Polarised politics

The truth is the Barbadian political landscape is far more polarised than is admitted.
In the face of compelling facts, the varied positions of commentators ought to be informed by different philosophical positions, but no, for the most part the difference seems political. Furthermore they are some who are seen as politicians first with a profession second, then they are the others who are able to mask the politics. 
My view of the polarisation has been reinforced by the reaction to the current economic crisis in Barbados which did not start with the most recent downgrade of the country’s international credit rating. Since 2009, the government published a Medium Term Fiscal Strategy (MTFS) document in conjunction with a Medium Term Development Strategy. 
What started out as a fiscal crisis morphed into an economic crisis because of poor policy choices. It is well documented in the theoretical economic literature and real historical evidence that there is a preferred way to respond to an economic slowdown that is externally driven. The response is certainly not for the government to tax its way out of a recession.  
From the inception, the MTFS stated that a major aim of government will be to reduce the fiscal deficit to a more sustainable level. To achieve the reduction, it was forecast that most of the fiscal adjustment would come via expenditure cuts and some increases in revenue. The secret to the strategy was the restoration of economic growth which was predicted to average around 3 per cent in real terms.
Expected to fall
When the MTFS was conceived the fiscal deficit was just 5.3 per cent of GDP or $460 million. Seven years later, the deficit that was expected to fall is now 12 per cent of GDP or just short of $1 billion. What is more important than the size of the fiscal deficit is the structure, which is predominantly on the current account. Some of the economic commentators are still not appreciative of the difference between what obtained in the early 1990s and now.
The issue with the large deficit is that it is hard to finance. This is exactly why the central bank has had to print and print and will continue to print money. This brings me to a different kind of polarisation. Typically the concept of printing money is associated with the Government’s overdraft facility at the Central Bank that is determined by an act of Parliament. The overdraft limit is 10 per cent of Government’s projected revenue for a fiscal year that is if revenue is expected to be $3 billion then the limit is $300 million.
As far back as September 2011, the central bank noted that the limit was reached. It therefore opted to increase the amount of treasury bills that it can purchase, which does not require parliamentary approval. The bank which over the years tried to avoid holding treasury bills recently held well over $400 million. It has now stopped publishing the figure.
It is well documented that the central bank has been making losses since 2009. The question is where would the bank get all that money from to buy the treasury bills? The answer is that it uses a facility like the overdraft. There is no good reason why any trained economist should see such action any differently to the printing of money.
For anyone to suggest that the central bank’s purchasing of treasury bills is not the same as printing money is purely political.
The fact of the matter is that the government has betrayed itself by not even coming close to meeting any of the objectives set out in the original MTFS. This is why it has had to revise the document and not even the revised figures have been in line with the outcomes.
Being patriotic is ideal, but patriotism also demands that the truth be spoken. It is not in anyone’s interest for any commentator to overlook the facts, though somehow some politicians are allowed to do so, under the guise that it makes them better politicians. Indeed these facts have been around for well over six years and the patriotic thing would have been for the non-politicians to join the commentary when it mattered most back in 2009/10.  
The international institutions ought not to be blamed for using the facts to evaluate Barbados’ current economic circumstances objectively. The government’s mistakes and procrastination are to blame and furthermore it is the minister of finance and not the ministry that should be issuing a response to a perceived unfair evaluation. Keep the professionals out of the politics.  
• Dr Clyde Mascoll is an economist and Opposition Barbados Labour Party adviser on the economy. Email mascoll_clyde@hotmail.com