The PM’s ‘recession’ scapegoat
“We don’t have recessionary conditions here because we are wicked, or because we want to cause anybody distress, or because we like to play Snakes & Ladders with people’s emotions,” Prime Minister Freundel Stuart last week told business executives attending the first monthly meeting of the Barbados Chamber of Commerce and Industry (BCCI)
In a speech that came across more like an economics history lesson instead of a clear-cut articulation of Government-crafted solutions, which would have been more preferable in the circumstances, Stuart pinned blame on what economists call “external shocks” for the challenges that have stymied economic growth under his Democratic Labour Party
“We have recessionary conditions in Barbados because from the 1640s, this country’s economy was tied up with the economy of the United Kingdom, later with that of the United States . . . and with that of Canada,” Stuart posited. “From the 1640s on, that has been our reality and whenever we experience profound recessionary periods here, that experience has been traceable to what has been going on in those three countries.”
Anyone who understands the inherently disadvantageous position which Barbados has historically occupied in the global economy, would hardly disagree with Stuart’s basic analysis, even though, admittedly, he or she may find it a bit limited and one-sided in explaining the problem. Stuart’s assessment, however, is not altogether correct.
While it is true that Barbados is at the mercy of the global economy to some extent, a country still has the option of crafting appropriate policy responses to mitigate any negative impact. A country, therefore, is never totally powerless.
However, Stuart got it wrong about Canada in this particular instance. During the latest Great Recession which began in December, 2007, and officially ended in June, 2009, but which the Dems continue to blame for Barbados’ economic ills, the Canadian economy performed comparatively well while the economies of Britain and the United States were in the doldrums.
It was the result of effective policy responses adopted by the late Minister of Federal Finance Jim Flaherty and Central Bank Governor Mark Carney. Britain subsequently snapped up Carney to run its Central Bank.
Stuart’s BCCI address was reminiscent, in some ways, of the discourse of a dependency theorist back in the 1970s. Dependency was a Marxist-influenced school of economic thought that emerged in the 1950s through the pioneering work of Raul Prebisch, then director of the United Nations Economic Commission for Latin America. It peaked in the 1970s under scholars like the Brazilian Andre Gunder Frank, but is hardly ever discussed today, except maybe in some development economics classes.
The gist of the dependency argument was that a post-colonial developing economy like Barbados’ stood on the “periphery” of the global economy, to use the school’s terminology. “Periphery” economies were designed to cater to the needs of developed countries in the so-called “centre”, leaving economies like Barbados’ at the mercy of external shocks.
The solution advanced by dependency theorists was for developing economies to delink from the global economy and pursue self-sufficiency through the import substitution economic model which also is no longer in vogue, except in the St Lucy-grown theory of Kellmanonics.
For the DLP to continue blaming the global recession for Barbados’ current difficulties, even though the recession ended almost seven years ago, is not only insulting to knowledgeable people but also tantamount to flogging a convenient scapegoat to obscure the regime’s failings. If a government is capable of thinking creatively to come up with innovative solutions, it is never helpless in the face of adversity.
Instead of displaying a “can’t do” attitude which comes across quite often from this Government, adopting a Vergil-inspired Possunt quia posse videntur (They can if they think they can) approach would make a big difference. Winning always begins with the adoption of the right mindset.
The recent experience of neighbouring Grenada offers a few important lessons. Its economy, which was in the doldrums three years ago, has started to make a remarkable turnaround. The Keith Mitchell administration, which took office the day before the DLP was re-elected to a second term on February 21, 2013, also had to confront a heavy debt burden, a crippling deficit and sluggish economic performance.
Like Barbados, it too opted for
a home-grown economic adjustment programme supervised by the International Monetary Fund (IMF). What were the results?
While the Stuart administration generally behaved as if it could succeed in turning around the economy without engaging key stakeholders and the general populace to secure buy-in, the Mitchell administration recognized the critical role of communication –– a point I have underscored many times in this column.
This approach has paid handsome dividends. The debt has declined significantly, unemployment is down, and the economy, which was expected to grow by 3.1 per cent last year, is back on a strong path. Grenada was described last year as having “the best performing economy” in the OECS subregion.
“The first point that needs to be made is the fact that we had to get buy-in from the population as a whole,” Prime Minister Mitchell told reporters during a mid-term interview to discuss the economy’s performance.
“The Government can lead but without the support of the stakeholders and the people as a whole, it would be extremely difficult to achieve any serious success . . . .
“Being able to get the understanding of all the social partners that this is our country and the country must be placed first despite our differences . . . must be the major factor for the changing fortunes of the country’s fiscal and economic situation.”
A second important success for the Mitchell administration is that it achieved fiscal stabilization and simultaneously positioned the economy for take-off. While fiscal stabilization was achieved in the case of Barbados, economic growth has remained sluggish at 0.5 per cent last year.
Mitchell explained: “You must have fiscal stability if you are going to have serious economic activity in any country and being able to reduce the monthly fiscal deficit from around $18 million to [just over] $1 million would have been a major factor.”
He went on: “. . . The [homegrown adjustment] programme [also] had a number of variables [dealing] with the question of growth because although you may achieve fiscal stability, if you do not have the measures to grow the economy, you could still be in trouble . . . . By achieving fiscal stability and a level of economic activity, investor confidence continued to grow and that was a major factor in economic activity. You can see that in local investors who are now taking risks [which they were not taking before].”
It is my submission that the DLP aggravated the condition of the economic patient by failing to administer the correct dosage of medicine in a timely fashion. Had this been done in 2012 when the country was in election-mode, Barbadians might have been spared the severe pain they have had to ensure as a result of the knee-jerk response to a seemingly overwhelming crisis that surfaced immediately after the 2013 general election.
In 2011, it was clear that the Barbados economy was battling a severe cold from the shocks of the recession. By 2013, it had developed pneumonia and had to be admitted to the Intensive Care Unit. The patient today is stabilized but not yet out of the woods. This year will be critical in determining the true extent of the recovery.
(Reudon Eversley is a political strategist, strategic communication specialist and long-time journalist.