The Democratic Labour Party (DLP) and the Barbados Labour Party (BLP) have embraced fundamentally different philosophies or theories of financing the development of Barbados. Over the past 50 years, each has tightly embraced their philosophy, even when it was clearly not working, convincing themselves that their theory was fundamental to Barbados’ existence.
After our independence, the DLP administration faithfully adhered to a philosophy of generally financing Barbados’ development through taxation. This method carried lower financial risks, but restricted the pace of development to what the country could actually afford. At the end of the DLP administration’s decade (1966 to 1976), Barbados’ debt was a relatively insignificant $259 million, but personal income tax rates were relatively high.
The BLP’s philosophy is that Barbados should finance its development by going into debt. This method of development carried higher financial risks, but allowed the country to develop at a faster rate. With development being funded by borrowing, the BLP administration reduced personal income tax rates and received higher revenues.
During the BLP administration’s decade (1976 to 1986), the Central Bank, National Insurance Building in Fairchild Street, ABC highway, Grantley Adams International Airport, General Post Office, and other national projects were built. However, the country was left $3.1 billion in debt, and Barbados was forced to go to the International Monetary Fund (IMF) for assistance.
The DLP took over the Government in 1986 and struggled with an unstable economy. Barbados was again forced to go to the IMF for assistance, and taxes were indirectly increased on public workers through salary cuts. At the end of the DLP administration’s eight years (1986 to 1994), Barbados’ debt had increased to $4.3 billion.
Once the BLP was elected in 1994, they remained faithful to their philosophy and immediately resumed borrowing until they were voted out in 2008. However, by that time, they had taken Barbados’ debt to a staggering and unsustainable $9 billion. The DLP took over the Government in 2008 and immediately increased taxes as directed by their philosophy. They have not stopped raising taxes to this day.
The DLP and BLP philosophies of development have both helped Barbados develop in a responsible manner for a period of our history. However, these philosophies have only worked when they were used within specific safe boundaries or limits. Once those limits were crossed, the philosophies no longer worked, but failed, and their continued use harmed Barbados. Both the BLP and DLP have allowed their philosophies to strictly govern their actions when their philosophies were no longer relevant.
The safe limit for developing Barbados through borrowing (debt), is that the amount of debt should not exceed 40 per cent of Barbados’ gross domestic product (GDP), or the amount that Barbados makes in one year. The BLP administration exceeded their philosophy’s operational safe limits in 1997, and despite repeated warnings about their reckless borrowing, they seemed incapable of letting go of their failed philosophy which was harming Barbados. To this day, they are still bound by their irrelevant philosophy and advocate that Barbados should borrow some more in order to solve our current economic problems.
The safe limit for financing Barbados’ development through taxation is more subjective. Taxes must be within the capacity and convenience of the individual to pay. If persons or businesses must go into debt to pay taxes, or if they are inconvenienced to the point where it affects their ability to generate income, then they may avoid paying taxes.
When the Government favours certain groups by reducing their taxes, it inequitably shifts the tax burden onto other groups. When people start to feel justified in avoiding taxes, then a tipping point has been reached, and increasing taxes will not bring in the projected revenues. The DLP administration has not realized its projected revenues for several years. Yet, they stubbornly persist with this now failed philosophy, to the eventual certain ruin of Barbados.
The BLP’s and DLP’s philosophies did initially help Barbados’ development, but their stubborn embrace of them, well after they were relevant, has brought Barbados to the brink of economic ruin. Their current actions confirm that they are incapable of solving our economic problems. Since neither of them has ever solved Barbados’ economic problems outside of the boundaries of their philosophies, they are essentially neophytes in the current economic situation.
Solutions Barbados’ guiding principle is to provide an environment where all Barbadian citizens and residents can become healthy, prosperous and educated if they choose to. Two years ago, Solutions Barbados published workable solutions for rigorous public scrutiny, in order to provide the public with sufficient confidence. They have also assembled 24 persons who are capable of implementing those solutions. Barbadians finally have a competent alternative to the two established ‘third parties’.
(Grenville Phillips II is the founder of Solutions Barbados and can be reached at [email protected])