The urgency of now – Need for a joint response to a regional crisis

The International Monetary Fund (IMF) says that this year the world economy will suffer its worst performance in 60 years and the International Labour Organisation estimates that the global recession will result in additional unemployment of 50 million people if the situation continues to deteriorate.{{more}}

In Jamaica, one of the Caribbean’s larger economies, the Planning Institute of Jamaica projects that the economy will experience negative growth in the fiscal year 2009/2010 and unemployment levels will rise to above 12 per cent.

In the Eastern Caribbean Currency Union countries – the countries of the Organisation of Eastern Caribbean States – the IMF says that growth is estimated to have slowed by 2 1/2 percent in 2008 and will remain flat in 2009 “with risks tilted to the downside”.

Everyone in the world – including the Caribbean – knows for certain that businesses are closing or contracting, employees are being laid off, and economic conditions are worsening.

On top of the already grave situation, capital flows to markets such as those in the Caribbean are in danger of collapsing. The Institute for International Finance forecasts that “net private sector capital flows to emerging markets” this year will be less than half of last year and only a fifth of the figure in 2007. Caribbean countries have to calculate that their share of that contracting pie will be even smaller since the bulk of it will continue to go China, India, Brazil and other larger developing countries.

The prospects for the Caribbean could not be bleaker, particularly with the likelihood of promises not being kept by developed countries to deliver official development assistance or aid in their own strained circumstances. Mindful of this, a UN Commission of Experts, at a meeting earlier this month, called on developed countries to “resist the temptation to cut back on development assistance”.

But, aid promises were being abandoned even before some industrialized nations were officially declared to be in recession. It is unlikely that they will increase aid spending when they are increasing their own debt burden as part of their stimulus programmes for their economies.

Given this troubling situation, the people of the Caribbean would have every right to expect their leaders in the Caribbean Common Market and Community (CARICOM) to gather as quickly as possible to consider how best they might together address the global crisis and its wallop on their economies.

It is worrying, therefore, that two meetings of CARICOM heads of government scheduled for Barbados on 30 and 31 January have been postponed to 12 and 13 March. One would have thought that, in the present situation, every hour counts. It is not a time for days and weeks to pass without urgent regional attention to the region’s fortunes.

On the eve of the postponement of the two meetings, the CARICOM Secretary-General, Edwin Carrington, underscored the absolute necessity for the region’s small economies to “come together to take decisive and collective actions” as “the only way in which they could effectively treat what seems set to be a long and deep global economic downturn”.

Caribbean ministers, attending a meeting of CARICOM’s Council for Finance and Planning on January 29, appeared to be seized with the urgency of now. David Estwick, the Barbados Minister of Economic Affairs, quite rightly said that CARICOM governments had a duty to their citizens to move towards convergence of their economies. And, significantly, he added that “the global crisis highlighted why the regional integration process must move forward”.

But, with the best of intentions, Finance and Trade Ministers cannot give the regional apparatus the authority and strength of heads of government. The Caribbean has lost valuable time by the failure of heads of government to meet and to decide together on a course of action that would avoid destructive competition between their countries, and lay out a plan they could advance in cohesion.

Carrington made a telling point to the CARICOM ministers of finance and trade when he told them: “While developed countries generally have the capacity to offer significant stimuli packages to their populace, our governments are constrained by the lack of fiscal policy space due particularly to high indebtedness and the increasing incidence of declining revenue”.

To understand the full implications of Carrington’s observation, we need look no further than the advice given by the IMF to the governments of the small island-nations of the OECS on January 27th. They were told that they must implement value added taxes, cut civil service wage bills, and contain public investment – the very opposite of the stimulus packages being implemented in the US and the UK, for instance.

So, the IMF apparently feels that there can be one set of rules for Peter and another for Paul, particularly if Paul is small.

At the World Economic Conference in Davos, Switzerland, in the same week that Caribbean heads of government did not meet, the Russians were pointing out that the result of the US government running a US$1 trillion deficit for years will be that the free liquidity in the world will run into US Treasury bills and will not be available to other parts of the world. This includes the Caribbean.

These are all issues that require the attention of the Caribbean’s leaders working together and with the benefit of the best technical advice that the region can collectively muster – from the public sector, the private sector, the trade unions and the universities.

There may have been very good reasons why Caribbean heads of government could not have met as planned in the last week of January. But since they will not meet until mid-March, the CARICOM Secretary-General should now be mandated to commission, for that meeting, a report of experts to advise on how the region can best cope with the global crisis in its collective interest.

Sir Ronald Saunders is a business consultant and former Caribbean diplomat.
responses to: ronaldsanders29@hotmail.com)