furthermore, it ranks 101 with regard both to ease of access to loans and the availability of venture capital. Beyond the difficulties firms experience in becoming financed and setting up, Barbados is listed at 130 with regard to strength of investor protection. These rankings represent formidable barriers to a restructuring process that could create a more diversified and therefore resilient Barbados economy,” said Mandle.
“Most of these are variables that are under the direct control of the Government. That these barriers are present suggests that Government policy has not yet seen the need to shift from tourism industry encouragement to industrial policy that seeks structural change,” he explained.
In order to achieve increased productivity and economic development, Mandle suggested that Barbados and other Caribbean countries could learn from Asia, in developing domestic industrial policies that suited their circumstances.
He also said the region was in need of a “state-led export-oriented strategy of development”, adding that Government would have to “dismantle the obstacles to structural change that presently exist”.
“Establishing a new business has to be made easier. Bureaucratic roadblocks to firm-creation will have to minimize. Something has to be done about the difficulty of financing, but that will just be the start,” he said.
Mandle also called on the private sector to expand beyond tourism and retail. (MM)