I am grateful for Professor Michael Howard’s comments and explanations which appeared in the WEEKEND NATION of Friday, September 22, in response to my letter in the MIDWEEK NATION on September 20.
However, it has left me only marginally wiser – which I attribute mostly to my failure to clearly understand his somewhat generalised academic arguments. I have some further questions and comments, which I hope will shine more light on what lies ahead for Barbados and its economy.
I won’t comment on the history of the Nordic economic model and its implementation in Barbados because it’s what it is – history can’t be changed. But it’s important to underscore Professor Howard clarifying that essentially the model comprises the state providing significant social services funded by heavy taxation – a classic socialist model.
I take particular issue with the reasons given by him as to why the model lost its sustainability in Barbados, which he says “was the failure of neo-liberalism, or free market capitalism . . . in the financial crisis of 2007 to 2010 [which] led to heavier taxation . . . decline of the international business sector in Barbados, negative economic growth, and large and unsustainable fiscal deficits”. Huh??
I remind Prof. Howard that he attributed the reasons for the failure of the model to “our tax system having internal administrative and economic problems” (his letter of Monday, September 18).
The global financial crisis started around 2007/08 and it did have an adverse effect on the Barbados economy as it did on all other economies.
The decline of the international business sector in Barbados was not due to the financial crisis which started in 2007/08. It was due to changes in legislation in Canada which affected Canadian international business corporations registered in Barbados, as well as relentless pressure from Organisation for Economic Cooperation and Development countries trying to prevent their domiciled companies setting up perfectly legal and transparent subsidiaries in Barbados.
My argument is this: it is acknowledged that the Errol Barrow-initiated Nordic Model is dependent on heavy taxation to be sustainable. When Barbados had a profitable sugar industry, the requisite funding was available, despite nearly bankrupting the sector through said taxation. However, we all know what has happened to the sugar industry over the last many years – the cost to produce a tonne of sugar is significantly more than we sell it for. Taxation gone.
Manufacturing is insignificant and too costly to export anything profitably. Even rum is now made from imported molasses. The mainstay of the economy is tourism which has to compete with many places.
Governments have sold off the Barbados National Bank, Insurance Corporation of Barbados, apparently agreed to sell the Barbados National Oil Terminal and now Blue Horizon Hotel to raise funds in lieu of being able to get more funds from further taxation.
It would seem to me to be a laudable goal for Government to give employment to as many people as possible who can’t find employment in the private sector or cannot be gainfully self-employed. As for the statutory corporations, how many are necessary other than as political tools?
But I once more pose the unanswered question to Prof. Howard: What’s to be done when the citizenry can pay no more, there are no more desirable entities to be sold and the cost of borrowing to fill the financial holes becomes prohibitive? Oil up the printing presses? Devaluation would be the craziest action of all, as I have never understood how the economic problems of a country can be solved at the stroke of a pen.
– RODNEY JONES