Barbados Governance and Next Steps

Behind every dark cloud is a silver lining.

The respected Bloomberg posted the headline [13/12/2013]  Barbados Debt Higher Than Cyprus Prompts Firing of 3,000. The preamble to the article reads “Barbados will fire 3,000 public sector workers by March and freeze wages as the eastern Caribbean island’s debt burden soars and the International Monetary Fund says “urgent adjustments” are needed.”  BU recalls in 2010 the suggestion to government to consider freezing public sector wages was mooted. In fact Minister David Estwick was publicly rapped on the knuckles for making the suggestion. The late Prime Minister David Thompson addressed the matter of wage freeze in his first press conference in 2010 – see Prime Minister David Thompson’s First Press Conference in 2010.

Where we find ourselves, AGAIN will provoke the usual political cackle from participants in the diluted Westminster system of government  we practice. In fact, leading political scientists and pundits will rationalize the political cackle as NORMAL,  emanating from an adversarial system borrowed from a colonial past.  Despite years of investing i education we have given little thought to changing the system of governance which continues to be a polarising force in a 2×3 country given how irrelevant it has become.

The national discussion will now mirror the tenor of the 90s when another DLP administration took the decision to slash public sector wages by 8% and jettison 8,000 public sector employees. Lessons learned you think? ‘Go to the ant thou sluggard…’.

The BU household always focuses on the part of the issue which Barbadians feel uncomfortable. Perhaps it explains why traditional media and prominent people in society read and contribute to BU but with a hushed involvement. This is the hypocrisy which supports a mendicant culture which is no longer relevant in a today’s world. No more preferential treatment from the More Developed Countries (MDCs) and no more lack of competition from the Lesser Developed Countries (LDCs).

The sending home of 3,000 public sector workers is not the solution to the problems which confront Barbados, it is a manifestation of one of many symptoms which ail the nation.  If there is one issue where there is consensus, it is that our economy has some deep flaws which must be addressed. Even the head of government’s economic advisory council has publicly admitted this to be the case. It seems to BU this was a good place to have started the discussion regarding a strategic economic approach in 2008. Looking forward, where do we go from here full in recognition that there is no silver bullet?

Governor Dr. Delisle Worrell Issues Plea to ALL Barbadians, LET US PLAY OUR PART!

Review of Barbados’ Economic Performance January to June 2013

Text – Review of Barbados’ Economic Performance for the first six months of 2013

Central Bank of Barbados: Political Tool or Facilitator of Economic Development?

Submitted by the Mahogany Coconut Think Tank and Watchdog Group

Sir Courtney Blackman, first Governor of the Central Bank

Dr. DeLisle Worrell, present Governor of the Central Bank

We are not a bit surprised that former Governor of the Central Bank, Sir Courtney Blackman is blaming both the Barbados Labour Party and the Democratic Labour Party for the current financial woes. We are also not surprised, that the current Governor, Dr. DeLisle Worrell, is saying that the existing financial sector stymies or does not support innovation and creative enterprises. In layman’s terms it really means, that those citizens with startup enterprises, cannot get them financed.

Notes From a Native Son: Has the Central Bank Failed to Give the Nation Any Direction on Economic Recovery

Hal Austin

Introduction:
The governor of the Central Bank appears quite clearly to have lost all sense of balance as far as the local economy is concerned. Not only has he been in office for the last five years or so, he is yet to come up with a publicly available reasoned and detailed plan for rescuing the nation’s economy from the situation it is in. His recent obvious confusion about the constitutional role of the Central Bank adds further to the confusion. Even local journalists are confused.

Dr Worrell’s reported U-turn on a policy announcement – a veiled criticism of the government, then claiming the government was on track – was but the latest in a series of embarrassing episodes. But first, we must get the legislation right. The Central Bank Act is irrelevant to the new financial architecture post-2007 and the new global regulatory paradigm. I said before, and say again, that the Act needs serious reform, giving the Bank a legally defined role, on par with the Federal Reserve, Bank of England and all the other major Central Banks. Be that role inflation targeting, financial stability, or even more explicitly, managing unemployment rates, there must be a benchmark against which we could measure the Bank. Now we have a situation in which the governor is publicly expressing views about fiscal policy, and one local website even describing the governor/central bank as the government’s primary monetary and fiscal adviser. Not at all. The central bank should be independent of the government of the day and should be reporting direct to parliament.

Notes From a Native Son: Before Voting, think with your heads and not your hearts

Hal Austin

Introduction:
When the voters of Barbados enter the polling booths on Thursday, it will be an enormous challenge for them to abandon old political tribal loyalties and objectively put the nation, future generations and their own futures before irrationally supporting a party or candidate they have always supported, while suspending reason. The harsh truth is that this is the most testing general election, not only since November 30, 1966, but since the early 1950s and the introduction of internal self-government.

In the new globalised world, there is no turning back for small nation states such as Barbados. New global organisations, such as the World Trade Organisation and the newly re-energised International Monetary Fund, now have power over small states, mostly wrapped up in international treaties, that they have never had before. At the same time, rich and powerful nations are subsidising their farmers and industrialists, such as car manufacturing and farming in the US, farming in the EU, and a long list of state-owned or controlled industries in China, which put further pressure on small states. But we are not just economic people, as a nation we are rounded with equal value given to our social relations, our civic and moral responsibilities and our cultural and creative environment.

Increasing Government Productivity:
One of the biggest drags on growth in Barbados is public sector efficiency, from improvements in technology, competent management to output per person. One only has to read the annual report of the auditor-general to see the extent of public sector incompetence. Take a simple, but important example, uncollected VAT. Value added tax is a sales tax paid by consumers and collected by trades and service people. For convenience, that money is paid to the government at pre-set dates – monthly, quarterly etc. However, in Barbados, there is a huge backlog of payments, of business people failing to handover to government monies collected on its behalf.

Review of Barbados’ Economic Performance for the First Nine Months of 2012

Review of Barbados’ Economic Performance for the First Nine Months of 2012 (Text)

Governor DeLisle Worrell Publishes How to Stabilize and Grow Small Open Economies

Dr. DeLisle Worrell, Governor of the Central Bank

A Joint Caribbean Group met recently with senior members of the International Monetary Fund (IMF) and World Bank. The Managing Director of the IMF Christine Lagarde of the IMF will remember the meeting for the sharp exchanges which are reported to have occurred with the Governor of the Central Bank of Barbados DeLisle Worrell.

Forgotten in the hullabaloo is the fact that Governor Worrell presented to the two international financial bodies a paper which is worthy of national, regioanl and international discussion titled, Policies for Stabilization and Growth in Small Very Open Economies.

Stabilisation Policy with a Fixed but Market-determined Exchange Rate

Dr. DeLisle Worrell, Governor of the Central Bank

The following paper by Dr. DeLisle Worrell, Governor of the Central can be found on the Central Bank’s website in its Economic Review for August 2012. In light of the heavy criticism levelled at the Governor by many of his critics – who have NOT taken the time to publish – BU links to the paper to provide fodder for debate on economic matters.The reality is not many Economists are as qualified as the Governor to speak about small island economies.

Abstract
This paper describes how fiscal policy is used in Barbados to manage the demand for foreign exchange and ensure that the Central Bank is always stocked with adequate foreign exchange reserves to supply the needs of the interbank market. This enables the Central Bank to maintain an unchanged exchange rate through intervention on the interbank market. Sustaining the peg in this way lends credibility to Government economic policy and provides strong incentives to save and invest in the local economy.

Read full paper, page 57

Notes From a Native Son: Bad Economics and Bad Policy-making Are the Root Causes of our Economic Problems

Hal Austin

Introduction:
Recently, the governor of the central bank, DeLisle Worrell, wrote a rather interesting essay for a leading economic website putting a case for small economies, using Greece as the model. Since the governor has avoided any public debate about the sorry state of the Barbados economy, which can be put down to simple rudeness, arrogance or even contempt – maybe he is just busy – his views can therefore be construed as a contribution to the Barbadian conversation by proxy. For Greece, read Barbados.

It can also be read as an insight in to the kinds of advice the governor has been giving his less experienced boss, finance minister Chris Sinckler. In his article, governor Worrell said: “It is now reluctantly accepted at the IMF, the |World Bank and in international policy circles, that these small open economies are disproportionately affected by global shocks that raise import prices and cut demand for their exports, and it is costly for them to build resilience to adverse influences from abroad.”

This view, however, can be and is disputed. Nobel Laureate Paul Krugman and former deputy governor of the Bank of England, Howard Davies, are just two highly influential academic and financial economists to questions the prevailing orthodoxy.