No one can deny that Caribbean countries continue to suffer from various serious problems including low and sometimes negative economic growth rates, huge and rising fiscal deficits, mounting and unsustainable public debt, increasing levels of crimes, high and growing unemployment particularly among the youth, and emergent frustration among citizens.
In response to these problems, some governments have been implementing structural adjustment programmes with and without the direct involvement of the International Monetary Fund. Other governments have undertaken belt-tightening reforms by containing the growth in public expenditure through wage freeze or small salary increases.
And some governments have adopted a wait-and-see approach, hoping that the recession in the international economy that has affected domestic economic activity will soon be a thing of the past, allowing the countries to return to sustained levels of growth and development when the global meltdown it is all over.
Whatever the approach taken, several lessons are clear. First, as small countries, we have to limit the size of our governments to what we can afford. The days of running up huge fiscal deficits on the current account are over. Second, borrowings have to be undertaken to facilitate capital projects, not for consumption. Third, the private sector has to be the main driver of economic activity and employment generation, not governments.
Fourth, our economies must be diversified to move them away from their current dependence on one or two major sectors and foreign countries as main trading partners. Fifth, our educational systems must be reformed to make them more flexible and durable to allow our economies to reposition themselves to take advantage of the movement from the industrial age to the digital age.
Economic difficulties
To date, many Caribbean countries seem to accept that their current economic difficulties are the result of a weak global economy. In short, many in our part of the world believe that once the global economy rebounds, then, our economic fortunes will be reversed. While that might very well be so to some extent because of the highly open nature of Caribbean countries, the strengthening of the global economy alone will not resolve many of the structural problems facing our countries as documented earlier.
In other words, even if the global economy fully recovers, we in the Caribbean still have to ensure that we do not allow big governments to reign again, that our borrowings are done for productive purposes, that our private sectors be given the right incentives to expand, that our economies are restructured to reduce their dependence on tourism
and international businesses, and that we produce educated workforces with the skills necessary to survive in an information and knowledge age. But, do we actually have the discipline to do so?
Imagine a scenario where growth in the global economy takes off, led by the United States and other leading capitalist economies in the western world. Consequently, tourism in the Caribbean starts to expand rapidly, international businesses increase significantly, remittances improve drastically, exports begin to surge, our economies start to grow, unemployment falls, our fiscal and debt situations improve rapidly, and optimism heightens.
Under those conditions, will Caribbean countries implement required economic reforms to ensure sustainability or will they allow optimism to ruin the day? Just food for thought.
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