At a recent high-level Caribbean Forum in Jamaica, Christine Lagarde, managing director of the IMF stated: “This is something that is prevalent in the Caribbean, not only the Caribbean, but there are also other places that, essentially, race to the bottom… The problem with the race to the bottom offering the best possible tax deal, at the lowest possible rate, over the longest possible times, is that everybody ends up at the bottom and the capacity to generate revenues and growth is impeded for all of them.”
Finally, we have an IMF director, who is willing to tell these Caribbean leaders the truth. However, she failed to acknowledge that the IMF in the 1990s’ Free Trade Agenda, introduced this “race to the bottom”.
The IMF coerced Caribbean countries into: liberalization, privatization, non-productive loans, taxes, downsizing, devaluation and foreign sales of national assets. In 1995, I presented a program in Trinidad and Tobago criticizing these IMF programs and warned them that this was a race to the bottom.
I advised that the low wage, non-skilled labor route, would not ensure success, since capitalists will always move to the areas where labor is cheapest. I discouraged them from participating in these structural adjustment programs that made them sell assets and borrow money for studies.
Having acknowledged the race to the bottom by Caribbean countries, you would expect the IMF to change course and realize that its programs are negatively impacting these countries. If you expected this, you are living in a fool’s paradise.
In Friday’s edition of the Jamaica Observer, Professor Hilary Beckles, vice chancellor of UWI, stated: “The growth in social and economic inequality across the region in recent decades, under IMF tutelage has been identified as a major concern. We seem impotent to prevent and understand, the consequences of the daily descent into poverty from the middle class, since the normalization and domestication of the IMF. The Caribbean is not only experiencing the systemic erosion of earlier social mobility gains, but the eruption of a new mental construct, in which more citizens, seized in the grip of economic decline, are focused upon ‘getting out’ and ‘getting even’ with the nation. Citizen versus State is emerging as the primary political feature of the IMF-ruled Caribbean.”
We have elected leaders in the Caribbean who have selected the IMF and other global agencies to run our countries. Our leaders have no vision for their nations or the Caribbean, so they have outsourced the economics and retained the politics.
The IMF is now in charge of our economics and they now pontificate that economic prospects for the Caribbean, are generally improving and that growth in the tourism economies, is projected to be 2.4 percent.
Of course, this projection does not consider the impact of hurricanes Harvey, Irma and Maria. IMF also noted that the performance of the commodity exporters has been weak. Trinidad and Tobago was hit hard by low oil and gas prices and production outages; Suriname by lower commodity prices, due to cutthroat conditions in the global aluminum market and necessary fiscal consolidation; and Guyana fared a little better supported by two new large gold mine discoveries and anticipation of oil production in 2020.
The IMF praised the Trinidad and Tobago government for taking steps to adjust fiscal imbalances, through efforts to reform the energy tax regime, reduce fuel subsidies, and boost non-energy revenues and inviting the World Bank to conduct a review that will identify cost savings in health, education and social services.
Anyone familiar with this economic jargon would realize that the citizens are in for a very difficult time. These measures will increase prices for all energy-related products and taxi drivers will have to raise fares.
After the World Bank review, the government will be forced to reduce expenditures in health, education and social services since IMF believes that these “entitlements” should not be funded, regardless of the fact that those citizens have been paying into the National Insurance Programme.
Following an IMF team’s two-week Article IV Consultation in Barbados, head of the mission, Judith Gold, warned that despite the introduction of revenue-generating measures, government would not meet its targets.
Even with the substantial hike in the National Social Responsibility Levy (NSRL) from two to 10 percent, an introduction of a new sales tax on foreign currency transactions, and a hike in the excise duty on fuel, Gold stated: “substantial further fiscal effort is needed to decisively place the debt on a downward trajectory. Reforms of state-owned enterprises should include improved management, cost recovery, reduced services, mergers, closures and privatization. Containing other current expenditures, including the wage bill and Government pensions are also critical.”
It should be obvious to Caribbean leaders and interested parties that the IMF does not care about the Caribbean. They have an agenda – foreign ownership of any natural resource that is controlled by Caribbean governments/citizens.
This is the worst case of mismanagement I have ever witnessed. An international agency, IMF, with total authority for the economics of Caribbean and other countries that seek their assistance, but has absolutely no responsibility for the outcome of its advice and counsel. The austerity programs imposed by the IMF focuses on repayment of debt, depreciation of local currencies and privatization of local resources.
IMF has stated that the currencies of Bahamas, Trinidad and Tobago and Barbados are overvalued. In 1995, I discussed devaluation in my TV series, Economic Strategies for T&T in the 21st Century.
I informed my countrymen that devaluation of our currency works if you have products for trade. We in the Caribbean do not have many products for trade and we import most of the goods and services that we use.
Our economies are primarily buy and sell economies. This results in our large debt burden and our constant shortage of foreign exchange. Devaluation of these currencies will cause the cost of imports to rise and therefore reduces our ability to procure capital goods and technology; it reduces the value of our assets making it cheaper for foreigners to purchase them; causes our revenue for exports to decrease, increases the cost of education resulting in erosion of our knowledge base. Finally, it increases our debt. For example: If you owed $2 billion US (or $12 billion TT@6-1) when our money depreciates to $7.00/US dollar now you owe $14billion TT.
Wake up Caribbean leaders, it is time you reject the IMF’s economic advice. It is time you understand that regardless of the economic problem the IMF has the same solution. No wonder all the patients are dying.
Over the past 20 years, these Free Trade policies have resulted in large income inequalities all over the world. Tax concessions that were given to the tourism sector to encourage cruise ships, hoteliers etc. have not helped those countries improve their economic conditions.
Selling off our main assets, instead of making them more efficient and productive, have left us poor and dependent. We are now constantly being asked to force our countrymen into a new type of voluntary slavery.
It is time for you to develop your vision for the Caribbean and pursue it regardless of the position of the IMF and other foreign capitalists. Their goal is to own and control your economies. Your goal must be to control your economies and the constant improvement of the lives of your citizens.