Professor Eudine Barriteau of the University of the West Indies, was blunt and to the point in her recent Coppin address, summarized in the Business Report of the Barbados Advocate (May 19, p. B3) Prof. Barriteau noted that despite efforts by Bim's present administration to correct the country's economic ills the global (Neoliberal) financial institutions "will stop at nothing until Barbados fixed rate of currency exchange is adjusted." In other words, the vultures are circling and don't believe that even higher VAT (value added taxes) and terminating the economic lives of 3,000 citizens is enough.
Prof. Barriteau recalled that following the last Article IV Consultation on Barbados by the International Monetary Fund, the Government embarked on the retrenchment of public sector employees and the introduction of other measures to demonstrate its seriousness to the IMF regarding stabilizing key economic sectors. But after all the painful measures imposed, the Neoliberal Axis - including rating agencies - still remained unimpressed.
Perhaps a better analogy is to refer to the Neoliberal wolves at the door, ready to pounce on innocent Bajans and tear them to shreds like so many docile sheep. One must probe then what's at the bottom of the yen to devalue. And perhaps, just perhaps, there is more at work here than meets the eye.
The article 'Disappointing Performance' in an earlier Barbados Business Report Section of the Advocate News perhaps gave a few clues. Evidently the island nation has been hit from multiple angles at all its most vulnerable points.
Tourism, for example, was expected to lead the way to pre-2014 optimism but it was hit in the cruise ship as well as air travel domain. We learned, for example, that both long stay and cruise ship passenger arrivals fell by one percent. What was to blame? According to Central Bank Governor Dr. Delisle Worrell, a major contributor was the cancellation of direct flights out of New York by American Airlines and the reduction in seating capacity by Air Canada. In tandem the two moves caused arrivals from both markets to decline. Neither of these has anything to do with Barbados itself, but shows the island at the mercy of the airlines.
What about the layoffs of thousands of public sector workers which was expected to free up money? Actually, according to Finance Minister Chris Sinckler, it was essentially a wash given "separation benefits", He did say some savings would be seen in the "medium term". Well, one hopes some national benefit would accrue with so many sent packing- but not to the IMF, World Bank, and rating agency 'wolves'.
Then there is the sugar cane sector, which now is geared mainly to produce the molasses used to make Barbados rum. The problem? The cane crop was to have begun February 24 and surpassed last year's by 2,000 tons. The facts? The start of the crop was not only delayed until March but there was a crippling strike that resulted in several acres of canes being left in the fields and at transfer stations - contributing to financial losses the industry can ill afford - and a rebuke from a major Rum manufacturer for wasting time and resources for a critical industry. This one was definitely in Barbados' court but ought not to have been any deciding factor on pushing for a devaluation.
Now add to that the ongoing recessionary trend which saw a 0.6 percent contraction in the island's economy between January and March this year - following on from a 0.6 percent contraction between January and September last year and a 0.2 contraction between October and December last year.
Despite all this the outlook is for a 0.5 percent growth this year - not too shabby if it comes to pass. Will the Neoliberal finance monster be kept at bay? I doubt it., According to Prof. Barriteau:
"It seems the international financial institutions and other financial structures such as the rating agencies will only be satisfied when they force Barbados to abandon a fixed rate of exchange rate - and after it has been forced to dismantle the key components of its economic model of development."
Let's note that this model of development has been the ideal for the rest of the Caribbean as it has promoted social justice as well as less inequality than manifested in any of the industrial (OECD) nations. Prof. Barriteau's most stinging observation was that "none of the international policies that regulates financial and economic activities are designed to enable the private sector in the Caribbean to flourish."
She attributed this to aggressive trade protectionism and subsidies (such as in the U.S. for its own rum) that make it extremely difficult for Caribbean exports to compete. This means that NO amount of devaluation - even 50% or more - making Barbados' exports cheap (say its rum relative to U.S. rum) will incept more export sales.
Meanwhile the Barbadian people will suffer because a devaluation will reduce the value of their money but not the value of imported goods, including food, or the fuel that keeps vehicles running. Indeed, a 50 percent devaluation would likely be followed by a 100 percent increase in all food prices and likely more for fuel. People already struggling will be hurled into poverty and destitution because even the most draconian effort of gov't could not appease the vultures (or wolves) of the Neoliberal Reich. Why not?
Prof. Barriteau believes it mainly is from a jaundiced view that presumes money laundering and tax evasion, though "the Caribbean people don't want the Caribbean to be the epicenter of either."
She emphatically stated (ibid.):
"We never have and we never will be because it existed in other places. The Caribbean is not the epicenter of money laundering or tax evasion."
Is There Another Side to the Story?
But what if the Neoliberal predators are merely lying in wait for an already savaged-ravaged nation? This is the other side of the story, which is now making the rounds on the island and in its news media, especially the Barbados NATION. According to former Sen. Frances Chandler, writing in the Nation ('Sinckler's Leaking Glass') the current government - run by the DLP - and with Chris Sinckler at the helm, is raiding the National Insurance scheme (analogous to our Social Security) to the tune of $40m a month and replacing it with commercial paper (call it fiat money) at high interest. As she asks:
"What is the point, minister, when we sacrifice to help fill up the glass, but your administration seems bent on boring holes in bottom of said glass and emptying it?"
Sen. Chandler also referenced Central Bank governor De Lisle Worrell's comment that the recent Credit Suisse loan (at an exorbitant interest rate which saw B'dos bonds degraded) "wasn't needed and wasn't being used- it was only borrowed because people were panicking."
Worrell himself has said the Central Bank will stop printing money (read: finance some of government's operations) once the deficit reduces to 6 percent of GDP from its current 11.3 percent. Meanwhile, another letter writer (John M. Robb, 'Destroying Barbados' Model', The Nation, 21 May, p. 10A) has basically accused the gov't of "destroying Barbados' economy" and putting it on a path to certain devaluation. In his words:
"Due to government's expenditure exceeding revenues there has been a sustained deficit the past six years - which some experts believe is too large and cannot be substantively reduced that easily.
In an effort to finance this deficit, which was the result of government's poor policies, government has encouraged the Central Bank of Barbados to print money to meet its obligations. This is a very treacherous practice which will put downward pressure on the Barbados dollar and if prolonged, could lead to a devaluation."
The sad fact is we may be even closer to seeing a devaluation than most believe. And if it occurs, the Barbados currency will never be revalued again higher. It will be forever in the maw of the Neoliberal jackals and vultures - picking over its bones endlessly.
That any government of the island nation could have been responsible for this sorry end is more than most of us can even contemplate. But we have to recall the same gov't was at the forefront when the last crisis hit - in 1991- in the wake of trying Reaganomics in 1986.