Professor Dr Bourne served as President of the Caribbean Development Bank from May 1, 2001 to April 2011. He currently services as Executive Director of the Caribbean Centre for Money and Finance (CCMF) in Trinidad and Tobago
By Professor Dr Compton Bourne
It remains a mystery how problems in an economy are allowed to fester and then become big issues when crunch time comes along. It is like waiting for the horse to bolt before closing the stable gate.
Case in point is the debate on what are the appropriate measures to improve government’s fiscal position and the suggestions that tough action be taken with some state institutions. Nowadays, everyone seems to recognize that these agencies are not only a drain on government resources but calls into question the very nature of their operations.
If the truth be told then it has to be said that the majority of them did not spring up overnight, and neither did the shortcomings being highlighted, start overnight.
They were present for as long as successive governments deemed it necessary to have them around. They are part of a deliberate policy of state intervention in the economy to support certain development purposes when it is recognised that the private sector will not take on certain tasks in the economy.
Overtime, the financial operations of these agencies have slipped into the red, leading to all kinds of allegations of poor management practices and the wastage of government funds.
In sober economic times the only voice that could have been heard crying in the wilderness so to speak, was that of the Office of the Auditor General. Year after year that department listed a litany of woes across the private sector. Agencies and departments of government were not practicing proper financial management, their financial statements were years behind schedule and when released, they were full of errors and omissions. For years the International Monetary Fund (IMF) has been calling for there to be tighter controls, including better management of state bodies.
From time to time politicians on both sides of the political divide weighed in the matter, but usually it comes down to a case where each side accuses the other indulging in excessive spending and going too far. The St Joseph Hospital was the subject of an enquiry by the former government, while it is also known that late prime minister David Thompson was very vocal about spending on the creation of companies without parliamentary approval.
Enter the global recession. This economic down turn has triggered an increase in government expenditure and debt, to keep the ship of state going. In the face of this state enterprises have now become a target of action, as highlighted by some commentators.
Commenting on a survey done among accountant on the economy, the Institute of Chartered Accountants of Barbados highlighted suggestions that the subsidy given to the Transport Board be reduced and the public transportation should be left to the private sector. There was another suggestion from the survey that housing development be left to the private sector as well. Others – not from that survey – have been calling for a roll back of some state bodies, arguing thee will be enormous savings that would improve the fiscal position.Barbados has a mixed economy with some clearly defined functions for the government and the private sector.
If it is accepted therefore that there must be a role for Government in the economy then it should be agreed that the state will look to enhance that role beyond the level of providing health care, education, defence and regulation, when it sees a good enough reason for it. In an environment where a private sector does just enough, government can ill afford to remain passive.
As a consequence of government’s involvement in the economy, expenditure will increase along the lines of the so-called Wagner Law.
This law named after German born Economist, Adolph Wagner posits that as a country develops, so too must its expenditure especially when there is market failure. Barbados is a small country, and successive governments therefore have been forced to use fiscal policy to point the country on a path of development, along with the private sector.
Doing away with public sector agencies and cutting pay by ten per cent and cutting employment in the public sector, should not be pursued.
What is required is to ensure that agencies of Government are properly managed. Nothing more, nothing less.