DeLisle Worrell | Reflecting on 2019 and Caribbean finance
In May of 2019, I issued a working paper on my website titled ‘The time has come to permanently retire all our Caribbean currencies’.
In that paper I argued that the currencies of Caribbean countries have now outlived their usefulness, and have become a liability. They were devised at a time when most payments were made using notes and coin, issued in distant metropolitan centres.
At that time, scarcity of the means of payment was a severe hindrance to commerce. In response currency boards were set up to issue local currency as needed in the colonies. The system worked well because the local currency issue was backed by an equivalent value of sterling, in a global system of fixed exchange rates.
In contrast, nowadays payments are made mostly by electronic communication, credit and debit cards, cheques and drafts, with settlement over digitised bank accounts.
In today’s world an own currency has become a liability for small economies, limiting access to international goods and services, exposing residents to risks of currency devaluation and inflation, eroding the value of domestic savings, increasing economic inequalities, providing a tool for unproductive government spending, and diverting attention from the need to increase productivity and enhance international competitiveness. The paper may be downloaded from my website – DelisleWorrell.com – and there is also video of a presentation I made at the annual conference of the Sir Arthur Lewis Institute.
In September I issued a second working paper, this one entitled “Rising above the orthodoxy of finance: Competitiveness is the key to economic growth”. The motivation for the paper is the erroneous notion, prevalent in the Caribbean, that economic growth is sluggish because savings are low. Instead, the foremost problem is failure to maintain and enhance the nation’s international competitiveness and the resulting scarcity of profitable opportunities for investment. My paper explains.
The need for a makeover of the public service, to raise performance to an acceptable international level, was a repeated theme in my monthly Economic Letters in 2019. Public sector inefficiency has been a major hindrance to investment in recent years, and addressing this issue is critical to the prospects for reviving growth in the stagnant economy.
In August I suggested that public sector reform might start with the timely publication of annual reports of all government departments, agencies and state corporations. This would allow for informed discussion of the reasons for the failures of the public sector, and public sector managers would be obliged to come up with plans for improvement.
A second issue that attracted my attention more than once was renewable energy. Barbados’ energy resources of sun and wind are potentially more valuable to the economy than discoveries of oil and gas would be. Fossil fuel reserves will eventually be exhausted; sun and wind are free and inexhaustible. However, to realise the potential of renewables requires a comprehensive time-bound strategy and action plan, devised by Government and with full engagement by the society.
May 23, 2019 saw the launch of the Association for Barbados-China Friendship, the ABCF, of which I am president. Those of us who came together to form the ABCF aim to “focus on personal experiences, people-to-people contact, cultural exchanges and exchanges of ideas, and the facilitation of travel, business and study”. That quote is from my editorial in the first issue of the ABCF’s magazine, Exchanges, which is available on the association’s website, ABCF-BB.com.
On October 17, 2019, Monica and I attended the Gala Dinner ‘Bretton Woods at 75’, organised by the Bretton Woods Committee, at the Andrew W. Mellon Auditorium in Washington, DC. There were addresses by the president of the World Bank, the managing director of the IMF and the secretary general of the World Trade Organization, WTO. The Speaker of the US House of Representatives was in attendance. The Bretton Woods Committee launched a book on the IMF, the World Bank and the WTO, titled Revitalizing the Spirit of Bretton Woods.
While in Washington for the annual meetings of the IMF and World Bank I attended the International Banking Seminar organised by the Group of 30 leading financial experts. My reflections on the main themes of that meeting are the subject of my November 2019 Economic Letter.
Very best wishes for 2020 to everyone.
Dr DeLisle Worrell is the immediate past governor of the Central Bank of Barbados. email@example.com Website: DelisleWorrell.com