By
Basil Wilson
For
Carib News
12/25/13
Tessanne Chin has returned triumphantly to Jamaica after winning The Voice singing competition. Her splendid performance and achievement has brought much merriment to Jamaicans, those at home and those abroad. Nonetheless, in the midst of the merriment and festivities, Jamaica passed the second International Monetary Fund test and is expected to continue on the course of reducing the level of indebtedness.
This will not be a merry Christmas for the Caribbean. Caribbean countries have had no choice but to run to the IMF to stop the bleeding and embark on austerity policies in an attempt to return to sustained economic growth.
Barbados was always regarded as the exception in the Caribbean. In the post-colonial years, Barbados experienced steady economic growth. Essentially, families remained intact, crime was relatively low, educational outcomes were impressive and social capital was a critical ingredient in the country’s stability.
The United Nations Development Program ranks nations based on their Human Development Index that not only looks at per capita income but examines the role of women in the workplace, demographic trends and measures economic inequality. Scandinavian countries such as Norway, Sweden and Denmark customarily rank high using these fairly comprehensive measures. Singapore is usually in the top ten and Barbados of all the English-speaking Caribbean countries invariably leads the rest of the pack.
In recent months, the Barbadian economy has succumbed to a struggling developing country adversely affected by the vicissitudes of globalization. There have been enormous benefits from the expansion of world trade. Countries like China, Brazil and India have seized the opportunity of expanding world trade to improve the material wellbeing of their citizens. In the case of China, multi-millions have been lifted out of poverty. The Chinese middle class is estimated to be over three hundred million. Yet globalization in almost every country has widened the gap between the rich and the poor. This is the case from an international perspective and an intra-national perspective.
Economic growth in Barbados has slowed. Revenues generated from tourism are down. Foreign domestic investment has not been rosy. The budgetary deficit is too gaping and the accumulated debt has become burdensome. The international reserves are less than robust and the recent IMF assessment has imposed further austerity measures on the government.
The International Monetary Fund has zeroed in on the inefficiencies of the public sector and either through attrition or lay-offs, the public sector in Barbados will have to shrink. Services that were readily provided to citizens will have to be curtailed. There is some light at the end of the tunnel as foreign domestic investments are expected to increase in 2014 and there is some anticipation of a recovery in the tourist sector. But in any case, as former Governor Hugh Carey stated regarding New York in the 1970s, the days of wine and roses are over.
Jamaica’s economic predicament long preceded Barbados. Jamaica passed the IMF test at the end of September and also passed a new benchmark test for December, 2013.
Jamaica has twice utilized the Jamaica Debt Exchange to reduce the pressure of accumulated debt on the annual budget. Jamaica has depreciated its currency and increased taxes. Inflation and the current depreciation have lowered living standards. There will be no shortage of Christmas cakes or sorrel but undoubtedly the average worker has been feeling the austerity pinch.
What complicates the situation in Jamaica and is the case in some of the smaller islands is economic constrictions rob the state of sorely needed resources to fight the scourge of crime. Even though the IMF has pinpointed that the size of the public bureaucracy must be reduced, the Jamaica Constabulary Force could easily double its size of 8,000 to be able to wrap the state’s arms around the crime epidemic.
Jamaica is banking on the expansion of the Panama Canal and for Kingston Harbour to serve as a logistical hub for the super cargo ships. Chinese investments remain the key ingredient for Jamaica to benefit economically from this expansion in world trade.
The Caribbean, like the rest of the world, is wrestling with economic inequality. Even the cautious President Barack Obama has weighed in on the question of economic inequality. The critical challenge is enacting policies that reduce the charm that divides the rich from the poor. The Caribbean has avoided the discussion and redistribution of wealth in the early stages of economic development is a tricky proposition.
Caribbean economies do not have the same latitude as developed economies. These economies have been stretched beyond capacity. There is no room for stimulus and must attend to economic growth to right size the economy. The IMF in the case of Jamaica and Barbados has placed emphasis on tax reform and the more efficient collection of revenues.
The slowdown in Caribbean economies is a result of the Great Global Recession and the loss of preferential treatment in British and European Union markets. Caribbean economies have tried to stimulate intra-regional trade through CARICOM but those markets are not transformational. The future of the Caribbean is in expanding its productive capacity and to penetrate new export markets such as Asia, Latin America and Africa. The Caribbean economist, Richard Bernal, pointed out in a conference held in Barbados in January, 2013 that Chinese exports have increased to the Caribbean but Caribbean exports to the Chinese market remain miniscule.
The Caribbean desperately needs leadership in the public and private sector that has some knowledge and understanding of export markets. The Caribbean played a vital role in the early creation of international markets. This is a different epoch and it requires a new mindset if Christmases in the future are to be merry.
