Time to level with Barbadians!
Though articulated through a narrative in which there is frequent reference to an array of numbers and concepts which are mostly confusing to the average citizen, economics has more to do with human behaviour than anything else.
It is the behaviour of people, living in a common space and pursuing their livelihoods through interacting with each other, that largely determines the performance of an economy. These interactions dictate what economists call supply and demand, the two forces which wield considerable influence on growth.
Unfortunately, this critical aspect is generally overlooked by policy makers, especially in Government. They tend to focus more on numbers and theoretical models on which they make projections related to growth and other aspects of economic performance, instead of also considering human behaviour and the kinds of stimuli that are likely to get people to respond in ways supportive of national economic objectives.
Next Tuesday afternoon in the House of Assembly, Minister of Finance Chris Sinckler will deliver the Government’s eagerly awaited 2016 Financial Statement and Budgetary Proposals. It could very well be the last before the next general election, if Prime Minister Freundel Stuart decides to seek an early renewal of the Democratic Labour Party’s mandate ahead of the expiry of the Government’s five year term in February 2018.
The Budget speech presents an opportunity for Mr Sinckler to demonstrate that he is sensitive to the human factor and is prepared, as much as is realistically possible, to be so guided in his policy pronouncements. As a clever politician whose ears are on the ground, Mr Sinckler surely should be aware of the prevailing mood in the country.
It is one of despondency which is potentially undermining of the Government’s overriding objective of high levels of economic growth. There is a lot of uncertainty which is hampering effective planning for the future both at the level of firms and households. Evidence also suggests that confidence, a critical driver of economic activity and performance, is not at the level where it should be. There are also questions related to the credibility of the Government in relation to its management of the economy, given quite a number of inconsistencies in its pronouncements in recent years.
After hearing from Government earlier this year that the economy had finally turned the curve, with the suggestion that better days were ahead after seven years of decline or marginal growth, Barbadians were naturally shocked by a statement last month from Central Bank Governor, Dr Delisle Worrell, which was widely interpreted to mean that more austerity with additional taxes was in the offing.
Dr Worrell had disclosed what obviously was a worrying decline in the level of foreign reserves during the second quarter and revealed that the 2016 Budget would contain measures to address this issue. Barbadians have been on tenterhooks ever since.
This pronouncement has triggered considerable anxiety as Barbadians feel they are already overburdened by taxation, especially as a result of post 2013 impositions. Little wonder the private sector is crying out for an ease.
Against this backdrop, the Budget presentation is also an opportunity for Mr Sinckler to give a candid and comprehensive report on the economy that explains, in no uncertain terms, where Barbados currently stands along its continuing journey of economic development.
There are signs that we have reached a stage where the private sector, which is assigned the task of generating growth in our economic model, believes that engaging in business activity may not be fully worth the effort, especially as high taxation sharply eats into profits.
The profitable pursuit of self-interest is what a drives a capitalist-oriented economy such as ours. The feeling of being overtaxed is also dampening the enthusiasm of workers who believe they are working not so much for their own benefit but for the Government. Which probably explains, at least partly, why Barbados is grappling with a problem of declining productivity.
Here are two examples of issues with a negative effect on human behaviour and also undermining of economic performance. For our economy to be placed on a sustainable growth path, Government needs to have the full support and cooperation of the private sector and population as it cannot accomplish this objective on its own.
In the circumstances, the Budget Speech presents an opportunity for Government to level with the country as a whole, including the Opposition, on the economy. Mr Sinckler should seize the opportunity. He has more to gain and little or nothing to lose. Given his pattern of willingness to engage stakeholders over the years, even when political conditions may not be entirely favourable, we have no doubt that he is fully up to the task.