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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.

3 Responses to Time to level with Barbadians!

  1. Tony Webster August 13, 2016 at 5:26 am

    Dear Ed: You KNOW I is dumb…so please, ah beg you….AND de Bo$$man: doan “adumbrate” me no mo’. Jes’ like The Dipper used to do it pon’ TV: look me straight in muh face, and tell me de trute; de whole trute; and nuttin but de trute.

    Lord…how I miss dat man…and M50 park-up…jes’ up de road from me.

    • Tony Webster August 14, 2016 at 4:36 pm

      @Hal Austin: I have wondered much the same myself: what text is used to anchor economics 101, hereabouts, and nowabouts?
      One however has to be careful about throwing out the bath-water, …with the baby, as without some foreign reserves for trade and industry nvestment flows, God help us: barter? Bitcoins? One (teeny-weeny) sympathy I confess for our Hon. Min. Finance, is that in seeking to correct long-standing, ingrained, wrongheaded, fundamental, and downright calamitous bad-habits of the socio-economic kind, without upsetting the daily bread cart…is that any brash practitioner of the dark arts will find this as easy as juggling sixteen scalpels directly over your treasures… while wearing a (very) thin kimono.
      Not me, bohsie!

  2. Hal Austin August 14, 2016 at 7:18 am

    This argument is economic illiteracy. Nevertheless, what economic growth model does the ministry of finance and the central bank use?
    What is the role of foreign reserves in the national economy? What, after eight years, is this government going to announce that it has not had an opportunity to introduce previously?
    Barbadian opinion-formers suffer from an advanced case of group think. They all sing from the same song sheet, even if the notes are skewed.
    We need a free market of ideas, and the vehicle for this are the various media. Ate present they fail the people. There is a wide world out there with different economies using different economic models on which to base their growth.
    We also have students, notably at Manchester University, who are demanding that they be taught a new form of economics because the old forms were blind to the 2008/9 crisis.
    That is how we progress from generation to generation. Not regurgitating the obsolete ideas of aged professors who graduated in the 1960s when the world was a different place.
    Graduates who have a vested interest in peddling the same economic nonsense, in particular about foreign reserves, since that is what they were taught and graduated in.
    To rejected these theories, this body of knowledge in which they are learned, is to reject years of education.
    That is the problem with education by rot, read and remember what the experts say; whereas a critical education prepares one to challenge dominant ideas.


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