Is there Caribbean sclerosis?

Saturday, June 14, 2014

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The above is the title of a recent comprehensive study published by the Inter-American Development Bank (IDB) which addresses the issue of poor and stagnating economic growth of Caribbean countries, confirming that economies have been hard hit by the global economic crisis raging unabated since late 2008.

However, after comparing the small economies of the Caribbean with other small economies it concludes that the Caribbean economies performed worse than other small economies. Therefore, it is not small size that accounts for the Caribbean's relatively poor economic performance, nor can external factors be solely blamed, as many in the region are fond of doing.

The report states that even if the international economy recovers, it will not be sufficient to restore the level of growth needed in the Caribbean. Passive policy will not do the trick, but neither will simple fiscal compression. A new policy paradigm has to be formulated based on the renewal of old business arrangements and new international economic arrangements involving new products and new trading partners.

The new policy matrix involves "crossing the Rubicon", that is engagement in a process of stabilisation and structural reform directed toward the attainment of higher and more sustainable economic growth by overcoming low total factor productivity, competitiveness, institutional quality, private sector and macroeconomic instability.

The authors venture that the overarching cause is what they call "Caribbean sclerosis". They suggest that policy inaction is due to the existence of entrenched growth-retarding special interest groups, which are then able to influence government policy to allocate resources in their favour.

By arguing that low economic growth in the Caribbean is largely a self-inflicted wound, the report falls into the genre of blame the victim pathology, which is the traditional analysis purveyed by the international financial institutions from the distance of Washington, DC.

What is new and different — and the authors must be commended for their courage — is the real problem of the role of the private sector in two related dimensions: the real economy and economic policy. The private sector needs to be more inefficient and internationally competitive and less successful in manipulating economic policy of governments to favour their operations.

If the analysis is accurate, then it leaves the issue of how to change the status quo in the Caribbean. That is the challenge to the people of the Caribbean and is beyond the remit of the international financial institutions (IFIs). While Caribbean countries work on their internal problems, the International Monetary Fund, the World Bank and the IDB must make sure they are doing all that is necessary to help the Caribbean to achieve economic recovery.

We say unto the IFIs, forget not Matthew Chapter 7, verse 3 of the King James version of the Bible. "And why beholdest thou the mote that is in thy brother's eye, but considerest not the beam that is in thine own eye?"




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