Welcome

Dennis Jones is a Jamaican-born international economist, who has lived most of the time in the UK and USA, and latterly in Guinea, west Africa. He moved back to the Caribbean in 2007. This blog contains his observations on life on this small eastern Caribbean island, as well as views on life and issues on a broader landscape, especially the Caribbean and Africa.

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Sunday, September 20, 2009

Harper on IMF and the condition of the economy

I like it that I am not beholden to the regular media, so when I write a letter I do not have to wait for the newspapers to publish it, I can do so myself. The following is broadly what I sent to the Advocate today:
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I greatly enjoyed Joey Harper's take on millipedes and things that go crawling in the ears in Saturday's Advocate see Advocate report). It seemed hard to not see the opening bars as a riposte to Hartley Henry's latest commentary on the state of the BLP, in Under the Microscope: No place for Millipede at Fowl Cock fight. As satire, though, it is the kind of piece that I would like to see more.

But, I have to take issue with his characterization of the IMF and some of his observations on the economic landscape. I declare myself as an ex-staffer, but with no remit to be their spokesperson. He wrote:

* "Contrary to the impression that was being given, they have clearly stated that the Barbados economy is on the verge of collapse." They said clearly no such thing. If they had, then the message would also have included reference to the need for additional external financing and a 'relationship' with the Fund.

* ''...this institution without a human face..." Excuse me! Hyperbole aside, what is that supposed to mean?

* "We have already seen the signs. A savage increase in the cost of water that I am sure will be followed by rises in bus fares, decimating the token gift of free bus fares for school children by placing an increasing burden on parents and caregivers". Budget financing is simple. If you have the revenue or access to borrowed funds you can spend as you pleas, subject to the need to be able to repay the borrowing as due later on. If you do not have the money, you have to curb what you spend. So, BWA is severely in debt and needs to cover some very heavy spending. We have seen price increases (high in relative terms, but still putting Bajan water rates no where near high in relative or absolute terms). The decision to raise rates was deferred by the previous administration, who considered even higher increases. Now, I would not wish to be cynical and suggest that the deferral had anything to do with electoral politics. But, by delaying an increase what was achieved?


* We have yet to see plans for BWA cost cutting. If a rise in bus fares is coming then one needs to see that they have not moved in years. Have costs remained unchanged and is revenue holding up well relative to that?There is no 'freeness': what happens is that something is subsidized--a body of taxpayers are funding the riding on buses of others who are not paying for it directly. If those taxed really don't want to do that or if the government purse really cannot afford the generosity, even if care about parents and caregivers is very high, let us know how to square that circle. Look at the existing budget deficit. What else should give way so that 'free' rides can continue.

* "The IMF has little interest in the welfare of children and less in the social infrastructure of the countries that they invade, even though these countries have contributed significantly to this institution over the years." The IMF is an institution with a mandate given to it by the world's politicians. The mandate does not involve a direct interest in the welfare of children--the World Bank was set up to deal with that in a broad sense. But it does have concerns in that for poor and heavily indebted countries (through the so-called HIPC [highly indebted poor countries] Initiative) it aims to reduce (even eliminate) the burden of debt repayments and the savings are supposed to go into social spending; if not, the debt relief is not supposed to continue. It has a concern about social infrastructure through the same Initiative. BUT, it is governments who DECIDE how to cut their social policy coats. Barbados is crimped in some areas because it 'graduated' from World Bank borrowing as it did so well. Maybe it would like to turn back the clock and be seen as part of the world's poor. I think it can be arranged. Will Bajans be happy with that and its consequences? I do not know. As for 'invade'...Methinks the words doth not fit well the truth.

* "I have asked over the past months for disclosure as to the real economic plight of Barbados and its population of people called Barbadians. I do not mean political answers with the sole intention of ensuring a second term in office, but the facts attached for public scrutiny." I would suggest to keep asking and if the answers are not forthcoming, keep asking louder. If the government feels that it has given the answers then perhaps they would be kind enough to SHOW that the 'real' plight has been spelt out CLEARLY. It takes political courage to do that, of course, so we will see if the mettle is there.

* "I am hearing of projects that will attract major financing and the IMF in its report states that social spending must be brought down." I've read the reports and found no such reference on social spending. If I missed it, I'd like to know the reference.

* "People in the country are hurting: contractors, store owners, car dealers who are recording drops in sales that are frightening; major building projects are stalled simply because no one in the position to make change is willing to meet and discuss possible solutions". I wish I believed that it was so simple as a meet and discuss issue. I don't think that the economic damage that is occurring is amenable to solution by mere talk and even action at the local level. If it goes international then it's really complex anyway.

So, my call is for a 'fair fight' over what Barbados can expect from the IMF. Enough of the knee jerk and, to my mind, misplaced commentary. On the broader economic situation, I think the issues are far graver than can be dealt with over a meal no matter how sweet the gravy.

Dennis Jones
Economist
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Let's see where editorial policy takes my comments.