What Should We Do?

My wife and I were both IMF economists; she still is, I am now a has-been. She has spent all of her Fund career working of Caribbean countries and issues, after working in in the public sector in her native Bahamas. I spent most of my Fund career working on countries outside the Caribbean--the exception being on Guyana to help them get their debt relief in the early 2000s. We both care deeply about the region's future, but are cast often as villains because of our work associations. Before I went to the US, I worked for the Bank of England, leading a team of analysts covering Latin America and the Caribbean, so I too have had my share of trying to understand the region's economic development, but never from within the policy making set up for any of the region's nations.

When we arrived in Barbados over two and a half years ago, we saw quickly several disturbing aspects of economic life and have pondered them ever since. In a simple though metaphorical sense, we saw a large 'hole' in the economy, but many locals would say "What hole? Then move a table cross the floor to shift the hole from view." We still see the hole but now a few more people are saying, "Oh, that hole? That's nothing much. If you had been here in 19991 you would have seen a real hole."

During a weekend that was devoid of work for us, we had the chance to spend time with two Bajan couples, whom we have just met, and who are all active in leading private enterprises in this economy. They are all black (or one is at least part black). We've talked about a lot and this afternoon we got onto the economy.

We are of course seen as part of a doctrinaire establishment determined to keep the Caribbean impoverished so that industrial countries can continue the rape they began with the shipment of slaves from Africa to the Caribbean. The systematic exploitation of blacks by this Euro-centric oppressive regime has been continued through the so-called Bretton Woods consensus, of which we are part. Its most damaging result has been the near destruction of the economies of those countries that have had long-term relationships with the Fund, such as Jamaica and Guyana. Barbados, never bowed to IMF conditions and did not devalue its currency and look at how well it has done.

We deny this, but few listen, so we get on doing what we try to do. My wife helps organize straining for officials in 21 countries associated with Caricom in areas such as tax administration, financial sector regulation, public expenditure management, macroeconomic statistics. I am very far from the details of that work, but in my previous life had to try to get officials trained and get the IMF to provide training and technical support. Whatever the true needs, we always have pressure from officials who are just interested in jaunts to go shopping in Washington, or get per diem funds to spend and really do less than all with the training. Institutions, too, can make little use of training opportunities and trained people. But, one tries to build capacity and hope that the economies and societies will benefit from that.

As we talked on Saturday afternoon, over cups of tea and home made cucumber, tomato, and smoked salmon sandwiches, scones, jam, coconut pastries, and chocolate marble cake, we ignored the English tourists around us. We laughed as Caribbean people can about anything--loudly. We had had our bellies filled by the pudding and souse made to our order by an Irish chef, who had only just had his initiation in the souse business. He knew the preferences for nice lean pieces, but also the love for knuckle, ears, snout, etc. We had enjoyed the company of a Dominican lady (who has the smile of their beloved agouti) and a Carolinian white man trying to discover if he has a black Bajan side (he'd just discovered Muster's pork chops and macaroni pie).

We talked about productivity, whose lowness is something the economy has suffered for too long. We discussed dishonesty, with workers pilfering and stealing goods and cash, even with clear camera security in place--how does the security guard who steals from the safe monitored by CCTV not expect to be caught? Duh. We discussed the lengths to which entrepreneurs have to go to safeguard their business from their own staff's thievery and from shoplifting. I have always been amazed when I saw the large items sometimes stolen from stores, even hardware items. I discussed work a cousin does to install pinhole video surveillance into companies to catch pilfering, and attempted robberies. The owner can watch a bank of computer monitors with say 12 frames on each screen looking in details at cashiers, and servers, and persons entering and leaving. It is amazing what goes on--the little tricks to gain the dollars day-in, day-out. But, the employees clearly do not want to support the owner. The robbers, likewise.

We discussed the exchange rate: the prevailing Bajan view is that defying the IMF in the 1990s and not devaluing saved the country from entering a downward spiral similar to Jamaica's and Guyana's. We argued the counter factual: what would have happened had devaluation taken place and forced some needed shift of resources in the economy/society. One doctor said that if the B$ were devalued, he would need to move to the US to be able to make money, given the current tax burden he faced. We noted that he had become a cash cow for government and was one of the casualties of an increasing national debt burden.

I raised an idea going around that the overvalued exchange rate was now a real drag on the tourism sector, and the main beneficiaries were the consumer and government, who were able to spend more than they should. We could not get to a common view on that. The hoteliers who have raised this, including Gordon Seale, are clear in their minds. When I had a chat with Mr. Seale and an English hotelier last weekend the talk got heated on their side and there were a lot of strong comments flying around about whose nest was being feathered and who was really paying the piper. The bottom line in their view--taking it that the B$ is about 20% overvalued--is that consumers (and government) need to prepare themselves for a sharp cut in their wealth. I cannot imagine how that message will go down.

We talked at length about what IMF programs mean, and what heavy indebtedness mean. All agreed that when countries can impose fiscal discipline on themselves the IMF is hardly necessary. We discussed the fact that by going to the IMF recently Jamaica got money (cheaper) than Barbados could get; the country may also be able to get more private finance with the Fund backing the direction of economic policy. Barbados has yet to convince markets in a broader sense that its course is right. We discussed how governments often shy away from hard decisions: wage and other spending cuts, for example--until they have no choice and by then much damage has been done.

We could not solve all of the country's problems but there was a better understanding of where weaknesses lay in decision making. One thing: demonizing the Fund is liking hating your doctor. One guy stays home afraid to have his heart checked only to see his friend checked, diagnosed with a murmur, have a procedure done and is ready to go on with normal life. After two weeks, the checked friend goes to bed with his wife and they make love all night and he's great in the morning. The guy who stays home afraid, gets taken to the floor by his wife who has such a good love making session with him that all he can say is "You're gonna kill me!" Those were his last words and his heart gave out. Could he have lived longer had he had a check up and started a remedial program? Not sure, but we think so. Now, his wife and family have no bread winner and all are poorer for that. It's an analogy but it often fits what countries do. For want of a nail...