This is a development from which the Caribbean is unlikely to be immune if key economic sectors such as tourism go into steep decline, government revenues fall, public sector programmes can no longer be funded and increasing numbers of workers in both the public and private sector find themselves without employment.
In Europe, where the crisis and its effect is more advanced, what appears to be happening is that public distrust of politicians is progressing from apathy to downright hostility. Nothing better demonstrates this than the anger-inducing but strategically peripheral issue of the bonuses paid to those who ran the failed banks and insurance companies that are now owned by the long-suffering European and US taxpayer. In an attempt to appease their electorates, politicians are belatedly trying to devise schemes to claw back payments from employees who astonishingly had made sure they were legally secure even if they destroyed their institutions.
For the average voter this is all too little too late. There is a growing sense in many parts of the world that prior to the crisis both the politicians and those in finance were operating as one, in the self-serving belief that lightly or unregulated markets would bring endless economic growth and by extension continuing power to those who presided over it.
In Europe in particular there are signs that electorates want an end to this. Spontaneous demonstrations over hard-to-handle issues such as migrant workers at a time of rising unemployment are leading to new forms of xenophobia. There is a growing resentment among both employed and unemployed workers in the private sector over the pensions provision and secure salaries of those in the public sector. There is also a feeling of anger at the near monopoly position of privatised utilities; a sense that the decade of growth may have been illusory and based on debt driven by ever more obscure financial instruments; and an appalled certainty that the vast amounts of money being spent by government to try to generate recovery will have to be paid for by swingeing tax increases.
What these factors together are doing is to create a kind of suppressed anger. Whether this find its outlet in the rejection of mainstream political parties or in unpredictable events on the streets is hard to determine, but governments in the developed world are hoping that the huge social security safety net they are providing will assuage the anger.
While the manner in which the economic crisis unfolds will be different in every nation, it is clear that the Caribbean is far from immune from similar reactions, as recent events in Martinique and Guadeloupe attest. What appears most likely is a slow burn with the full impact not reaching the region until some time this summer as the full force of the downturn in remittances, tourist arrivals, falling exports of goods and services, declining investment, and the contraction of the construction industry, becomes apparent.
A little more than a week ago Caricom Heads of Government meeting in Belize and driven by the collapse of the CL Financial Group and the Stanford Group of Companies, recognised the dimensions of the crisis unfolding in the Caribbean and its implications for government revenues. They set aside much of their agenda to consider short-term issues relating to the failure of CL Financial and how nations might recover the sums that governments, their institutions and others may have less than wisely invested in a group whose assets are now effectively frozen. They concluded that a recently formed college of regulators consisting of governors of central banks and others would try to track down the assets and liabilities of the company, noting in an unusually clear indication of the seriousness, that Caricom heads will then meet “immediately” to consider their report.
They also considered the broader regulatory and other implications for the Caribbean of the situation surrounding both CL and the Stanford Group noting that the failure of both “may have significant implications for hundreds of thousands of Caribbean policy-holders, depositors and investors.”
Despite this, the communiqué and an accompanying statement said little that was detailed or reassuring about the Caribbean’s response to the global economic crisis. In an opaque style that seems intended to keep the Caribbean people at arms’ length, the Caricom statement suggested that heads were worried about the worsening global economic and financial crisis and indicated that the impact on the region’s productive sectors, remittances and investment will result in “either very low or negative growth and increased unemployment in many Caribbean economies.”
Without explanation it is suggested that Caribbean governments “have taken into account the needs of the most vulnerable” and have adopted “a number of” unspecified “measures partly supported by regional and international financial institutions” before concluding: “It remains a reality, nevertheless, that many Caribbean countries are already highly indebted and all are currently faced with declining revenues.”
In reality, what appears to be happening is that based on the best regional technical advice, Caricom nations as a group are to go to the major multilateral lending institutions for some form of standby facility to be provided on regional basis that will enable national draw down.
In the interim some governments will have to introduce austerity budgets involving higher levels of taxation and significant cuts in public expenditure but without the social stability net that the developed world is able to provide.
The Caribbean is resilient and has overcome many crises. Soon a moment may come in some nations when it is essential for both government and opposition to recognise that whoever is in power will have to address the social implications of an economic crisis and that the greater national interest lies in stability. There is a strong case for transparency and the extension now of the same levels of frankness to the Caribbean people as is about to be shown to the international financial institutions.
Previous columns can be found at www.caribbean-council.org
