Challenges and options
Devaluation in and of itself does not have the ability to destroy the social and economic fabric of a country. More than devaluation, it is what can be termed the intellectual simplicity at best and intellectual dishonesty at worst of the leaders of a country that will determine the fate of a challenged society.
First of all, let me issue a disclaimer here that I want to treat this week’s article as a think aloud session. This discussion is out of my field of professional competence and, therefore, I am attempting my layman’s perspective instead of any prescriptions or historical facts. In fact, there seems to be a significant historical gap still existing in literature which analyzes the causes and effects of the major devaluations we have seen in sister CARICOM territories. This is a critical gap in the historical account of the Caribbean civilization and should be treated posthaste.
Let me add, too, that I think it is a grotesque historical inaccuracy to refer to the devaluations of the Jamaican, Trinidadian and Guyanese currencies as if they were a singular event sharing contiguous precursors and outcomes. Even if only an examination is carried out at a chronological level, the three devaluations happened quite separate and distinct from each other. Jamaica’s devaluation began in 1973. It was not until 12 years later that Trinidad and Tobago faced devaluation in 1985 and then Guyana three years later in 1987.
In many cases, the devaluation of a currency and reaching an agreement for balance of payment assistance or refinancing with the International Monetary Fund (IMF) are packaged as one and the same catastrophic and destabilizing phenomenon. Notwithstanding, the experience of Jamaica, Trinidad and Tobago and Guyana all bear out a different reality. Jamaica’s monetary devaluation started in 1973 but they did not officially enter an IMF agreement until 1977.
Trinidad and Tobago was one of the only countries in the Caribbean which was not engaged in any IMF or other international financial programme during the 1970s or 1980s. Their reason to devalue was a strategic one perceived to make their export industry better suited to compete. When Guyana devalued its currency in 1987, it was under President Desmond Hoyte’s homegrown strategy dubbed the Economic Recovery Programme.
If we are making comparisons of the economic routes taken by Barbados and Jamaica and Guyana, in particular, we find that Barbados has already done at least two of the things done by these two countries before their economic collapses. Barbados and Jamaica printed money to support government expenditure and all three attempted internal devaluation mechanisms. Some may suggest that these types of decisions set the outcome of what happens in a challenged economy more than devaluation in and of itself.
Just like IMF programmes and devaluations are not inextricably linked, devaluations and social fallout are not in a casual relationship. The devaluation in the three Caribbean territories of Jamaica, Trinidad and Tobago and Guyana did not happen in a vacuum. Each of the three countries had some kind of social turbulence which went before the restructure of the currency value and which, to my mind, had greater bearing on the subsequent social fallout.
As recently as 2015, China made the strategic decision to reduce the value of its currency by two per cent. The adjustment did not automatically lead to social upheaval in China. This is because China’s social system was not already under any significant pressure.
It is not lost on me that China has a stake in world power in a way that Jamaica, Trinidad and Tobago and Guyana have never had. However, that point in itself has a counter consideration. That consideration is that perhaps the social demise of Jamaica, Trinidad and Tobago and Guyana was not solely under their purview to control.
We know that during the 20-year period between the 1960s and 1980s, people were fleeing Guyana because of the complicated political situation. Guyana attracted the attention of the United States of America as it was perceived to be communist leaning. Jamaica and Trinidad were young societies trying to create space in the multi-million-dollar industries of bauxite and oil. These types of circumstances bring international attention to small vulnerable spaces.
These are some of the thoughts engaging me as I consider our own situation in Barbados. Those commentators who continue to preach an overly simplistic message that devaluation will destroy the Barbadian society are doing more harm than good, in my estimation. Barbados is at the point where we have spent more money than we have earned. We continue to spend more money than we earn. This situation is untenable and it has to be brought to an end.
The point is that whether we make the adjustment by devaluation or whether we make the changes by structural adjustment, we have to make changes. Further, there will be significant social displacement in the Barbadian context, exactly because we are in no better a position to control our destiny than Jamaica, Trinidad and Tobago or Guyana were. The social displacement, though, will be a progression of social fallout which has been creeping along on a gradual but upward trajectory in Barbados for some time now.
So, using the experience of Jamaica, Trinidad and Tobago and Guyana, what serious Barbadian leaders would be doing at this juncture of our reality is using the experience of the fallout from the social challenges of the 1970s and the 1980s to plan. The question we need to pose is how we can ensure that the structural adjustments which are needed do not result in the further growth of what I call a culture of poverty and desperation in Barbados.
The social fallout of the structural adjustments which took place in various Caribbean societies in the 1970s and 1980s were so steep and so ‘dollars and cents’, as opposed to human-focused, that they caused severe psychological shock. People found their standard of living and their routines unrecognizably altered. Simultaneously, the social issues which were plaguing the societies found space to deepen. An example is the pervasive use of cocaine which Jamaica was grappling with in the 1970s and the associated crime and unrest the event caused.
The prolonged period of social and economic adjustment has challenged the psyche of the people of our three sister territories. They were not born worse than us or more ‘wicked’ than us. The reason why more of them risk to pedal drugs into America and other territories than Barbadians is because they have faced social displacement and economic stagnation longer than Barbados has. There is nothing to stop the Barbadian psyche from progressing to the same point – unless, of course, we start a social engineering strategy.
Such a strategy is long overdue in our history and is, in my view, a part of the reason we are facing an economic crash now. We should ensure that we get maximal benefit out of this fallout. Just to say that devaluation destroys society is painfully vapid. Structural adjustments, like periods of boom, are simply historical cycles. In fact, perhaps we can see Trinidad and Tobago’s devaluation as one caused more by their oil boom than the balance of payment crisis we find ourselves in in Barbados. What matters more than where a country finds itself is how the position it finds itself in is managed. Who is managing us?