Whatever the outcome, it is clear that the case brought by the US Securities and Exchange Commission against Sir Allen Stanford in relation to some US$8B of certificates of deposit sold through Stanford International Bank (SIB), has resulted in a huge reputational blow with far-reaching and long-term consequences for Antigua, the region and its financial services industry.
Although the alleged fraud − which it should be made clear does not relate to SIB’s onshore retail operations − primarily casts a spotlight on Antigua’s regulators and its offshore environment, it will almost certainly be the final act that confirms to the US administration and other OECD governments that they should move in concert to curtail the activities of all offshore financial centres.
That it should occur within weeks of uncertainties emerging elsewhere in the region about other Caribbean companies for completely different and unconnected reasons, ought to put every Caribbean government on notice that no matter how professional and dedicated their central bankers and authorities are, the absence of a pan-Caribbean regulatory environment is long overdue.
The Caribbean overseas territories, the region’s principal offshore centres, are also far from immune from the fall-out from these developments. Coming as they do within days of the ending of a commission of enquiry in the Turks and Caicos Islands which heard evidence about corruption and excess on the part of members of its government and after the arrest of an individual who used the islands as an offshore centre to run an allegedly fraudulent ‘investment’ scheme in Jamaica, paints a further damaging and negative picture of the region.
There may well be further shocks to come. Not only do uncertainties remain in some nations about the protection Caribbean investors may have in local life assurance companies, but it is far from clear whether, in some countries, national insurance money may have been invested in institutions now in the public gaze.
This is not to make a political point – these are rightly issues for Caribbean governments and their citizens – but to indicate that the global financial crisis is not only raising hard to address macro-economic issues for Caribbean governments, but is also shining a spotlight on regional financial governance. Put another way, it is bringing into focus the practical effect of what happens if the much desired Caribbean Single Market and Economy and its associated regulatory environment is implemented in a piecemeal and slow manner.
In a recent paper on the implications of the situation surrounding CL Financial, Professor Norman Girvan makes a number of important points. In part he argues that “there is no substitute for adequate monitoring and supervision and muscular enforcement of appropriate regulations” and that “regulation should be regional and seamless; so that regional conglomerates cannot evade regulations in one country by exploiting loopholes in another.” These and other themes in his paper suggest the need for government to exert greater control from a Caribbean perspective so that ordinary citizens do not to suffer.
The macro-economic and regulatory problems now arising in Caribbean nations as a consequence of the global recession, the arguments that surround the EPA with Europe, and Professor Girvan’s focus on the need for regionally driven solutions, indicate a far deeper and unresolved tension: the absence of any consensus on what constitutes a Caribbean designed and owned economic and social development philosophy.
In the thirty or so years before independence much of what was absorbed by the nascent political leadership in the English-speaking Caribbean was the thinking of the British Labour Party (‘old labour’), the trades union movement and the views of mainly British social reformers. They coupled this with the need to see history from a Caribbean perspective and a desire to see all citizens embrace their national and personal sovereignty. Consequentially the emphasis was on the role of the Caribbean state as the equitable provider of services from utilities to social welfare and on how best to govern within the pre-existing British system.
Independence enabled governments to take this model forward supported by Commonwealth and then European preference, extensive aid programmes and other special arrangements. Its sustainability was largely driven by the Cold War and helped by the Cuban revolution that together, for the West, required the anglophone Caribbean to remain as an ally.
However, the end of the Cold War effectively cast the Caribbean adrift and led to an understanding that overcoming smallness would require future development to occur through regional economic integration and global competitiveness. But well before achieving any adequate form of integration or regional governance, external pressure led the Caribbean to join the WTO, liberalise its economies and unquestioningly embrace the Washington consensus before having fully adjusted to the rapid reduction in its dependence on preference and external aid.
The global recession throws this experience into sharp relief and may well force the region to confront the unresolved contradictions of its historic commitment to social provision and equity with its apparently universal commitment to growth, the market and a desire to consume in the image of the US. It short the economic crisis highlights the need to resolve the contradictions of nationalism, small economies, social commitment, open markets, inadequate regulation and a regional economic integration process in which regional governance or authority is lacking. It illuminates decades of drift in Caribbean thought and an absence of focus on consequence and implementation.
The economic crisis will lead to new economic models that will within a decade result in new approaches to global economic governance and radical change in the global economic order.
This suggests that academic institutions, governments, regional institutions and civil society in the Caribbean might start to look beyond the pain of the economic crisis and ask what kind of model they wish to have when a chastened world economy emerges.
Previous columns can be found at www.caribbean-council.org
