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**

Sunday, February 07, 2010

Eating Frozen Custard: Government Minister Uses the F- Word

When Dr. David Estwick broached the idea this week that a wage freeze was something to consider (see Nation report) everyone should have known that life would never be the same again. When I read the headlines, they took me by surprise because earlier in the day when they made front page news, a local business journalist had asked me what advice I would give the government to deal with its economic and financial plight. My view was that the government needed to grapple seriously with its spending--which it had not shown a willingness to do so far. That meant looking hard at what it did and justifying every single dollar. That process should point out where savings could be made now or very soon and where savings could be made over a longer period. I said that the PM should ask every spending Minister to do that and come back with proposals for savings. Those who were not capable or willing to do that would have it done for them by the Finance Minister--the PM wearing another hat. Those spending curbs were not necessarily to be immediate, because the recession gives the government the excuse to keep spending high to cushion the tendency for the economy to fall as the private sector is struggling. But, government spending has to be high quality and should not be protected if it is wanton and wasteful.

Government's options were narrowing so not dealing with the spending issue as a medium term consideration was merely postponing the inevitable: the debt burden was rising and would show no tendency to do otherwise. Government would also in the process of reviewing spending have to stiffen itself to take some very unpleasant decisions. It was not necessarily that people would need to lose their jobs or take pay cuts or see no pay increases. It was also that some of the privileges public servants enjoy would need to be things of the past. Sure, you may not be able to make the needed changes without some negotiation but that process needed to be engaged.

Ordinary people have commented publicly about luxury vehicles for public servants. Why should any public servant be driven in, or drive, a BMW? When chips were down in Guinea during my term there, the government took back all the four wheel drive vehicles from Ministers and officials and gave them small saloons--Toyota Corollas; that in a country with terrible roads and real mountains to traverse. It showed in some way a sharing of the burden. Now, Toyota's current safety issues may suggest that they would not get the contract, but the principle is clear. Government does not generally create much of the national wealth, so why should it have free reign to spend it? Do public officials need to fly in a class other than coach? Does expanding overseas representation make real sense now? What is the bang for the buck that is expected? If you cannot show any, don't do it.

The government on several occasions has seemed hell bent on manufacturing the worst public relations situation for itself. To me, this is yet another attempt. Why would you want to broach the notion of freezing people's spending power when you have touted curbing the cost of living, but done little to make that a reality. Then why do it just days after a public agency has granted what many would see as another swingeing increase in a basic utility? The justification for the increase by Barbados Light and Power (BL&P) has been poorly made. After the increase was agreed, BL&P's officers tried to talk to the matter in the mainstream media. What was wrong with an attempt to explain ahead of the decision? The arguments were the same. All that most people will see is that water rates went up 60%: government did that. Now electricity rates will rise 10%: government allowed them to do that. LIME was close behind, proposing increases in land line rates: government has no means to stop them doing that. So, costs of living for most people were set to rise by substantial amounts, all due to government action or complicity. Then, the government says, "Santa forgot to give you a gift. Here, take a freeze in pay." Ordinary people will see this as callous disregard for their problems. How can they try to make ends meet? They cannot default on their utility bills without perhaps suffering worse by getting disconnected. I go back to the matter of arrears, where no real efforts seemed to have been made to try to get back a sou owed to BWA before imposing a rate increase.

When Dr. Estwick described the freeze as "something we have to do...We don't have a choice. We don't have the fiscal space" he may be right, but that is not a situation that came about last weekend. So, his uttering the f- word should not have been last week but many months ago. Was it political courage that was lacking why it was not even mentioned. Those who read the IMF Article IV consultation report say there that amongst the options the government had to consider was wage 'moderation'. So, why not prepare the ground? Blurting it out, without first referring to the social partners smacks of 'stick it'. It's not designed to 'get to yes' easily.

The economist in me can see the sense in what the government appears to want to do, but it is such an unhitched wagon they are driving that I have to wonder if I am just being too understanding. Government has done a poor job in putting in front of people a vision of the economic future that is not about waiting for the recession to end to get back to normal. They have not suggested that the 'new normal' will be a prolonged lowering of living standards in Barbados, even though that message has been aired abroad for some time. By taking that approach, it seems alright to not address any deep seated problems in the economy--and in society, more broadly. As I commented about the 2009 Budget, an opportunity was missed to deal radically with structural issues. Barbados' problems are not getting solved by holding breath. Issues of productivity, competitiveness, value for money, service delivery, straight forward inefficiency, and more have been there for anyone to see for a long time. But, when times are good one can paper over those cracks, and pretend that the bad smell is coming from next door's yard. Like Madoff and his Ponzi scheme, one can pretend in those good times that there are real gains to share, when it was really spinning a wheel. As they say, when the tide goes out you can see who was swimming naked.


Christopher Halsall said...

Just for clarification Dennis..

@DJ: "Now electricity rates will rise 10%: government allowed them to do that."

This isn't true. BL&P will be allowed a 10% rate of return on rate base. Rates for *most* people will *not* increase by 10%. Please note they were already receiving just over 6% previously.

@DJ: "LIME was close behind, proposing increases in land line rates: government has no means to stop them doing that.

LIME didn't "propose" these increases -- they announced them.

And, no, the Government has no means to stop them because of the mis-programmed Price Cap Mechanism (PCM) as approved by the FTC.

I consider you quite strong in your skill set, so I thought you would appreciate the above.

Best regards.

-Chris Halsall

Dennis Jones said...


Appreciate the clarifications.

On rates, understood. One of the issues that has racked my brain has been how poorly BL&P and FTC have explained what the rate decision would actually mean. (For comparison, I recall a few years ago in Jamaica that there was a call for explanations by Jamaica Power Service in easily understood language, and they did this in at least one radio presentation.) I was not impressed that Stephen Worme kept on telling the audience last week that he was not well-versed (or similar words) in some of the details and continued to try to tell people what was going on. Why go there without the right understanding or come with someone who has it? This is not trivial. None of this is helped by complicated billing presentations.

I still believe there is a huge gap in public understanding and still wonder if BANGO can do much to narrow that--a point I have made before--and I wonder again whether BANGO should not seek to get the chance to do that as publicly as BL&P did last week.

Wont beat the horse dead on 'propose' and 'announce', though propose can mean 'put forward a[n] intention'.

I have concerns about FTC, based on how I see it operating in the BL&P case (some actions and procedures seemed arbitrary), but would have felt stronger in taking those issues further had I been able to see them in operation for myself.

acox said...

@ Dennis
I have been trying to wrap my mind around the suggestion of the cars being driven by the public servants
Question Do you really think that it would close a substanial hole in the defecit.
Another thing I would think The PM
would have taken a look at that
We are talking about millions of dollars not thousands and the government is going to have to find a way to correct the deficit
and it is going to take more than one ore two cars to do it.

Dennis Jones said...

Confucius said: "A journey of a thousand miles begins with a single step." A million is made up of one million ones.

The way to solve problems is not to seek to do everything in one fell swoop. As far as cars go, they would be a saving (and a part is better than none). They would be part of a series of measures, and nothing should be off the table. There is also the demonstration effect. I have heard this point made several times on radio discussions in the past few days, along the lines of what would Ministers do if pay was frozen, or are government officials prepared to make visible changes in their 'life style' (with allusions to Errol Barrow cutting cane, or Ministers walking, etc.).

You say one or two cars, but it's much more than that.

I also never presume that any idea has been considered if I do not see it applied. If it has been considered then we can be told and also why it was dismissed. I go back to my notion of accountability.

Governments are not benign agencies, but have to be turned towards what people need from them.

acox said...

This must be a cumulitive between government and people to solve this problem.They both must be willing to give up a little. Like in any household when their is plenty of food everybody belly is full and when their is not plenty then we have to share. So we all going to have to share some of the burdine.Sooner rather than later.

Dennis Jones said...


No disagreement that a 'team' effort is needed. My focus on the public sector is because anecdotal evidence suggests that the private sector is already making significant adjustments. Hotels and restaurants have closed. Firms in many sectors have been working reduced hours and cutting back on staff. So, there is evidence that living standards of private sector workers have been pared. has been done in the public sector? People should see that burden sharing, or if it is not to happen then they need to understand why.

acox said...

Now you are talking my language. As
far as the wage freeze I am for it and I am also for cutting some of the social programs providing they don't affect the elderly. The PM must advice the people that actions
are necessary and try not to focus on who are to blame. People are not ignorant of such facts but he must wear his diplomacy hat in order to get his point across to the masses. People in general would understand. He needs to stay focus.