The fear of being right
I am very excited to join the Barbados TODAY writing team, and hope to make some contribution to the level of discourse, whether in a rum shop in Baxter’s Road, brothel in Nelson Street, lime in Oistins, or wherever else people congregate.
Admittedly, given that I am a practising economist, people instinctively assume the only thing I can discuss has to be related to economics, or the state of our public finances, but I will use this space, yes, to touch mainly on economic issues, but also to examine some social, cultural and perhaps psychological issues that seem to have taken firm root in our society.
However, let me establish that when I am required to speak or write on any subject matter, I do so with little expectation that anyone will agree with anything I may espouse. That is not to say one is being deliberately provocative, but as an economist trained to understand the interrelations of systems, it is in my DNA to see the broader picture and the potential ramifications on interventions, whether positive or negative. Having benefited from taxpayer-funded university education, I feel compelled to share some insight about my profession. Not to do so would, in my view, be an abdication of the civic duty which all citizens owe their country at some point in their lifespan.
Economics and economists, by extension, are not very sexy; yet our broad skill set touches every aspect
of our lives.
At the individual level it covers areas such as religious practice and beliefs, the utility of personal relationships, as well as our provision of labour in the marketplace, just to name a few. At the level of the society, our skill set also covers policy-related issues in areas such as transportation, health, education, industry, competition and so on.
We use jargon like micro which refers to the individual level and macro when referring to the societal
or national level. Naturally, both the micro and the macro are connected, and it is the job of the economist to first understand the nature of these interconnections and then to communicate these connections to respective parties.
Most of the empirical research conducted over the past 30 plus years has focused almost exclusively on macro issues such as balance of payments, fiscal policy, exchange rate regimes, inflation and the like. Almost all of it has been published in some journal, or annal, or working paper series, completely inaccessible to ordinary people.
Quite frankly, the ordinary citizen may not be interested in our research because it may be perceived as something highfalutin, or simply an academic exercise with no clear application or explanation as to how
it affects the price of milk.
As I analyse my profession, I observe a set of people (highly motivated to publish and certainly qualified to do so) who by nature of our focus on macro issues have developed behaviours suited to the adoption of a “wait-and-see” approach. By definition, the macroeconomist relies heavily on the release of official data in order to help explain what and why some particular outcome materialized. This is not necessarily a bad thing; but in a crisis one has to be much more dynamic.
Also embedded in the psyche of the macroeconomist is an affliction with classifications. We love to classify things, no matter how mundane. We even classify ourselves, using terms such pre-classical, classical, neoclassical, Keynesian, monetarist, socialist or Marxist, and so forth, to represent the various schools of thought that exist within the field.
For me, personally, I am an interventionist by nature (you see, even I am afflicted), meaning I prefer to get my hands dirty in order to influence a particular outcome, rather than wait until afterwards to then try and figure out what just happened. This requires having a more than healthy dose of pragmatism.
Though one is trained to read and practise economics, we have our individual biases, and as such can sometimes find ourselves wedded to ideology. I do not hold fast to any particular school of thought or ideology in the field of economics. Being a pragmatist wouldn’t allow for that, even though there are some truisms, otherwise known as facts, that cannot be denied no matter your persuasion.
I view these schools of economic thought as mere tools to be stored in my economics toolkit for use at the appropriate time. The same thought process should apply to economists, as it would to any carpenter, in their decision to use a hammer versus a screwdriver. I believe the task of the 21st century economist must be to discern what policy is most appropriate to fit a continuously changing global environment, whilst acknowledging some overriding constraints together with suitable engagement of citizens.
Having been trained first as a macroeconomist, the interventionist in me causes me to view myself more these days as a microeconomist, getting my hands dirty in the trenches with businesses, individuals and other entities with a clear view to shaping their fortunes. I tell people that I learned the practice of economics at the Central Bank of Barbados, a fact of which I am not yet ashamed.
In those days (just over ten short years ago), the Central Bank I knew engaged the public openly; economists were economists and engaged management of the institution in robust debate on monetary policy and financial stability first, balance of payments and fiscal issues second, with a firm view of growth prospects, whilst keeping account of the debt situation.
This engagement was important because the work we did ultimately found its way into both monetary policy of the Central Bank and fiscal policy of the Government.
In more recent times, I have had to ask myself who and/or what is informing public policy. It appears to me that something very fundamentally has gone wrong with our policymaking framework in Barbados. We seem to be the only country in the world that does not want its economy to grow.
Recent announcements regarding the requirement for tax clearance certificates in order to conduct business in foreign currency is nothing short of ridiculous. Administrative measures like these have the potential for creating anomalies in the market for foreign exchange particularly, given the proliferation of unannounced changes emanating from the BRA.
The reality is that the state of being tax-compliant today is not the same as it was yesterday, and certainly will not be the same tomorrow. I can see firms and individuals bypassing the formal banking system and utilizing other means, which would eventually serve to keep foreign exchange out of the system. Companies that transact foreign business would likely choose to keep increased stocks of foreign exchange overseas.
To me, none of this makes sense in an economy still struggling to recover. To me, none of this makes sense when businesses are crying out for better facilitation. To me, none of this makes sense if growth is your primary focus. To me, none of this makes sense if you are serious about improving the prospects for tax revenues.
The signal which I have received from this latest measure is that Barbados has reached a stage in our economic crisis where we are now officially rationing foreign exchange. I am always prepared for the possibility that my assumptions may be incomplete, due to some piece(s) of information currently unavailable to me.
My gut tells me I may be right. My training in economics tells me I may be right. What I must reconcile in my mind is how to rationalize and deal with the fear of being right.
(Ryan Straughn is a UWI, Cave Hill, and Central Bank of Barbados-trained economist.