“The health and well-being of the population must be protected from unfettered capitalism.”
So said Charlie Skeete, an economist and a former Barbados’ ambassador in Washington as he emphasised the essential role of government in Barbados’ market as self-employment rises and interest in entrepreneurialism surges at a time of prolonged economic recession and rising joblessness.
Actually, Skeete, a former permanent secretary in the Ministry of Finance, was reacting to a suggestion articulated in Britain the other day by Dr Nima Sanandaji, author of a report published by the United Kingdom Centre for Policy Studies. As he saw it the British government should act to produce more entrepreneurs, “cutting business and personal tax rates and taking the axe to red tape”.
Sanandaji didn’t mince words. “The lesson is clear: to encourage innovation and entrepreneurialism the government should do as a little as possible beyond cutting taxes and regulations.”
In other words, it should get out of the way and allow businesses to function with few rules and regulations and lower taxes.
Should the Freundel Stuart administration embrace that idea to help aspiring business people get their private firms off the ground and keep the doors open? Many Barbadian small business owners would answer in the affirmative. Skeete disagrees.
“Just cutting taxes as an abstract proposition is nonsense,” Skeete argued. “Governments have to provide security and infrastructure and offer help to folks in the society who are under-privileged and vulnerable and cannot look after themselves. All of those things governments need to do in a properly functioning society. Every time an investor offers to put money into a venture but asks for tax cuts, something is terribly wrong.”
Sir Courtney Blackman, a former Governor of the Barbados Central Bank, agrees but put it differently.
“There is nothing virtuous about cutting taxes,” he said. “Actually, the people who need tax cuts are people who don’t have enough money, people who are hardly making enough money on which to live, some of them hardly making any money at all. This idea of tax cuts which the ideologues in the International Monetary fund preach I don’t support.”
After all, governments must have the money to provide the infrastructure needed by firms to operate and flourish.
“The finances must come from taxes,” he said. “When Sir Grantley Adams [Barbados’ first Premier] and Errol Barrow [its first Prime Minister] came to office they didn’t cut taxes to improve the economy,” Sir Courtney argued. “Both imposed taxes on the plutocracy. That’s what built the infrastructure, the schools, and highways and pay the teachers.”
An advocate of an effective regulatory framework for the private sector, including the banks, Sir Courtney thinks almost every business activity must be regulated to protect the health and financial well-being of the public. And that’s true whether they are the fishermen or commercial banks.
“Every market has to be intelligently regulated in some fashion because you can’t leave it alone,” Sir Courtney contends. “In Barbados, the Central Bank regulates the banks as part of its responsibility in order to prevent damage to the economy as a whole. “That is what regulation is supposed to do. Unfortunately, far too often it isn’t done very well. But look what happens when there are minimal regulations. Statutory corporations in Barbados are allowed to operate for years without producing any financial statements to the public. That is the height of irresponsibility. That’s a case where there is no regulation and so the statutory corporations do as they like.”
The argument for less government red tape to boost entrepreneurship wasn’t helped when West Virginia’s water supply was polluted several weeks ago by waste from energy firms that weren’t properly regulated. Loose regulation on Wall Street contributed to the financial debacle which has hit Barbados and countries around the world.
On the other hand, the hotbed of entrepreneurialism and innovation in America is California, not the low tax states in the South.
“California businesses have benefited from public research, large government contracts, supportive planning and labour rules,” said Stian Westlake, executive director of research at Nesta in London.
Obviously, the hand of government in Barbados can facilitate entrepreneurship when it works alongside private firms. In addition, timely decision-making by governments greases the wheels of business enterprises by making the market more predictable.
“A technical training component in the educational system is also useful. That’s why the Samuel Jackman Prescod Polytechnic and so on exist,” said Skeete. “Where there is a need, Barbados can have an industry-specific project that solves the problem of a manpower shortage. That’s a short-term solution. But the long-term calls for an educational system that matches the supply of skills with the demand for them.”
