Over-rated

Economist takes a dig at international credit rating agencies

Political economist Dr Don Marshall has sought to downplay the importance of downgrades by international rating agencies, stating they ought not be an accurate “litmus test” for the ability of a government to manage its finances.

“Credit ratings management have become the litmus test to which sovereign debt is made into a problem for government and its management an issue of competence and fitness for leadership,” Marshall told a discussion entitled Sustainable Caribbean Futures: Challenges of Sovereignty and Fiscal Governance at the 3Ws Pavilion at the Cave Hill Campus of the University of the West Indies on Tuesday.

“Here, the quest for investment grade and low debt to GDP ratio represent normal and budgetary correctness and are essential to a government’s legitimation.”

Barbados has suffered 21 downgrades over the life of the incumbent Democratic Labour Party, which took office in 2008.

With every new downgrade by Standard & Poor’s (S&P) or Moody’s, local economists and the Opposition Barbados Labour Party (BLP) question the ability of the Freundel Stuart administration to manage this country’s fiscal affairs.

Three months ago S&P announced that it was lowering its long-term local currency sovereign credit rating on the island to ‘CCC’ from ‘CCC+’.

However, while not specifically mentioning the country’s fiscal outlook, Marshall, the head of the Sir Arthur Lewis Institute of Social and Economic Studies (SALISES), argued that there was much more to the management of public finance than the “limiting parameters” of the international credit rating agencies.

“If the country has lost investment grade, if the country also is marked by high debt to GDP ratios, we see that as a failing mark on the part of the regime. Now I am not saying that there is something fundamentally wrong with that. What I am saying is that when this is privileged as the central preoccupying test of what national governments are supposed to be about, then it runs counter to an understanding that the responsibility of government is to ensure that there is a robust economic, political and social development plan in place,” he contended.

“This business of reducing government to this litmus test is self-defeating. It normalizes a sort of managerial approach to leadership because state leadership is much more than just bringing down the debt.”   

The SALISES head further argued that since the 1990s developing countries have been pushed in the direction of seeking financing from the international capital market, which he described as loan sharks.

He therefore concluded that it was no surprise there was now an explosion of debt, which has adversely affected credit ratings.

“Just know that the international capital markets are waiting not just for individuals but for governments to borrow, and to borrow on the international capital market you need to be rated by credit rating agencies. The same credit rating agency that gave PIGS [Portugal, Italy, Greece and Spain] a AAA rating and led to the financial crisis of 2008 are now supposed to assess the sovereign default risk of countries, never mind that only a handful of countries have ever defaulted,” he stressed.

24 Responses to Over-rated

  1. Heather Cole
    Heather Cole December 8, 2017 at 12:02 am

    Don I refute your arguments. You are giving all economists a bad name. Tell us why we did not need a different set of criteria to be measured by prior to the last 9 years.

    Reply
    • Juanita Blanco
      Juanita Blanco December 8, 2017 at 9:13 am

      Ask him why he is making those statements. Trust me, there is a motive for Mr. Chairman of the NIS board to make such statements.

      Reply
  2. John Everatt December 8, 2017 at 12:19 am

    I am not sure what this economist’s agenda really is but it appears that he is attempting to do damage control for the DLP.

    Reply
  3. Simon Templar December 8, 2017 at 12:29 am

    Don is no economist. All of Don’s academic qualifications are in political scientist. He speaks on economic matters.

    Reply
  4. Saga Boy December 8, 2017 at 2:46 am

    Simon have you ever checked Dr.Marshall’s qualifications? Most if not all social scientist complete courses in economics and enough to be making the sort of comments he makes. If you had checked you would have seen that Don D. Marshall acquired a Ph.D. in International Political Economy from the University of Newcastle-upon-Tyne in the U.K. in 1996. He was promoted to Senior Fellow in August 2005 and his current research projects focus on:
    The Globalisation Phenomenon,
    Offshore Financial Centres,
    Scientific Finance as a discourse,
    Industrial Policy Issues,
    Democracy and Governance in the Eastern and wider Caribbean.

    Reply
    • Leroy December 8, 2017 at 5:12 am

      All those qualifications for nothing.

      Reply
    • harry turnover December 8, 2017 at 7:15 am

      …and he is NOT an Economist.By now you should have known that at UWI certain courses are done for CREDITS ONLY
      Chris Sinckler is NOT an Economist ,that is why he can’t get the Economy fixed…he is a MECHANICAL ECONOMIST…every RH method he tried BREKING DOWN.
      Right now he driving on FOUR FLAT TIRES and just now he gine be pun the rims…..Reserves BREK down…the Economy BREK down…Credit ratings BREK DOWN and communications in the CAMP BREK DOWN too.
      Right now wunna don’t even know if Mara Thompson running or going…everybody is DEM own boss now and the PM in saying nutten as usual.
      Stuart, tek up the stumps and ball and DUN play like Sandie and see how QUICK certain people will fall in line…ya gine sit back and leh DEM mek mock sport at ya…DEM got more to lose than you.

      Reply
      • straight talk December 8, 2017 at 9:32 am

        I totally agree with you this is true true true everything in this country BREK DOWN and everybody in thee DLP camp doing as they like and thee PM can’t say a word.

        Reply
    • Simon Templar December 8, 2017 at 11:24 am

      I know exactly what he is and what he did. He is/was not trained as an economist. The courses that you listed are general courses that could be part of any social sciences degree. Trained economists have to do advanced studies in microeconomics, macroeconomics, econometrics and specialised fields in their areas of interest, e.g., public finance, monetary economics, development economics, international trade, etc.

      Reply
  5. Ali Baba
    Ali Baba December 8, 2017 at 4:58 am

    ok keep down playing, ya just like ya ugly master…

    Reply
  6. Tony Webster December 8, 2017 at 5:07 am

    Nice timing. Purely coincidental, without a doubt.

    Reply
  7. chris hill December 8, 2017 at 6:05 am

    what this man smoking? just another DEM looking to sweeten the mistakes of the Freudel admin.

    Reply
  8. Bradg December 8, 2017 at 6:56 am

    Its ashame that a man with his intellect would allow himself to be used as a political pawn.

    Reply
  9. Saga Boy December 8, 2017 at 7:45 am

    Ali Baba somehow I detect that your references to black people being ugly is racist. Are you Indian or White?

    Reply
  10. Angela December 8, 2017 at 7:56 am

    I wonder what economic qualifications the above critics n of Don have?

    Reply
  11. Roger Ifill
    Roger Ifill December 8, 2017 at 8:17 am

    Spin it all you like.. but you can’t spin facts.

    Reply
  12. roger headley December 8, 2017 at 8:37 am

    I guess that is why Donville appears to be so ‘cut up’ about it.

    Reply
  13. Rory Goddard
    Rory Goddard December 8, 2017 at 9:32 am

    If you read the article and see what he is quoted as saying then there should be no reason to speak negatively about what he has said. He didn’t say the ratings don’t matter, he said they should not be the only way to judge a government’s performance for its people. This government has failed across the board in all areas but that isn’t something that can be known by only looking at the downgrades. What he said makes perfect sense.
    “This business of reducing government to this litmus test is self-defeating. It normalizes a sort of managerial approach to leadership because state leadership is much more than just bringing down the debt.”
    If government put itself in debt to modernize the QEH so people would receive much better and more timely care instead of “stealing” it by giving out of proportion contracts to people; then we would be in the same financial state in terms of servicing our debt but we would also have a much better health care system, which would be a big plus for the people of this country.

    Reply
  14. Audience Member December 8, 2017 at 12:28 pm

    It is really unfortunate that the article is written in a way so as to suggest that the lecture was a partisan statement on the economy. I attended the lecture, which was in no way an apology for government. Marshall was critical of how global governance entities and credit rating agencies reproduce colonial relations of power as they engage developing countries. The problem with the partisan discourse of several of the responses to the article (which is a distortion) is that it (partisan discourse) is ahistorical. He was also very critical of the lack of a diversification and industrial policy by administration, after administration. The journalist failed to capture the international political economy analysis offered by Marshall in which he critiqued local, global and political forces at work in the current configuration of Caribbean economies. To support the argument, examples from across the Caribbean was offered, based on ongoing and published research completed by Marshall.

    The actual lecture was not limited to Barbados but focused on Caribbean development challenges in which blame was assigned to not only credit rating agencies and IFIs, but also to Caribbean governments.

    It is also illogical and nonsensical to assume the a critique of the economy should be left to economists.

    By way of correction, the only non-credit courses that anyone takes at The UWI are foundation and co-curricular courses. All others are graded, are for credit, and affect the class of degree one receives.

    The audience also benefited from a thoughtful discussion of sustainable development and entrepreneurship by Mr Mark Hill.

    Reply
  15. Donild Trimp December 8, 2017 at 3:11 pm

    @Simon Templar –
    I agree Don is not an Economist but you cannot dispute the fact that he is eminently qualified to speak on the matter he was addressing.

    Reply
  16. Lorenzo December 8, 2017 at 5:12 pm

    Dr Don Marshall is a known Dem.,if you check all his speeches they are always in support of this Government and that is a fact,so this latest speech is no exception as I suppose if the ratings were favourable he would have no problem.

    Reply
  17. Winnie Meade
    Winnie Meade December 8, 2017 at 5:13 pm

    Rory Goddard tell me what this goverment do nothing but for there friends and family . Riad bad TaxTaxTaxTaxTax Tax over so much Tax people cannot get there tax return he must stick up for them because he is one

    Reply
  18. Donild Trimp December 8, 2017 at 7:43 pm

    @ Winnie Meade –
    What the hell are you trying to say?

    Stop posting gibberish.

    Reply
  19. Sheron Inniss December 8, 2017 at 8:35 pm

    I think Chris should ask Ri Ri for help. Something that puzzles me too is why we have to purchase stuff from our Caribbean neighbours in USD dollars.

    What makes that $ special. The US is in so much debt yet nothing happens to them.

    I opine it is more about power plays and wanting to own the world.

    Reply

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