Barbados facing challenges

It is now just under two years since the December 2008 general elections in Barbados when the Democratic Labour Party, led by Mr David Thompson, gained a convincing victory over Mr Owen Arthur and his Barbados Labour Party, taking the DLP back to office for the first time since 1994. In its last period of government, the DLP had become consumed with seeking to come to terms with the effects of a hemispheric recession which other Caricom countries had earlier experienced, eventually taking the country into the IMF. That issue led to the downfall of the DLP, but it had catapulted Thompson into the position of Minister of Finance before the 1994 general elections.

Arthur has generally been credited with achieving a revival of the Barbadian economy into the first decade of the new millennium, and maintaining the country’s reputation as one of the more advanced middle income countries of the developing world. He steered the economy in the direction of a new economic possibility, the financial services industry, which he saw as Barbados’s second leg in the services business, after tourism. Only very recently, Barbados has been ranked in the top 50 countries in the World Economic Forum’s Global Competitiveness Index, being placed at a respectable 43 of the 139 countries surveyed. Arthur’s adoption of prime ministerial responsibility for planning the implementation of the Single Market, has been seen as largely successful, in spite of the tardiness of governments in actually pursuing its implementation.

But it was also the case that, with a new recession dawning in the latter part of the 2000s, he exercised the option of seeking to sustain the economy by substantial public expenditure, so that the increasing debt to GDP (economic output) ratio became progressively more severe. And on taking office, and presenting his budget in May 2009, David Thompson said, that the ratio of central government debt to GDP was expected to be 87% in that year, that public sector debt was up to 98%, and that output was likely to decline by 2.5%. As the recession in the Western world has taken its grip, the government has had to struggle as tourism income has fallen; and although Barbados had done its best to meet the OECD’s terms on financial services, that area too was suffering from the recession.

When Thompson assumed office then, his orientation was basically to keep the ship afloat pending the ending of the recession. Unfortunately, particularly in respect of the major countries on which the Barbadian services economy depends, the United States and Britain, the recession has been more prolonged than some anticipated, with the new British government  itself cutting public expenditure further, and therefore reducing Barbados’s chances of enhancing its tourism prospects much in the coming season.

It is in the midst of this uncertainty about the Barbadian economy’s ability to rebound vigorously, that Prime Minister Thompson has fallen seriously ill, and has, in effect, now decided to pass on the mantle of responsibility for the future of the economy to Mr David Sinckler. Sinckler has, up to now, had little direct experience as a policy-maker of engagement with the economy. This circumstance has taken place just as some respected former Barbadian public servants have begun to insist that a firm policy grip must be taken on the economy, and perhaps some unpleasant medicine administered. Former Central Bank Governor, Sir Courtenay Blackman, has called on the government to place control of public expenditure as the top priority, to resort to a virtual freeze on public sector wages, reform the public enterprises which he sees as being involved in wasteful expenditure, and to focus on the “tight management of the foreign reserves.” Blackman has argued that concentrating on these issues is preferable to directly aiming at reducing the fiscal deficit – a policy which has been suggested by the IMF and Standard & Poor’s, and which he refers to as “a red herring.” Similarly a former senior public servant and senior economist at the IADB, Mr Charles Skeete, has also called for a wage freeze in the public sector, while rejecting calls by others for complementary price controls.

At the wider level, the public’s mind has been somewhat diverted from the issue of the management of the economy to the meaning of the changes made by Prime Minister Thompson, particularly the elevation of Mr Chris Sinckler to the position of Minister of Finance and Economic Affairs. This has been perceived as a demotion of Dr David Estwick, until recently Minister for Economic Affairs. Some commentators have also seen Thompson’s elevation of Sinckler as a rejection of Deputy Prime Minister Freundel Stuart, recalling that Stuart largely supported Clyde Mascoll (who, then the leading economist in the DLP, subsequently defected to Owen Arthur’s government) in the contest for the leadership of the party with Thompson. And others go on from them to suggest some degree of uncertainty about the future course of the government, anticipating some jockeying for positions in the absence of an active Prime Minister.

Citizens of other Caricom states will watch the present Barbados position with interest, aware of the country’s reputation for political stability. From a Caricom perspective, Thompson and his government have been seen as somewhat lukewarm in taking on the mantle of responsibility for the Single Market and Economy, many being surprised also, at the stance which the government has taken on the issue of immigration by other Caricom nationals into the country.

Minister Sinckler has a certain reputation, particularly among the civil society groups in the Caribbean, as an advocate of regional integration, although as minister, he disagreed early on  with his former associates on the issue of the advantages and disadvantages of the Economic Partnership Agreement with the European Union. No doubt Thompson will have taken into account recent polls showing Sinckler to be the most popular of the younger brigade. But Barbados is now essentially in a time of waiting.