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It’s a cycle

11/3/2009

FOR more than a year we have been speaking at length about the global financial crisis and trying to get the point across that the best response is to continue spending to ensure that the economy keeps “ticking over”.

In order for this to be the case, persons must continue to be employed, and this has been a focus of local policy makers, and the commitment given by those within the social partnership, as it has been realised that without the maintenance of employment levels, individuals would not be able to spend and therefore keep businesses going.

So far it appears that these efforts have been relatively successful, with mass lay-offs not being something that have been seen in the local context. However, the argument can be made that although there haven’t been mass lay-offs, there has still been a marked reduction in spending.
On exiting office last week, now former Governor of the Central Bank of Barbados, Dr. Marion Williams, once again advised Barbadians to continue spending in the current environment.
The governor reemphasized that at the macro economic level spending is good for the economy but that it still would not be wise for persons to spend excessively, and therefore argued that “striking a balance is vital”.

In attempting to strike this balance, Barbadians have been carefully watching their level of spending, having an impact in the area of credit, which has not seen any growth, despite the Central Bank’s efforts to reduce lending rates.
This wait and see attitude was recently referred to by officials of the Barbados Teachers’ Cooperative Credit Union Limited, who stated that it has been difficult for their members to access more credit, noting that they are being very conservative in their spending, refusing to put themselves in further debt because of the uncertainties presented by the current environment.

Conservative approach
The local business community could therefore argue that this conservative approach has meant that the levels of spending on the part of consumers have not been what the former desires to take some of the pressure off them in terms of meeting their wage commitments. As a result, it has become increasingly difficult for employers to live up to the commitment made by the social partnership.
This therefore brings us to the point of realisation that we are in a vicious cycle, because although it has been agreed to by stakeholders that maintaining employment is a must, the persons being employed must also realise the role that they need to play.

Quite simply, if they do not take the money that they are being paid and pump it back into the businesses that are continuing to employ them, then the commitment would be in vain.
The point must be made here however, that given the significance of the tourism industry in the context of the local economy, there are inherent challenges that will be presented.

For example, although hoteliers have committed to maintaining employment levels, Barbadians do not necessarily pump money into hotels. Therefore once occupancy levels are down, it essentially creates a situation where the hoteliers are paying their staff but are not earning sufficiently for this to be maintained long term. As a result, those businesses that depend on the tourism industry also suffer seeing that the hotels can no longer afford their services.
Attempts have been made to address this with the introduction of the “Staycation Programme”, which has been heralded as a success, but there is no doubting that there needs to be much more spending on the part of Barbadians in this sector, particularly if the performance of the industry turns out to be below what is hoped for.

Indices

as of close 9/15/2009


Local	3404.30	-

Cross-List	1665.14	-

Composite	847.81	-