Fixing the economy

When the Central Bank governor gives his report on the nation’s 2012 economic performance in a couple of weeks, the accounting of the economy’s outturn will not be pretty. Some of us will view the picture that he paints as a glass half full and others will view it as a glass half empty.

The facts however, will suggest that the economy is not in good shape and the prospects for 2013 aren’t rosy. Without attempting to pre-empt the governor’s report, I will humbly suggest that as the country turns over a new page, policy makers, business people and residents must endeavour to wring out the old and wring in the new.

Barbados needs a course correction. If a pilot sets out on a particular route to reach a destination, he/she may experience turbulence so severe that it becomes necessary to consult the radar and control tower in order to alter the route. Such action may be required to achieve the initial objective, i.e. reaching the destination safely.

If there is one thing that should be learnt from the current economic and fiscal crisis is that Barbados can no longer afford business as usual. Old policies and programmes must be tweaked or replaced with a new plan of action. Holding strain is a defensive posture that rarely results in success.

What is needed is a vision of the future, the preservation of the gains of the past and the determination to build the foundation necessary to realise that vision. The world has changed and Barbados must change with it or be left behind. I strongly believe that Barbadians have it in them to not only adapt but to get ahead of the curve.

The process of change or growth is not seamless. Indeed, the process of growth could be painful and even disorderly. Much of the change that Barbados needs to undertake will not be pleasant in the short-term. It will be like Buckley’s: “It tastes awful — and it works”. However, I am confident that if we unite and pursue the type of change that most Barbadians voted for in 2008, Barbados will return to a sustainable growth path soon after.

The time is now to utilise our collective intellect, experience and skills to better navigate the current inhospitable global economic environment. Failure to do so will result in greater pain than that which results from our own remedies.

Most of you are seized of the challenges that Barbados is facing; ballooning public debt, an unsustainably high fiscal deficit, unemployment, a rising cost of living and doing business, a high level of taxation, runaway government spending, falling aggregate demand, declining productivity, relatively poor service delivery, globally uncompetitive productive sectors and so forth. Currently the country’s saving grace is the healthy level of Net International Reserves, commonly referred to as the foreign reserves.

In a previous article I discussed some of the pillars of competitiveness: social infrastructure, political institutions, fiscal and monetary policy, the sophistication of company operations and strategy, the quality of the national business environment and of course national endowments.

Mercedes Delgado, Michael Porter et al in a July 2012 NBER working paper described these factors as the determinants of national competitiveness. They are drivers of foundational competitiveness and global investment attractiveness.

Whichever political administration is leading Barbados during the next five years will have to confront the challenge of galvanising the nation in an effort to make Barbados more competitive and much more attractive to global investment.

On the part of the Government, the most immediate priorities should be to eliminate the fiscal current account deficit, boost capital spending in the short-term, gradually reduce the level of taxation, create a more attractive business environment and legal framework for international business, incentivise tourism development, overhaul tourism marketing, diversify the country’s energy mix, reduce the cost and consumption of energy and restructure government by reforming public administration and parliamentary governance.

As I have said before, the existing funding model for tertiary education and health care must be changed. The government is merely prolonging the inevitable. Other transfers and subsidies to statutory corporations must be reduced.

The Transport Board needs restructuring and recapitalising within a broader framework of route rationalisation and a reconstitution of public transport to make it reliable, comfortable and effective. Corporations like the CBC are good candidates for privatisation while others should be scaled down or disbanded.

The civil service is no longer fit for purpose in its current form. Reform is necessary to ensure that it is nimble and responsive to today’s challenges. The civil service needs to be changed to ensure that there is accountability and a high standard of service delivery becomes the norm. This can be achieved without disadvantaging public servants.

As a matter of fact, there are many competent and professional public servants that would welcome a 21st century working environment which rewards effort, sanctions delinquency and provides mentorship and career guidance.

Parliamentary reform is also necessary to ensure that the legislative and executive branches of government are more responsive to the needs and aspirations of the people. The Senate should become an elected chamber that is more involved in drafting and introducing legislation as well as providing oversight of the executive branch. Failing that, I respectfully suggest that it should be abolished.

The administration of justice is also in need of major improvement. The lethargic nature of the judiciary is bad for justice and bad for business. Fine departments like Town and Country Planning should be adequately resourced in order to enable them to respond to the growing demands of physical development in a timelier manner. And for crying out loud, the land registration process needs to be introduced to the 21st century.

Unfortunately this week’s column does not afford me enough space to flesh out more of my recommendations. I will therefore have to pick up on this thrust next week. Until next time, have a nice weekend and reflect on how we can make Barbados a better place to learn, work and play.

* Carlos R. Forte is a Commonwealth Scholar and Barbadian economist with local and international experience.

Leave a Reply

Your email address will not be published. Required fields are marked *