It is widely believed that Barbados’ path of economic growth and social development was simply due to having good leadership. Indeed, this country can boast of such for the most part.
But good leadership requires not just an ideology but an understanding of what is pragmatic. It is in the sense of the latter that the colonial experience left behind some critical structures such as the legal, parliamentary and civil service.
In addition to the above, the British imposed a budgetary system that demanded either balance or surplus as its way of achieving good housekeeping. On one obvious occasion with the building of the Deep Water Harbour under the Grantley Adams administration, Barbados was allowed to borrow from abroad and run a fiscal/budget deficit. This was done with pride and so from very early the country had a good name.
On the attainment of Independence, the Government abandoned the pursuit of balanced budgets and went for fiscal deficits to accommodate its mission on building out the country’s infrastructure. A change in ideology was also met by a new pragmatism that would serve Barbados very well in the post-Independence period.
This pragmatism was first associated with Errol Barrow, who in his 1971 Budget speech, outlined two major elements of what would become the Barbados model – economic growth and current account surpluses – when he said the following: “I am an unrepentant product of the Keynesian revolution in economic thought. My confidence in this approach . . . has been more than fortified by the steady, relentless growth of our economy and the accumulation of surpluses, which has assisted in defraying part of the cost of our capital expenditure during the same decade.”
In this quotation, Barrow is speaking to the importance of growing the economy and its implications for assisting the Government in raising revenue and generating surpluses on its current account. He recognises the relationship between economic growth and the growth in Government revenue. These represent two most important policy targets for any Barbados Government, to which may be added a fixed exchange rate.
Once these two targets are achieved, employment is possible in both the private and public sectors in a way that is sustainable. Economic growth is usually accompanied by employment creation in the private sector and Government current account surpluses make employment in the public sector possible and sustainable.
There was a deep and abiding ideology associated with the Barbados model that is the current generation ought to make a contribution to the permanent assets of our country.
In this regard, Prime Minister Barrow articulated: “These [current account] surpluses, when added to the annual charges of debt, constitute this generation’s contribution to the permanent assets of our country. The total actual capital expenditure during the development decade [1961-1970] was $94.5 million; the surpluses available were of the order of $29 million so that they underwrote approximately one-third of our capital expenditure during the period.”
When both economic growth and current account surpluses are achieved, the country is on course to creating wealth and the current generation is in a position to make a contribution to the country’s permanent assets.
Since 2008, the current administration has abandoned the two major elements of the Barbados model. It has accumulated $2.932 billion in deficits on the current account. In fact, this figure is more than the $2.440 billion in surpluses by all Government between 1966 and 2008. In addition, it made no effort to grow the economy, choosing instead to tax and spend in the wrong areas.Â
Prior to 2008, the Owen Arthur administration added to the simple fiscal principle enunciated by Errol Barrow, by imposing a limit on the fiscal deficit. He targeted a fiscal deficit of 2.5 per cent of GDP. This showed an appreciation of the constraints to financing fiscal deficits in the Barbados economy, as well as its importance in maintaining the fixed exchange rate anchor.
Post 2008, all of the major elements of the Barbados model, with the exception of the fixed exchange rate, have been cast aside. The result has been a significant setback for the economy, businesses, households and some of our major institutions.
As a result, Barbados’ path of economic growth and social development, so jealously guarded since Independence, has been reversed by at least a decade. This is evident not only in the lack of economic recovery, but the lack of access to health and education services as obtained in the past.  Â
Poor leadership, lacking in ideology, is the major fault for the country’s reversal.
• Clyde Mascoll is an economist and Opposition Barbados Labour Party adviser on the economy.
