The Death Spiral

As expected, Standard & Poor’s downgraded Barbados’ sovereign credit rating yet again, this time to CCC.  As long as the DLP continues to follow their developmental philosophy of high taxation, then further downgrades and eventual currency devaluation are certain.  So what is the solution?

First, we need to understand that the DLP’s developmental philosophy has benefitted Barbados immensely.  However, their philosophy no longer works when we have entered the death spiral.  Our problem is that the DLP continues to stubbornly embrace their failing philosophy, which will certainly ruin Barbados.  Pharaoh’s heart appears to be hardened to any good economic advice.

Some think that the solution is to simply change administrations.  That thinking is valid in normal circumstances.  However, once we have entered the death spiral, special measures are required to get us out.  The BLP and DLP are as inexperienced as all third parties in getting us out of this level of debt.  Therefore, the critical question that responsible voters need to ask those offering to manage Barbados’ economy is: how do you plan to get us out of this death spiral?

The DLP’s management of the economy has been continually examined by the international rating agencies. The now familiar downgrade announcements simply chart our progress to foreseen economic ruin.  However, would anything improve if voters selected the BLP?  To assess the likely outcome, we need to examine the BLP’s development philosophy.

The BLP’s development philosophy is to finance Barbados’ development through debt.  Barbados has benefitted immensely from this philosophy.  However, their philosophy no longer works when we have entered the death spiral.  Our problem is that BLP is also blinded by their developmental philosophy.  Even as we are racing towards economic ruin, the BLP’s solution is to burden Barbados with even more debt – they simply know no other way.

To get out of this death spiral, we need to understand how we got in.  All economic enterprises, whether they are households, businesses or countries, should be run within safe operating boundaries.  Banks normally protect individuals (and their families) and business owners (and their employees) from going outside of these boundaries, by limiting the amount of debt they can acquire based on their income.

Individuals or business owners may acquire additional debt from other sources.  However, once it reaches an unsustainable tipping point, then they enter the death spiral where their families will eventually have to vacate their houses, and their employees will eventually become unemployed.

Our elected politicians negotiate national loans on our behalf.  However, unlike individuals and business owners, international funding agencies willingly lend politicians any amount, but inflict punishing interest charges on citizens based on the risks of lending.  The IMF warned us citizen not to allow our politicians to enter the death spiral.  We enter this spiral when our debt exceeds 40% of our Gross Domestic Product (GDP).

The BLP took us from the safety of 30% GDP debt to approximately 90% GDP debt.  Entering the death spiral is deceptive, since there is very little change in the circumference or size of the circle in the initial cycles.  However, as we move from the rim and inevitably travel downward towards the eventual drain, then with each successive cycle, the circle gets smaller, the effects of each cycle become more noticeable, and we become more alarmed.

If Barbados has the misfortune of electing the DLP, or any party that shares the BLP’s failed philosophy, then Barbados is sunk.  Solutions Barbados is the only party that has published a non-austerity plan for getting Barbados out of this death spiral.  It has undergone over 2 years of rigorous public scrutiny and is available on SolutionsBarbados.com.

Essentially it comprises 4 proven main steps.  The first is to increase Government revenues by lowering taxes and making them fair, and easier to calculate, pay and audit.  The second is to increase productivity in both the public and private sectors by managing each Government service to the international customer-focused quality management standard, ISO 9001.

The third step is to effectively address corruption by fining those who receive and pay bribes up to 10 times the value of the bribe, and rewarding the whistle-blower with the full value of the bribe.  The last step is to depoliticise the civil service by ensuring that all public workers are promoted on merit alone.  The details are on SolutionsBarbados.com.

In the upcoming election, the choice for voters could not be clearer.  We either complete the death spiral by voting for politicians who embrace the failed philosophies of the DLP and BLP that have brought us to this point, or we get out of this death spiral by voting for Solutions Barbados candidates.  Decide Barbados.

Grenville Phillips II is the founder of Solutions Barbados and can be reached at NextParty246@gmail.com

Advertisements

You may comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s