BARBADIANS HAVE PERIODICALLY sacrificed much since the 1930s. The periods of sacrifice were accompanied by the expectation that a better foundation was being laid for the next generation to benefit.
This recent prolonged period of sacrifice leaves a much less secure foundation. Furthermore, there seems no desire on the part of the Government to understand its role as a caretaker of the once adored and admired gem of the Caribbean.
If Prime Minister Freundel Stuart fails to understand that the economic link between the present and the future is captured in an interest rate, then he is free, out of ignorance, to dismiss the downgrades of the international credit ratings.
While he is doing so, he needs to explain why in the face of lower deposit rates and some adjustment in lending rates, his Government had to offer such a high interest rate on its savings bonds.
When we go to a financial institution to borrow the money of its depositors, the lender decides on the borrower’s ability to pay in the future. There is risk to lending on the part of the institution, which influences the interest rate charged on the loan. On the other hand, the lender tries to assess the risk, while seeking to make a profit. The higher the risk, the higher the interest rate.
It ought to be evident, even to a nascent prime minister, that the decision to borrow and therefore to lend, constitutes knowing a lot about the present with the hope of getting the future right. It is hoped that all the knowledge is captured in the interest rate placed on the loan. The rate therefore links the present to the future. To dismiss a downgrade in a credit rating is really arrogance parading as ignorance.
Prime Minster Stuart is of the view that most Barbadians have no desire to understand the mundane economic issues. He sees no need to engage in such trivia. His intellect is on the more enticing issues of creating public sector jobs. Perhaps, he reasons that the downgrades are home-grown and should matter not to the rest of the world.
Resulted in worse
The nine-year sacrifice asked of Barbadians has resulted in worse, not better. In the country’s worst fiscal, not economic, crisis, the Government sector has grown much faster than three other major sectors – tourism, finance and other services and distribution – that have recorded pedestrian growth.
Sometimes the symbolism of sacrifice is more important than the size of the sacrifice. The recent stock of Government vehicles, from the top to the bottom, is exceedingly impressive. While as a percentage of the budget, the cost of such a stock may appear small, the bigger issue is that it is happening when the Government sees nothing wrong with printing $50 million per month to pay civil servants.
There is an opportunity cost in sacrificing. We are asked to forego something now in the hope of receiving something in the future. There must be some time-line between the foregoing and the receiving. At all levels, sacrifice must be initiated, in which case it is led by someone. This happens to be the prime minister at the national level in Barbados.
Uncertainty
At that level, it is expected that the terms and conditions of any sacrifice must be clearly spelt out to those who are to carry the burden. In circumstances where it is not made clear, then uncertainty becomes the hallmark. The future price of uncertainty is reflected in the country’s ability to pay its way.
Barbadians have been paying the price for uncertainty in leadership, through taxation, no salary increases and a declining quality of life from an economic perspective. On the social side, the evidence of uncertainty is equally compelling.
There is an old saying that “one-one blow does kill old cow”. The home-grown blows have damaged Barbadians’ pockets, their psyche and, in some cases, their memories. The damage has been severe on all classes.
Even those who previously felt untouchable have recognised that the present influences the future. Their property values have been affected. The value of their businesses has been shaken. And the quality of life of future generations has been compromised.
The rate at which the damage has occurred is a collective interest in self-preservation that has resulted in a very heavy cost to Barbadians’ present and future, by a short-sighted Freundel Stuart administration.
• Dr Clyde Mascoll is an economist and Opposition Barbados Labour Party advisor on the economy. Email: [email protected]
