It is Spring time in the United States. This is supposed to represent a period of renewal and growth. However, the state of US politics is becoming a clear and present danger, not only to millions of Americans but to the rest of us seeking to pursue democratic norms.
The trouble that countries like Barbados find themselves in is there is little that we can do to pull the US back from the precipice that it appears to be heading.
Our economic future, even when we were tied to the United Kingdom through the late Queen Elizabeth II and the British monarchy, was still heavily aligned with the United States.
The US is among our largest trading partners. We still depend on the US for significant development assistance. Private sector investors in mutual funds and pension funds have millions of dollars invested in US treasury notes and other American government debt instruments. Equally important are the significant number of diasporic links that exist with West Indian communities across America.
Furthermore, with hundreds of millions of dollars loaned to Barbados by the International Monetary Fund, it is important to note that the US government/president decides who heads that multilateral institution and plays a big role in which countries benefit from IMF lending and support.
In fact, we can recall former President Donald Trump’s controversial appointment of a political acolyte David Malpass to the presidency of the World Bank in 2019.
By 2023 Malpass was forced to resign following a number of scandals and missteps. At a time when developing countries like Barbados were pushing for reform of the lending agency, and for it to acknowledge the impact of climate change on the life and economies of nations, Malpass refused to accept that fossil fuels were driving climate change.
Appearing on a climate finance panel at a conference in New York in September, he was asked repeatedly whether he believed “man-made burning of fossil fuels . . . [are] rapidly and dangerously warming the planet”, Malpass tried to dodge the question, the UK Guardian newspaper wrote.
These are just a few of the reasons why we need to keep a very close eye not only on the political machinations and developments in the US but also on economic decisions.
We continue to be baffled at how one of the world’s most strident defenders and proponents of democratic norms and values, is barrelling in a direction that gives us reason to pause.
The latest cause for worry is the potential for global economic mayhem if the US does not find a political resolution to its “debt ceiling crisis”.
In remarks delivered by Vice President Kamala Harris on May 3, she warned that an inability by Congress and the Senate to approve the debt ceiling (pay for bills the US has already spent on credit) would severely damage the US economy and its credit rating.
“A protracted default would likely lead to severe damage to the economy, with job growth swinging from its current pace of robust gains to losses numbering in the millions,” she stated.
When “the US sneezes, we catch a cold” is no idle metaphor; it is very real.
The threat of a major recession in the US, whether it is self-inflicted or not, will be devastating to the economies in the Caribbean. We know what happens when there is uncertainty. Americans stop spending, they travel less, they worry about the future, and the ripple effect would likely be another major global recession.
Once the bottle has been opened, the genie will be released and getting him back in will not be an easy task.
American politicians, more particularly members of the Republican party, are playing with fire. Their juvenile acts of brinkmanship are putting the entire global economy at risk.
The deadline to reach an agreement is nearing and in a matter of days, if the debt ceiling political duelling is not resolved, Treasury Secretary Janel Yellen warned the US government will not have enough cash to pay its debts from as early as June 1.
Our advice to Barbadians is to closely monitor what is happening on the American landscape because it has the potential to upend our lives and reset our gains. ]]>
