Tuesday, April 23, 2024

How is the economy, really?


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OVER THE YEARS, several commentators across the Caribbean have argued that successive governments could have done more during the “times of plenty” to diversify their respective economies and implement various types of structural reforms.

The fact that Barbados still appears to be suffering from a condition I refer to as anomalous inertia has led me to conclude that perhaps we may have missed the paradigm shift that presented itself at the onset of the global economic downturn.

According to Romain Ranciere and Aaron Tornell in their article Why Do Reforms Occur In Crisis Times, they remain puzzled by the fact that countries seem less inclined during good times to implement structural reforms when they could better afford the associated adjustment and compensation costs.

They further argued that history has shown that major structural reforms often face staunch opposition in prosperous times but are more widely sanctioned during crises.

Compare the days when oil-wealthy Venezuela established the Petra-Caribe agreement, providing preferential payment options to struggling Caribbean economies with now, when that country’s economy seems to be on the verge of total collapse given the reductions in oil prices worldwide.

Did Venezuela miss the paradigm shift or did they choose not to fill their barns in their seven years of plenty? Should they have diversified their economy in times of plenty?

Perhaps the Government of the day may have tried and perhaps the evidence of their current misfortunes substantiates the point that perhaps the luxury of comfort makes us less inclined to accept that our structures must be reformed in anticipation of inevitable failures.

If the foregoing argument holds merit, then I would like to reiterate that we have missed the boat somewhat in Barbados. I continue to aver that frank, open and truthful discussions are necessary to build common ground, trust and consensus.

Feeling effects

The Government of Barbados would have indicated in 2008 that Barbados would soon be feeling major effects of the global economic crisis. It called for restraint, it called for reform, it called for cohesion. The Government asked us to do our part to ensure our nation’s sustainability.

The journey since then has been particularly tenuous and they have been several deep craters along our path but what troubles me the most is that during that crisis, we did not seize the opportunity to collectively and sufficiently address the need for major structural reforms.

We are now hearing that the country is back on a growth path; our ministers and parliamentarians are proposing to restore the pay cut they took in 2010, while the unions are set to demand pay increases given those pronouncements. This may suggest that we are no longer in a crisis situation and hence structural reforms are no longer required.

I am compelled to ask: are we really out of the woods? Has our economy, has our society truly been reformed? Have we risen from the ashes of the world economic crisis? Or are we being misled?

According to recent reports, we are being told that our tourism numbers are up, the economy is set to grow, crime is down and the list goes on. Judging from these pronouncements perhaps we have successfully implemented the widely discussed structural reforms. It would appear that a change in my glasses is urgently required.



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