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.







**You may contact me by e-mail at livinginbarbados[at]gmail[dot]com**

Wednesday, November 25, 2009

Do You Have The Stomach For The Fight?

A long time involved in public policy making highlights certain aspects that are not always apparent to the general public. One of them is consistency. Another is credibility. One more is fortitude.

My wife said to me yesterday, as we walked in Washington DC, "It's a really nice day." Cold rain drops were drizzling onto our heads, and the sky was grey. Leaves had fallen off most of the trees, and the wind was noticeable though not biting. I said, "Today is not a nice day, except if you say that you had expected a heavy blizzard. We live in Barbados, and a nice day has sunshine at the very least; even when it rains, that is warm." She glared at me and said I just wanted to be negative. I said I was being realistic and truth full. She wanted to make things seem goon and in a relative sense, she perhaps had an argument. I preferred to see things in a more absolute sense: cold, damp weather do not a nice day make.

I look at some of the national movements over the state and fate of the Barbadian economy in terms of these two sets of aspects. Let's look at the weather analogy first. When you compare what is happening to the local economy some may see a 'nice' day: they had expected that things would be much worse, so even though measured unemployment has topped the psychologically important 10 percent level and the economy looks set to generate 4 percent less income (or goods and services) than the year before, this is not as bad as some had feared. Some look around and say that the fact that many companies are still in business and that tourist arrivals had not fallen through the floor, and that their friends are still mainly in jobs means that things are good, or for sure not as bad.

Realistically, though, many people did not have a good frame of reference for the economy beyond faded memories of the early 1990s. Whatever the reality then, it is seen as 'the darkest hour'. Anyway, look around. All of the world is in a similar plight and some, even the mighty Britain, are as badly off as Barbados, so what's the worry?

Well, the worry really comes from not really being able to deal with bad weather except to hope for a really good day. In other words, the weather comes and goes and not much the nation does really affects it on the ground. People in Barbados have seen lots of nice days after nasty ones, so think they can wait it out, like the tide lapping on the clothes left on the beach. The real weather comparison though ought to be preparing for hurricanes. Because they usually bypass Barbados, everyone talks about them but do little to be ready: no spare food or drinking water, no lamps, no batteries, no window coverings, etc. When the winds and rain look set to hit, then off to the supermarket and hardware stores they go to try to get what they can in a rush. The winds and rains come but not too badly and there is muttering about how it was all for nothing to get all that stuff. So, next time the tendency is to just not bother. But if next time is THE big one, we know what will be the result.

In that hurricane sense, people may look at the country's international reserves and say that at about 20 weeks of imports they would allow a lot of things to carry on as normal if the economy really started to tank. Maybe. Lots of things make that block of foreign exchange seem enough, but a few turns for the worse in terms of what adds or reduces it can make it seem less comforting. But, let's be glad that oil prices seem stuck between US$70-80 a barrel, and that tourists are still coming--though I am not so convinced that money coming is not less than appears from the data. We know that a prime sources of foreign exchange--so called direct foreign investment--has virtually dried up. So, let's keep and eye on magic number 20.

I would be less comfortable with 10 percent of the workforce being unemployed if it seemed that it was going to be short-term, but I do not believe it will be. I also do not believe that many of those being added can find new work just because the economy starts to grow again. The general jobs are getting fewer and fewer and careful consideration of whether a group of unemployables is being built. If so, they need to be trained fast or they will develop the kinds of skills for money making that will threaten all of us. Giddit?

It is never easy to make policy that affects people in a negative way, unless you are unfeeling or are sadistic. Politicians often dislike spelling out truths to their populations if these are not pleasant. They feel that the blame will fall on their shoulders so prefer to cast things in the more optimistic of all possibilities. The clear dangers is that when reality strikes people will feel that they were misled--rightly so--and argue that had they known then some preparation would have been possible.

If you look at what most Bajans are seeing of the economy, do they see signs of a faltering economy? One of the main signs has been company closure, but most of these have been in the food area, and the closing of restaurants does not affect a lot of locals in terms of opportunities lost--these were for the tourists mainly. But their going, from an economy based so heavily on tourism, must mean that the major pillar of the economy is crumbling. We hear of more air lifts--JetBlue bargains, British Airways increasing their flights, US Air back on the runway--and about more cruises. But, walking around, do you see a lot of tourists and what are they doing? The place has not been overrun, and talk is of a 'pick up' over the winter period. That's hopeful thinking. Has Barbados remained THE place to visit? Some Britons I met at the weekend said reassuring things: "Barbados is cheaper than Europe." Though the pound has had a tough time against the US dollar (and thus the Bajan dollar) over the past 15 months, it has had a tougher time against the Euro. Once, going to places like Ireland, Spain, Portugal, Greece, or Italy was cheap when they had their own weak currencies, now they are all in Euro-land and Brits like a bargain, so those who want to, still drop down to Bim. But, for Americans and Canadians, they see cheapness coming from not spending on a Caribbean vacation or heading to Orlando rather than to Bim.

So, what have the policy makers done to get people to gear up for this 'new normal'? I see little credible in most of what has been said about how tourism has been doing, though the 'over optimism' has been consistent. I still do not see a real 'strategy', though I hear of many 'events' and 'opportunities' being sought.

I do not see consistency in the message about what will be done to bolster the economy: much talk about getting to grips with government spending has not been matched by anything tangible. Sure, it's tough to imagine getting rid of people to save money but why should public servants who are not giving value for money eat other people's lunch? Why should public utilities get any ease on wasting money that they have and look likely to waste money they may get from higher rates while not doing anything much to stop water draining away? That's where we get to fortitude. Setting the Barbados Water Authority (BWA) afloat with a 60 percent rate increase but with no stated plan for what to do about the large stock of existing arrears just defies financial logic. So, when the PM said last week that he was disappointed that he had seen no improvement in BWA he really ought to reflect on what incentive he had given to make changes. He'd given them access to more money with no commitment on their part to do anything to earn it.

I have not seen much to make anything stronger or really offer sacrifices to weather what is going to be a bumpy ride. A lot of that may come down to attitude as much as application. Giving up gains has not been part of the national need for so long that no one knows how to go about it. When I read last week about delays in paying refunds from the Inland Revenue Department, I have to admit to understanding nothing of the PM's attempt to explain that there was no cash flow problem. I'm not the brightest button on the coat, but I usually manage to figure out what is meant. But, I was left scratching my head.

My argument is to question if the nation is ready for a recession and a hard slog to get the economy back into a growth setting. The country has been in it, but I am not sure that people have really come to terms with what they are experiencing.

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