With the present Eurozone on the point of collapse, the world’s developed economies on the brink of a second recession, and a slowing in advanced developing economies such as China and Brazil, the prospects for near term growth in the Caribbean appear bleak.
Having failed to find a way to address the 2007-08 global economic crisis as a region, governments in Caricom decided to focus on national solutions within relatively small and in most cases increasingly vulnerable economies. They did so in a manner that may in the short term have shored up many governments’ domestic political support, but in doing so offered little reason to hope for a robust regional response to any future challenge.
Today Caribbean states are amongst the most indebted in the world. Many are undertaking IMF programmes. Most central banks paint pictures of weak economic recovery. The tax take is either diminishing – and with it government’s ability to deliver social services – or its burden on the productive sector increasing.
External sources of grant funding are in the process of being reoriented to loans, undergoing revision or running dry. Export earnings and foreign investment flows are weak. Key feeder markets for tourism are either in decline or have not returned to pre-2007 levels. There is no sense of direction.
In the recent past the response would have been for the region to develop a single narrative, see value in strengthening and deepening economic integration, consider reducing regulation and encourage the private sector to utilise external trade agreements offering freer trade, while seeking new opportunities at a regional and national level.
What is striking now is how little high-level public comment there has been in the Caribbean about what is occurring in the global economy.
This is despite the concerns of central bank governors about the region’s narrowing room for economic manoeuvre. Notwithstanding the excellent start made by the new Caricom Secretary General, Irwin LaRocque, there are few signs that the political class in the region is likely to be able to act as one if the global economic outlook darkens; so much so that there is a danger that the Caribbean may be transfixed in the headlights of the oncoming crash.
One common response has been to urge the region to unite if it is to weather the global economic slowdown. Speaking recently, in answer to a question about the vulnerability of Caribbean economies to the financial instability in Europe, the Caribbean Association of Industry and Commerce’s (CAIC) outgoing President, Carol Evelyn, said that Caribbean nations had made themselves vulnerable by not coming together. Mr Evelyn also pointed out that commitments made to Caricom are regularly undone when opposition parties come to power because there was no national consensus before any regional commitment was made.
In his view, the business sector had to lead the integration movement within Caricom Single Market and Economy (CSME).
Others suggest that it is the hard pressed and underfunded Caricom Secretariat that should be playing this role. In a recent commentary on the failings of Caribbean regional integration, the British Economist Intelligence Unit noted that the inability of Caricom to implement the CSME called into question the future of regional integration and highlighted the inadequacies of regional governance structures.
It suggested that the Caricom Secretariat had to be concerned with finding ways to promote growth, job creation and development across the region while encouraging the involvement of the private sector in a way that distributes the benefits equitably, if as it put it, the region is “to do more with less.“ It also proposed the scaling up of regional enterprises.
But what is the region to do if the reality is that there is no longer any appetite for regional integration and all the Secretary General of Caricom can do is urge heads of government to achieve a consensus and to implement what they have agreed?
Firstly, Caricom could have a louder more inspirational voice both warning and leading thinking about the challenges and responses the region has to make. Caricom’s Secretary General has already embarked on this task and his public statements indicate an awareness and sensitivity to the challenges the region faces.
Secondly, heads of government, politicians and opposition parties might agree a common regional narrative and to identify a few regional initiatives that can be delivered rapidly in a manner that rebuilds confidence.
They might also, if financing is limited, explain what a ‘Caricom lite’ might best be doing.
Thirdly, the good interpersonal relationships between the Caricom and Cariforum secretariats ought to be reflected at a political level so that a message of mutual respect emerges in particular in the Caricom Dominican Republic relationship.
Fourthly, the language about the private sector should be turned into reality. The lip service paid by government to the private sector and it developmental and integrating role is frequently not observed in practice.
What politicians and the public sector often miss is that nothing happens in the private sector if there is not the opportunity for profit. Unlike government and academia, business will not even look at any prospect unless there is an obvious return on the time and money invested.
Fifthly, the nature of the Caribbean private sector ought to be recognised. Except for about fifty to one hundred larger relatively well capitalised companies, the private sector in the region consists of either very small domestically-oriented enterprises, a large number of entities in the tourism sector sometimes owned or whose services are marketed by companies outside the region, plus utilities and self-employed professionals.
This means that the opportunity to encourage private sector led regional economic integration is likely to be limited and slow if as seems to be the case, larger companies see better opportunities outside the region to grow their balance sheets.
No one should underestimate the crisis that now faces the region as a consequence of external economic forces. For this crisis it is too late for the obvious response: deepen regional economic integration.
The alternatives for nations without energy, minerals or a well-diversified economy are limited: years of austerity, bold initiatives aimed at encouraging foreign investment with a possible consequent loss of sovereignty, or restructuring taxation, the public sector, pensions and social services. If the world enters a second recession, some hard choices lie ahead.
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