Should we be selling off the family silver?
Amid growing discussion about privatization of state assets, two interesting stories were reported by Barbados TODAY in yesterday’s edition – one on Minister of Industry Donville Inniss and the other on entrepreneur Gabriel Abed.
Mr Abed, who runs a digital solutions company, told a Barbados International Business Association-sponsored panel discussion in the Grand Salle of the Central Bank on Tuesday night, it was time to bring back a local bank.
His argument was that the reintroduction of an indigenous bank was an answer to the threat of the loss of international correspondent banks, and to satisfy a number of growing local financial needs.
“We don’t have a national bank in Barbados, we have foreign banks. What I would like to see is an update to our Financial Services Act to amend it to include a Part Four type of bank, which can partly fit under the Part One, but particularly as it relates to a payment bank,” Mr Abed said.
The sale of majority shares in the then Barbados National Bank (BNB) to Trinidad & Tobago’s Republic Bank by then Prime Minister Owen Arthur in 2003 was an unpopular decision among Barbadians, who had something akin to an umbilical connection to the indigenous bank. It remains very much a sore point to this day.
In fact, in the campaign for the 2008 general election, the then Opposition Democratic Labour Party (DLP) promised to buy back the BNB. It struck a patriotic nerve. However, by 2013 the administration had sold its remaining shares in the bank to Republic.
What makes Mr Abed’s call fascinating is that it runs contrary to what an increasing number of people – mostly economists, but not just economists – are recommending: privatization of state assets.
Which brings us to Mr Inniss. In an address at the opening of the International Business Week conference at the Hilton Barbados Resort yesterday, the minister left no doubt where he stood on the matter.
“My simple position is that the State must move with greater alacrity to devolve itself of some of the services and goods it currently provides and let a bolder, more imaginative and efficient private enterprise provide such services . . . . Perhaps there is a philosophical divide here, but let there be no doubt as to where this minister stands on this matter.”
When Arthur sold the majority shares in BNB, he was accused of selling the family jewel. Privatization has since become such a dirty word, with which the Opposition Barbados Labour Party was plastered leading up to the 2013 election. This makes Mr Inniss’ emphatic position even more riveting, since it shows that at least this one member of the ruling DLP has openly abandoned the pre-election pledge not to privatize. Pragmatism? Maybe. Some might even say it was self-serving.
Perhaps the one person who most eloquently appealed against “selling off the family silver” was the former British Conservative politician Harold Macmillan – who served as prime minister between 1957 and 1963 – when he blasted then prime minister Margaret Thatcher’s privatization exercise with such aristocratic contempt.
“The sale of assets is common with individuals and the state when they run into financial difficulties. First the Georgian silver goes, and then all the nice furniture that used to be in the saloon. Then the Canalettos go.
“Modern economists have decided there is no difference between capital and income. I am not so sure,” he said at the time, making reference to 1929 when some friends had failed to make that distinction.
“For a few years everything went well, and then at last the crash came, and they were forced to retire to some dingy lodging-house in Boulogne.”
Privatization ought not be the dirty word that it has become. However, if any lessons are taken from Mr Macmillan, it is that we ought not be hell-bent on shedding off state industries as if there were no tomorrow. And worse yet, at knockdown prices.
True, selling state assets will bring in much-needed cash, which will help for a year, probably. However, does it solve next year’s problems and those of the following year when we still have to fund services such as education and health care? Or do we, as Macmillan said, keep selling more and more? Must we privatize schools, hospitals, national insurance? What price are we as Barbadians willing to pay?
For, although Mr Arthur might disagree, as the sale of BNB has shown, the taxpayer seldom comes out well from these sales.
Nonetheless, Government may want to take a very close look at all the state agencies and determine which ones do not really serve the public good, cognizant of the fact that stripping everything public to bare bones will do little to solve the fundamental problem that brought us to our current situation.
The agencies that live off the public purse must be made to be accountable and efficient. On the other hand, the politicians must set policy and stay away, and allow professionals to do their jobs.
The debate on privatization is a useful one that we encourage. However, we must be careful not to over-reach and place ourselves in a position where we are still in a financial mess, but with nothing left to sell.