Economic crisis and the Caribbean: The challenges facing Barbados
By Hilbourne Watson From Stabroek News
Hilbourne A. Watson is Professor Emeritus of International Relations at Bucknell University, Lewisburg, Pennsylvania
Barbados is yet another casualty of the economic crisis facing the Caribbean, with the Democratic Labour Party (DLP) government euphemistically announcing last December that it is “sending home” 3000 public sector workers – about 10% of the civil service labour force. The reality is that the predicament engulfing Barbados speaks to the deeply rooted structural problems inevitably facing countries which import and consume much more than they produce and export, and which lack a competitive productive base. Countries like Barbados lack the means to resolve this serious problem.
I am yet to encounter any serious discussion of the structural problems in Barbados’ economic situation in the discussion flowing out of the island since the announced layoffs. An article by columnist Al Edwards, “Sandals will help boost Barbados’ economy,” carried by the Jamaica Observer on Friday, January 31, is high on expectations and low on substance in terms of addressing the concrete economic situation in Barbados, beyond mentioning what the Minister of Finance and Governor of the Barbados Central Bank have said. Much like the government and capitalists in Barbados, Edwards focuses on symptoms rather than structural problems in his identification of five points that reflect the government’s hopes and expectations from the announced arrival of the established Sandals’ all-inclusive tourism chain in Barbados. Tourism arrivals in Barbados have declined significantly since the 2008 global economic and financial crisis. In this article I discuss the misplaced optimism in each of these arguments.
1. With the Barbadian public sector set to lose 3,000 workers, the two hotels to be established by the Sandals chain will be employing some 1,500 workers. This spells a net loss of 1,500 workers with the country experiencing an unemployment rate of 15 per cent.
Sandals acquired two hotels – Almond Casuarina Beach Resort in the south and Almond Beach Village in the north, with projections, which are not the same as guarantees, to create some 1500 jobs. There can be no guarantee that even if Sandals were to employ 1500 workers, this number will qualitatively compensate for the equivalent number of jobs being destroyed in the Civil Service. Sandals is likely to hire mainly low wage workers as housekeepers, cooks, waiters, gardeners and other general staff – jobs that will not translate into a net increase in “good” paying jobs at or near the level of many civil service jobs being destroyed to meet austerity requirements. The process will follow the capitalist norm of shifting jobs around without a net increase in employment. Austerity will hit the working class very hard, considering that government workers will be forced to endure a wage freeze for 5 years into 2018, among other impositions. I did not notice any serious discussion of measures to restructure the country’s productive base.
2. Both hotels represent an investment of US$250 million at a time when foreign reserves in Barbados are low at just Bd$1.2 billion. Therefore inflows from Sandals should contribute almost half of those reserves, a boon at this time when Barbados is starting down the barrel of devaluation.
Where will Sandals raise the US$250 million for investment? Will Sandals borrow the bulk of the capital in the Barbados financial market and drive up the cost of borrowing in a contracting economic environment? Sandals simply is not in business to improve Barbados’ declining foreign exchange reserves. In fact, as Jamaican economist Reggie Nugent points out, markets are “strategic in moves by capitalists” and multilaterals like the IMF to destroy the “institutional underpinnings of states,” hastening their integration into global capitalism.
3. Sandals will bring an additional 800 rooms to the country’s room stock, resulting in an additional 130,000 tourists visiting the country.
Sandals plans to convert Almond Casuarina Beach Resort into Sandals Barbados and anticipates modernizing Almond Beach in due course, according to an online report in Barbados Today. The Sandals model across the Caribbean involves privatizing public beachfront space, denying locals access to beaches around their hotels, a policy that Barbadians oppose in a land where the mass of working class people own very little land.
It will take time to mitigate the effects of the crisis in tourism in Barbados. Any realistic plan to “grow” tourism in Barbados will have to consider those factors in Europe and North America that contributed to the decline in tourist arrivals, length of stay, spending, etc. Barbados suffers from a crippling import bill for food and energy that also redounds to the benefit of tourists, compounded by a very high net foreign exchange drainage associated with tourism.
4. Its presence will help make Barbados a stronger destination and with Sandals’ marketing abilities, this should help to redress Barbados’ declining visitor numbers.
St Lucia significantly increased the number of tourist arrivals when Barbados experienced a net decline in arrivals from North America, which means Barbados was negatively impacted with attention to long-term stays, foreign exchange generation, and employment in tourism. The net decline in arrivals rests partly on Barbados resting on laurels of a putative exceptionalism – the idea that tourists are eager to rush to Barbados simply because it is Barbados. Barbados will have to do much more to achieve globally-defined competitiveness.
5. Sandals will be actively looking to local suppliers, thus precipitating a trickle-down effect which augurs well for local businesses.
Most of the jobs likely to come to the tourism sector via Sandals will be low wage jobs that are unlikely to boost private sector expansion, bearing in mind that contraction in the public sector includes a five-year salary freeze in a society with an extremely narrow productive base and that depends on imports to fuel consumption. The private sector has already begun to contract, according to Barbados Today. Local suppliers to tourism in Barbados include a narrow group in which economic and financial power is heavily concentrated.
The indispensable global context
The global context is indispensable for making sense of the crisis currently engulfing the Caribbean, and that has now clearly reached the shores of Barbados. Capitalism is a global form of production for profit and private capital accumulation, which is a global process, and crisis inheres in capitalism. Recent global trends signal major problems on the horizon for “emerging markets” – such as Russia, China, India, Turkey, South Africa, Brazil, and Mexico, among others. A January 23rd report in the Wall Street Journal reports that investors pulled $58.7 billion of cash from “developing countries in recent years; particularly vulnerable, in investors’ eyes, were countries that regularly import more goods and services than they sell abroad,” which includes the entire Caribbean. Economic policy in the US since Obama took office in 2009 has benefited the top 1 percent, which has received 95 percent of all gains in income and wealth, at the expense of the economically and financially battered working class that finds it more difficult to travel as tourists.
There is a deepening concentration of wealth in the hands of the global wealthy, which stashed around $52 trillion in offshore tax havens – the British Virgin Islands, the Cayman Islands and other Caribbean financial holding centres. This confirms the lack of opportunities to invest in productive (profitable) activities, and reflects the dominance of finance capital in global capitalism. The global majority, which is forced to rely on wages, is compelled to endure austerity that is designed to restore profitability for a global handful. The scientific and technological revolution, via artificial intelligence, robotics and innovation, is creating jobs for robots and other machines much faster than for humans, forcing growing numerous workers to compete with machines for a dwindling supply of jobs.
Austerity in Europe and North America makes it harder for large numbers of people to travel abroad as tourists. Approximately 2/3 of the working class in the USA has seen real wages stagnate mainly since the late 1970s, and, since 2008 masses of white-collar workers labour under the crushing weight of the housing crisis that eroded the equity in their homes that they relied on to finance overseas vacation trips. Most of the new jobs being created are for low wage workers, who can hardly afford to travel as tourists. Inequality – the real source of poverty – is rising and enveloping the white-collar and blue-collar working class, compounding contradictions for tourism-dependent countries like Barbados.
The real starting point for studying capitalism is not the market but rather commodity production in association with the absolute necessity to reproduce a reserve army of labour, which becomes more explicit under neoliberalism. The strategy of the DLP government in Barbados to fire upward of 3000 public sector workers to deal with debt, budgetary, and foreign exchange problems, speaks to the absolute necessity under capitalism to maintain a large unemployed labour force, to reduce the cost of labour in production. The DLP will force workers to fight like dogs over the remaining jobs, while the private sector also contracts, aggravating insecurity and desperation among the majority of Barbadian people.
In places like Barbados the technocrats and economists focus on the market at the expense of carefully studying capitalism, unmindful that, as economist Reggie Nugent has observed, the market is “foremost a political construct that can’t be reduced to any amoral technical space through which appropriate signals about appropriate economic and financial activities are sent to investors.“ Nugent emphasizes that markets are “integral to both the distribution of services and goods and the accumulation/distribution of capital/profits.” Under capitalism, markets are therefore strategic sites of power, which makes them political by nature, and they operate beyond the confines and constraints of national (sovereign) states and societies. It is in this contexts that states with a capacity for effective sovereignty hold advantages over those without (the Caribbean falls pretty much into this second category). The time has come to part with illusions about “Brand Barbados” in order to think more seriously about how the country might try to build new infrastructures capable of contributing to the types of science and technology, education, skills and other requirements to face an uncertain future that remains to be made.
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