A TREMENDOUSLY WISE Milton Friedman, the Nobel laureate in economics, once said in reference to the United States federal government: “If you put the federal government in charge of the Sahara Desert, in five years there’d be a shortage of sand.”
Those words have been reverberating in my mind each time I reflect on the manner in which the local economy has been managed in the past seven years and ever since I read what can only be described as a pejorative report by the International Monetary Fund (IMF) in its recently concluded Article IV mission to Barbados.
In a press release dated July 17, 2015, assessing the current and future prospects for the Barbados economy, the executive board “welcomed the improvement in macroeconomic conditions and the authorities’ commitment to tackle urgently needed reform.”
More important, they sounded the alarm bell, warning that “the country faces daunting challenges, including external risks, high fiscal deficit and debt levels and competitiveness challenges”.
Consequently, the IMF “urged the authorities to implement a comprehensive reform programme that includes strong fiscal adjustment and structural reforms to foster growth and external and debt sustainability”.
On the fiscal side, the IMF was much more accommodating of Government’s efforts at fiscal consolidation and the tax measures implemented in the recent budgetary proposals. Yet, given the magnitude of the difficulties facing Barbados in relation to its fiscal performance, the IMF highlighted the “need for continued ambitious adjustment efforts…, importance of reducing current spending and addressing the stock of Government arrears…, strengthen their accountability and accelerate their restructuring…, consider divesting some state assets in order to lower debt. On the revenue side, directors welcomed the recent tax measures, and encouraged the authorities to broaden the tax base further and remove tax waivers”.
Given whatever wisdom can be drawn from the words of Friedman, and the image of the current and future state of our economy as painted by the IMF, it is absolutely clear to me that Barbados is on an accelerated path towards economic calamity. But, how do we reverse that trend? Can this country change course? What are some possible remedies for Barbados’ economy?
To get the Barbadian economy back to a stable macroeconomic situation, where each of us can once again experience the “fulfilment of the human personality”, here are some specific suggestions to the authorities: immediately seek fresh economic counselling, from local sources, preferably; cease the excessive printing of money by the Central Bank to finance Government’s fiscal deficit; halt all discretionary spending by both the central government and statutory bodies that depend directly on the Treasury for funding; lower the marginal tax rates on the value added tax as well as on personal and corporate incomes as an incentive to boost personal consumption and investment; privatise problematic state entities that continue to generate significant stress for the public purse.
Government should also implement a growth and development strategy that puts individual self-sufficiency, private sector investment and entrepreneurial development centre stage; and diversify the economy so that sports, culture, education and other promising areas of engagement can play meaningful roles in turning around our ailing economy; and above all, undertake a comprehensive debt restructuring exercise, tailored to meet the country’s peculiar circumstances.
To our decision makers, I ask meekly: Are you on board?
Email: bfrancis@uwi.edu.bb
