Craftsmen of our economic fate

As promised last week, the latest monthly economic letter published by Dr Delisle Worrell, governor of the Central Bank of Barbados, on January 3, 2017, is our topic of discussion for this week.

The title of the letter “We are the Craftsmen of Our Economic Fate” is very instructive, in my view, and one that must be remembered for some time to come. It begs the question, though, of who constitutes the “We” to whom the Governor keeps referring.

The Governor writes: “The foundation for growth is a stable economy, and in Barbados that means a balance between foreign exchange inflows and outflows. We know when we have achieved that balance because in that case we do not have to dip into the Central Bank’s reserves of foreign currency to make up the difference.

He adds: “The country has failed to achieve that balance since 2013, and there remains a need to dampen spending further in order to protect the country’s reserves of foreign exchange. The reserves are what protect us against the devaluation of our currency. The Central Bank remains in a position to provide US dollars at the 2:1 exchange rate to meet
all legitimate needs, if no other source
is sufficient.”

Sunday, January 15, 2017 will be nine years to the day that Barbadians entrusted the Democratic Labour Party with the administration of the affairs of this country. During that time, every single Barbadian residing in Barbados, whether young, old, middle-aged, working, unemployed, retired, persons with disabilities, business people, lower-income, middle-income, high-income, credit unions, you name it, has sacrificed year after year as we have been put through the ringer with tax after tax
after tax.

To assert that “the country”, meaning “we the people”, has failed to achieve the balance since 2013 is an insult to Barbadians.  Further, to even suggest that there is a need to further dampen spending, is to suggest that “we the people” have gone on a spending spree over the last nine years and, therefore, are the ones responsible for the current state of the foreign reserves.

“We the people” have not crafted a single policy over the past nine years.  “We the people” did not print billions of dollars to support public expenditure. “We the people” did not raid the National Insurance (NIS) Fund. “We the people” did not use the sinking funds (monies set aside to repay principal on outstanding debt) to finance government deficits.  “We the people” did not give millions of dollars in concessions to retail and hotel establishments only to introduce taxes on ourselves to recover the said revenue losses.

“We the people” have endured a significant fall in our standard of living as prices have risen substantially while incomes have either been reduced or, at best, remained the same. “We the people” have put up with poor water and sanitation services where such things were taken for granted. “We the people” have suffered through the literal deterioration of the road infrastructure right before our very eyes, yet we are told potholes save lives and are transitory inconveniences.  “We the people” have put up with significant delays in receiving our tax refunds.

So, I ask again, who is this “we” that are the craftsmen of our fate? It certainly isn’t me and I’m pretty sure it’s not you, faithful readers. The simple answer to my own question is this. Freundel Stuart, Christopher Sinckler and Delisle Worrell are the craftsmen of the economic fate Barbados is in at the moment.  They are the primary ‘WE’ and are assisted by Richard Sealy, Denis Kellman, David Estwick, Denis Lowe, Donville Inniss, the two Lashleys, and the other members of the Cabinet.

My last article for 2016 questioned the state of the foreign reserves and the extent to which freshly minted cash was received by the Bank during the last week of 2016.  I don’t believe in coincidences, but the governor of the Central Bank should know that increasing the money supply to help Government finance its deficit is the primary reason that rumours are going around Barbados about the possibility
of devaluation.

This is perhaps taken more seriously now because of the statement that the Bank remains in a position to protect the 2:1 currency rate to meet all “legitimate” needs. Who determines or defines “legitimate”? Clearly the answer to that question remains the craftsmen of our current economic fate until the people of Barbados determine otherwise.

As a practising economist and certainly now as a Barbados Labour Party candidate, I want to make it abundantly clear that whilst I cannot escape the debilitating effects these craftsmen have had on our economic fate, I will not take any responsibility nor would I want to associate the BLP with any of it.

I am prepared to take ownership of rescuing Barbados from these craftsmen because individually and as a party, we have not just provided alternative policies to the country but have indicated time and time again over the past nine years, that the policies being pursued by the current craftsmen would lead us to right where we are.

I recall my very first article for this publication entitled “The fear of being right” published on June 5, 2015, not so long ago. As we enter the 10th year under the stewardship of the DLP and knowing that a general election looms large, their impulse will be to attempt to win at all costs. This reality, along with the importation of fresh money in December 2016 and the publication of the Central Bank governor’s latest economic letter, have heightened those fears expressed when I wrote my first article.

The current craftsmen of our economic fate should do the honourable thing and step aside.

(Ryan Straughn is a UWI Cave Hill and Central Bank of Barbados-trained economist and the endorsed BLP candidate for Christ Church East Central. Email: straughn.ryan@gmail.com)

4 Responses to Craftsmen of our economic fate

  1. Veroniva Boyce
    Veroniva Boyce January 14, 2017 at 12:33 pm

    Craftsmen of POTHOLES!

    Reply
  2. Sydonette Dennie
    Sydonette Dennie January 14, 2017 at 12:57 pm

    Economist need to loose the belt a little by and minimize the tight hand regulations so one can breathe more and have a bit more foreplay so that the economy can be stimulated and grow. It is very stupid that regulations are put into place to monitor the behavior of every dollar in a country.

    Reply
  3. Hal Austin January 14, 2017 at 1:04 pm

    Economic stability economy is about steady employment, stable prices and inflation targeting. Not the myth of foreign exchange inflows and outflows.
    We cannot change these macro-economic rules to tickle our fancy. Economic voodoo is still voodoo, we can call it obeah if we like.
    As I have pointed out on another blog, we must be clear what the reserves are for, not some mythical three monthly imports.
    That can be met through the currency futures markets by hedging in a rolling quarterly sequence.
    The world has been doing this since the 1980s, that is why the global financial sector is now valued at about US$1quardrillion. derivatives alone are valued at about US$700trillion.
    But the most important role of the foreign reserves are to meet what actuaries call a once in a 200 year event ie bird flu, the much hyped millennium time bomb, etc.
    Barbados has not had a once in a 200 year event since Sept 22, 1955, and even then it was no great economic threat to the nation. Times were tough, as the governor well knows, since St Giles school was tuned in to a hurricane shelter and we had to go to St Barnabas part-time.
    The other use of foreign reserves, which the governor presumably means, is meeting any threat from capital flight or sudden rises in the cost of essential commodities.
    That too can be met through de-pegging from te Greenback, the cause of the massive internal devaluation of the Bajan dollar, and hedging to a basket of currencies and commodities.
    In 1973, when we first pegged, the dollar was the only reserve currency in town; the pound sterling was weakening daily.
    But times have changed. The dollar is till the most important reserve currency, but the yuan/renimbi is doing good trade in Asia and growing in Europe; and despite the soothsayers, the euro will recover and prosper unless something really disastrous happens. The US share of global trade is diminishing; north/south trade is also diminishing; we are now at that historical juncture when south/south trade is growing.
    What the governor can do for Barbados as a nation – similarly to all the major central banks – is to publish the central bank’s methodology. It you put nonsense in, you get nonsense out.
    Instead of leading a national debate on the economy the governor has retreated in to his bunker, coming out occasionally to have comic discussion with radio phone-in hosts and comedians.

    Reply
  4. Joel C. Payne
    Joel C. Payne January 14, 2017 at 11:28 pm

    Led by the downgrades shop.

    Reply

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