What is Barrow’s Economic Policy?Contributed
The news of the Mena Group of Companies going into receivership last week reverberated around the business community like aftershocks from a massive earthquake. Many were left wondering how businesses owned by this very savvy entrepreneurial family could fold, and who would be next! This is a bad sign for many reasons, but the really scary thing is that there are a lot of other large and medium-sized businesses that are on the verge of going into receivership or closing their doors. I guess the so-called stimulus package the Prime Minister trumpeted last year provided some boost, but for only a select few, like that architecture firm hogging up all the business.
I maintain my position that the only way we will get out of this economic crisis that we are faced with today is if this government fosters an environment whereby the private sector has the confidence to invest and grow their business. For some reason this is not the way it is in Belize these days! In his budget speech for 2010/2011 the Prime Minister stated – “We have long since considered so-called big government a moral and practical imperative in aid of the poor.” What the Prime Minister was trying to say is that the government should be the focal point of development in the country, not the private sector.
It is sad to say, but the reality is that government’s interference in the economy has only caused the situation to deteriorate in Belize. So I ask: how much involvement should this government have in rebuilding our once vibrant and diverse economy, seeing that they have neither the skills nor the experience to develop a plan that can take us forward? Before you answer this question, I will outline the different kinds of economic theories to see if the policies of this government are in line with any of them.Types of Economic Theories
There are four main theories as regards the role of the government in the economy, including: Laissez-Faire Economics, Keynesian Economics, Supply-Side Economics, and Monetarism.
People who believe in Laissez-Faire Economics believe that the government should not get involved with anything that can affect an economy. The system includes the idea that the government should not regulate the marketplace, workforce, environment, etc., and allow the economy to move and evolve naturally.
Keynesian economics is at the other end of the spectrum and challenges Laissez-Faire Economics. Based on the ideas of John Maynard Keynes, this economic theory hinges on the belief that if people do not consume or invest enough into the marketplace, the government should step in and regulate the economy using fiscal policy. Fiscal policy involves either tax cuts or increased spending to combat recession. According to Keynes, if a government has to spend money to combat recession, the resulting deficit would not be bad because it was necessary.
Supply-side economics is an economic theory that is geared towards controlling the potentially deleterious effects of runaway inflation. It calls for tax and spending cuts, which would in turn give people the incentive to produce and increase the supply of goods available. The tax reductions would leave more money for the building of new factories and job growth, allowing, in theory, for the benefits to flow to the public.
Monetarism is the idea that the quantity of money in circulation is an important factor in how the government can regulate the economy. People who support this theory believe that the government needs to be able to ensure that the money supply grows in parallel with the economy at a constant rate, while at the same time controlling interest rates and other factors that would affect the economy.What is GOB’s Role in the Economy?
The government’s main responsibility is to guide the overall pace of economic activity, in an attempt to maintain steady growth, high levels of employment and price stability. By adjusting spending and tax rates (fiscal policy) or managing the money supply and controlling the use of credit (monetary policy) it can slow down or speed up the economy’s rate of growth — in the process, affecting the level of prices and employment. Taxes, inflation, and interest rates are also controlled by government decisions and actions, and play a substantial role in Belizeans’ ability to live a decent and respectable lifestyle.
When in opposition, the UDP constantly criticized the economic policies of the then government. At least the PUP government had an economic policy and it showed with the expansion of all the major sectors of the economy from 1998 to 2008. Looking back at the last two years, one would find it very difficult to explain the economic policy of the present government. Truth be told, this UDP government does not have a clear and focused plan that will improve the lives of the Belizean people. I am proud to say that one of the greatest accomplishments of the last PUP administration was the tremendous diversification of the economy. In fact, Dr. Carla Barnett in one of her speeches, I think it was for Tourism Week at the Princess Hotel, trumpeted this great achievement by the then PUP government.The Future Looks Real Bleak
In his book, “How Capitalism Will Save Us”, Steve Forbes states that “bad economic policy can cause economic upheaval far more brutal than any disruption caused by the normal operation of markets.” I agree with Mr. Forbes’ statement! However, I would also like to add that government’s interference in an economy without a clear and focused economic policy can be worse than a bad policy. This is what we are faced with today, a government that is on the deck of a rudderless ship and heading for a massive iceberg. I hope the Prime Minister’s economic advisors are preparing for the next major dip in the US economy. I beg of you, decision makers in the government, for the people’s sake, especially the poor and indigent, please get your sh_t together and please do not say that we are immune from the exogenous shocks, like the great recession! Two and a half years have passed and it is high time you provide some solutions, Mr. Prime Minister. The clock is ticking. http://www.belizetimes.bz/2010/08/06/what-is-barrow%E2%80%99s-economic-policy/