“For it is God who is at work in you, enabling you both to will and to work for his good pleasure.” – Philippians 2:13
Many years ago, the late Trinidadian economist Dr. Trevor Farrell made the following statement: “Within reason, it does not matter at what level a country sets its exchange rate, as long as the country supports it with the appropriate macro-economic policies.” This statement has always fascinated from a national public-private partnership management perspective.
In such a partnership a major challenge is to get the governance right. This hinges on a recognition of the relative roles of the social partners. The diligent pursuit of the social partnership model implies developing an optimal strategy towards the achievement of the objective of sustainable development. The media has a very important communication role to play in this model.
My view is that the role of the private sector is to ‘do business’ and drive growth. The role of the government is to provide policies and services in a dynamic enabling environment which includes establishing the macro-economic policies in support of the private sector.
The role of the Trade Unions is to induce harmony between employer and employee to achieve greater productivity for fair compensation; and the role of Civil Society is to support the other social partners by mobilizing volunteers and garnering grant support from benevolent sources.
In particular, there needs to be strategic re-visioning of the focus of trade unions from the admirable stance of ‘fighting to maintain jobs’, albeit in a flagging economic environment, to a new perspective which focuses more on promoting increased labour productivity, quality and standards of excellence among workers, thus inducing greater national competitiveness and economic growth.
Trade unions should shift gears and become consultants and advisers to the workers while brokering the relationship with employers for fair compensation. This strategic visioning process should be regarded as a healing process in the interest of the sustainable health of trade unions.
The government has no right getting involved in doing business not only because its governance systems are not designed for optimal business implementation, but also because of the need to remove any temptation of political interference. The social partners must engage in continuing dialogue and complement each other if we are to achieve sustainable success.
Barbados, from the inception of the Central Bank of Barbados in 1972, pegged the Barbados dollar to the US at a fixed exchange rate and has survived to date. In 1992, the Barbados economy was struggling financially but the Barbados Government stubbornly rejected an IMF conditionality to devalue the Barbados dollar.
The Barbados cabinet invited representatives from the private sector and trade unions to discuss solutions to the problem and this signaled the advent of the Barbados “social compact” which was a public-private partnership between the three parties. A national productivity council was established under the Ministry of Finance. In order to stimulate a recovery in the economy, there was also an agreement that prices would be frozen and that public and private sector wages would not be increased, except they could be justified by increased productivity.
This worked well enough for a while – the threat to devalue the currency was avoided and maybe the public-private partnership, which engendered idea exchange, played a great part in the recovery process. Less than 25 years later, we are back to square one with a struggling economy.
In April 2015, a study undertaken by the Central Bank of Barbados supported arguments that devaluation of currencies will not improve price competitiveness in very small open economies like those in the Caribbean. The study reported that “in small economies, devaluation is more likely to cause high inflation and economic contraction, rather than economic growth”.
My observation today is that the social compact has lost much of its original stamina. Perhaps a strategic review of the model is needed, coupled with sensible macro-economic policies, to see if once again we can rekindle the furnaces to inject some life in the economy. We must be positive in attitude, revive the partnership by bringing on new brains (youth and experience) to address the task at hand. This time around, we have the opportunity to learn from the history and to focus on the effective roles of the social partners.
In Trinidad and Tobago, falling oil and gas prices are playing havoc with its economy. It is instructive to note an article (April 2013) by Trinidadian economist Dr. Terrence Farrell, a former deputy Central Bank governor (brother of Trevor mentioned above), entitled “Floating of the TT dollar: 20 years later” which chronicles the history of the exchange rate in Trinidad and Tobago since 1976.
In Barbados and T&T, there is talk about devaluation as there sometimes is when foreign reserves begin to fall. What should Caribbean and other countries, in general, do?
Why not fix the exchange rate and positively support it by macro-economic policies to include:
(1) a social compact (public-private partnership) to establish continual dialogue between the social partners rather than to continue to experience random confrontational forays;
(2) rationalize the many efforts to promote enterprise development, especially for products and services with export potential;
(3) expand exports where we have a competitive advantage;
(4) adopt the three-pronged Shepherding model (Enterprise selection, Shepherding to mitigate business failure, Seed/Equity funds) for sustainable economic growth;
(5) continue to develop the tourism product, tourists around the world are looking for destination diversity;
(6) embark on an aggressive and efficient import substitution programme fuelled by state-of-the-art technology and foreign investment;
(7) reduce unnecessary imports; and
(8) improve tax collection – this should not be difficult in small communities.
Let us all maintain a positive attitude and bring love to all that we do. Let us all recognize our roles and work together to effect change, sustainable development and happiness for all.
(Dr. Basil Springer GCM is Change-Engine Consultant, Caribbean Business Enterprise Trust Inc. – CBET. His columns may be found at www.cbetmodel.org and www.nothingbeatsbusiness.com.)