PUBLISHED ON Sep 19, 2016

State of the Union

Barbadians approach the 50th anniversary of our country’s independence at a very challenging time for our economy, and indeed for the Caribbean and the world economy in general.

It is, at the same time, an era of seemingly limitless possibility, thanks to technological breakthroughs and new global electronic communications that have truly made the world everyone’s oyster.

Barbadians have every reason to celebrate our country’s extraordinary achievements over the past 50 years and more, not out of a spirit of triumphalism, but because our past performance gives us the self-confidence, the energy and the enthusiasm to tackle today’s unprecedented challenges with a steadfast determination to make for ourselves an even more successful future than what we, as a country, have so far achieved.

In the article that follows, which is excerpted from a chapter that will appear in a volume of essays edited by Senator Sir Trevor Carmichael later this year, I document our very considerable economic progress in my lifetime, I speak to the challenges our country faces, I conjure a vision of Barbados’ exciting potential, and I conclude by expressing confidence in our future, so long as we absorb the lessons of our past successes and failures alike.

BARBADOS 2016 is an internationally competitive economy with a high standard of living, a commendably egalitarian distribution of income, strong financial and commercial institutions, and very sound infrastructure, utilities and communications, by international comparison.

Moreover, the country has developed a highly effective framework for economic policy, which has succeeded in maintaining the exchange rate peg through sustainable market-friendly policies, and has contributed to the economic resilience of the country.

Barbados has been buffeted by international economic forces to an extent similar to its larger Caribbean and Central American neighbours, but has outperformed them for the most part, thanks to its resilient policy framework.

Barbados is second only to the Bahamas in the Caribbean and Central America in terms of our standard of living, as measured by the United Nations Development Programme’s Human Development Report 2014.

The report, which is the most comprehensive assessment of standards of living available for most countries, ranks Barbados as having high human development, on par with Trinidad and Tobago and Antigua and Barbuda, on the basis of the purchasing power of the average Barbadian’s income, and our indices of health and educational achievement.

The national income per person (irrespective of age or working status) purchases almost US$14,000 worth of products and services each year; for a family of four that amounts to US$56,000 per year in total. Clearly, the majority of families do not earn that much; the average includes the very wealthy as well as the very poor, and there remains a preponderance of single family households in Barbados, so the actual amount spent by the average Barbadian family is much less. However, the average does indicate that the typical Barbadian family has the means for a decent quality of life.

Life expectancy at birth in Barbados and the Bahamas is about the same, at 75 years; in Antigua it is a little higher, at 76 years. Trinidad lags in health indicators, however, with life expectancy at birth of only 69 years. By way of comparison, Japan records the highest life expectancy at birth of any country (almost 84 years), Singapore and Canada about 82 years, and the US 79 years.

With respect to education, Barbadians are expected to benefit from 15 years of schooling, compared with 13 years for the Bahamas and 12 for Trinidad and Tobago. This compares with almost 20 years in Australia, the highest, 16 years in the US and 15 in Canada.

The Human Development Index (HDI) data bear out the common observation that the lifestyles of teachers, policemen, accountants, mechanics and hairdressers are very similar in Barbados, New York and London, and the same is true for any profession or occupation.




Housing conditions and household amenities of the average Barbadian household are also on par with industrialised countries. The 2010 Population and Housing Census reports that 45 percent of homes in Barbados have five rooms or more, and 93 percent have two bedrooms or more.

Overcrowding, where there are more than three persons to a bedroom, was reported in only 6 percent of all homes. There is 100 percent use of gas or electricity for cooking; only one percent of homes lack running water, and only 8 percent do not have a water toilet.

Ninety six percent of households own stoves, 94 percent have refrigerators, 69 percent have washing machines, and 49 percent have water heating, which is a luxury in a country where temperatures seldom fall below 24 degrees Centigrade.

In 2010, in the early years of cellphones, 47 percent of households were already on the internet, and 74 percent relied on fixed line telephones. Over half of all households (52 percent) owned at least one private vehicle.

The economy is very competitive, by international standards. Barbados ranks first among seven Caribbean countries included in the Travel and Tourism Competitiveness Report 2015, published by the World Economic Forum, the body which hosts the famous Davos conference in January each year.

The Forum’s measure of competitiveness is a comprehensive one, taking account of all the factors that influence potential investors’ decisions. Barbados’ strongest showing is in the quality of its health facilities and the quality of water and sanitation services.

It is an area where the Caribbean scores high marks, by international comparison, and even so Barbados outshines its Caribbean rivals.

Barbados has built its reputation on its high end tourism services, going back 100 years or more, when tourism was the exclusive privilege of the very wealthy. This island was among the places the privileged classes of Great Britain and North America spent their winters, and where they came for health reasons.

In making the transition to more popular tourism in the past 50 years, Barbados’ tourism services continued to be biased towards the higher income levels, by offering superior amenities at higher prices, with more local value added and greater benefit to the economy.



Overall, Barbados scores well in the global rankings with respect to the factors that make countries attractive as magnets for inward investment. The World Economic Forum has developed a composite index of competitiveness which takes account of the following factors: the depth and reach of social and political institutions, the development of infrastructure, the macroeconomic environment, higher educational achievement, the efficiency of markets for goods and services, the efficiency of the labour market, the development of the financial market, the country’s readiness for technological change, the size of the domestic market, the degree of business sophistication, and the degree of innovation.

In the category of institutions, Barbados is seen as offering a secure environment where the rule of law is well established, organized crime is low and property rights are well protected.

Under the heading of infrastructure, Barbados scores well for its telecommunications, airline connections, and its electricity supply. In the goods market, the report finds evidence of strong domestic competition, a welcoming attitude to foreign direct investment, and relatively few trade barriers.

In the financial market space, banks are sound and the securities market well regulated; financial services are widely available. The late technologies are readily available in the island, there is a relatively high degree of technology transfer, and internet usage is high.

With respect to the macroeconomic environment, low inflation was a point in the country’s favour, but the Government deficit, the national debt and the country credit rating were all problematic factors.

Barbados’ enviable social partnership is a crucial part of the institutional framework that makes the economy resilient. In 2013 it was a national consultation organised through the social partnership that brought the need for strong adjustment to the attention of all parties to the partnership, and helped everyone to understand why fiscal tightening of the order of magnitude instituted was necessary in order to stabilise the balance of external payments and arrest the drain in foreign reserves at the Central Bank.



The factor that has contributed most to Barbados’ international competitiveness since Independence, is the maintenance and enhancement of the island’s reputation for quality.

The foundation was the country’s excellent primary and secondary education system, the superior quality of its sugar products, and public administration skills of a high order.

The best Barbadian primary and secondary schools were world class, and their graduates proved capable of holding their own against any competition. Although the bulk of Barbadian production was raw sugar for export, the industry was distinguished for its fine golden crystal sugars and liquid sugars (known in Barbados as “fancy molasses”), and for the aged rums produced in small quantities for the connoisseur.

A small but efficient and professional public service provided the country with tax collection that was seen as transparent and equitable, quality primary education that was universal, fine health services that were unfortunately not always accessible by poor people, highly regarded services of law and order and well-oiled electoral machinery.

Barbadian educators, administrators and law enforcement officers served the entire English-speaking Caribbean, from Guyana and Bermuda to British Honduras (now Belize).

Barbados’ reputation for quality has been upheld in tourism, international business and financial services, and quality rums, as they have emerged to become the leading sources of foreign exchange earnings in the island. In areas like public service and sugar production where we failed to sustain high quality, we have lost competitiveness as a result.



A major challenge facing Barbados in its 50th year of Independence is our failing consensus on the extent of social provision of services such as health, education, sanitation and other social benefits.

Fifty years ago the argument for universal provision of most social services was strong. Free university education made sense in 1960 when the proportion of the population with any university degree was 0.2 percent for males and 0.1 for females. In other words, among a thousand males in Barbados at that time, you would typically find just two persons with a university degree, and among females, only one.

By the time of the 2010 census 29 percent of the population had a post-secondary education, and there is a surplus of graduates in all fields except science, engineering and applied technology, over and above the country’s needs.

What is more, the average middle income household is more than capable of providing for their children’s university education, with the help of a subsidy to the university that Government can afford to pay.

There is a similar story to be told with respect to the provision of hospital services. Although the cost of hospitalisation is beyond the cash resources of most, the majority of persons in private employment benefit from a company-sponsored health benefit plan, which covers most of the cost of hospitalisation.

However, many hospital procedures remain free of cost, and hospital stays are free of cost, unless the patient elects to have a room of their own. Fees, where they apply, have not been adjusted for inflation for a very long time. The hospital is underfunded, and the queues for elective procedures are long.

The university and the hospital are used to illustrate the need to re-think the implied social contract in line with our society’s changed circumstances.

Barbados is no longer a third world country with no social safety net, only a vestigial middle class, and widespread inadequacy of basic social services and amenities. In the former circumstances universal state provision was very cost effective, because almost everyone stood to benefit from the provision of an essential package of basic services which few could afford from their own resources.

Today Barbados is a middle class society where the average household demands a range of social services that goes far beyond the basic, and has the means to buy the services they want, if they are not freely available from the state.

At the start of our 50th year of Independence, the Barbados Government faces a deficit which is larger than the expected increase in the national income. The deficit, the difference between the amount spent and the revenues received, is financed by borrowing.

The Government’s debt will therefore once again increase by more than the increase in our GDP, and the ratio of debt to GDP is set to increase, unless expenditure can be cut or revenue increased. A further increase in the debt to GDP ratio increases the cost of borrowing, which is already too high.

Another major challenge for the Barbadian economy is the widening gap between labour costs, which have been rising steadily, and worker productivity, which has been stagnant since the turn of the 21st century.

The inefficient use of technology plays a part, but in addition a recent employee survey has shown that two thirds of the workforce have no real commitment to their jobs, or to achieving high standards to ensure that the clients of the companies or organisations they work for get good value for the money they spend.



Barbados’s geographical location, its interconnectivity, its well-developed infrastructure and public services, and the attractiveness of living conditions in Barbados all make it a natural focal point of economic activity in the eastern Caribbean, from Suriname to the Virgin Islands. Personal, professional and sporting links, and their common membership of CARICOM, bind the eastern and western Caribbean together, though the western Caribbean (the Bahamas, Jamaica, Haiti, Cayman and Belize) has no obvious common focus similar to Barbados.

One foreign bank has established its headquarters for the Caribbean as a subsidiary in Barbados, and other foreign banks run their operations in Barbados and countries of the OECS as a single entity, with headquarters in Barbados.

Green energy is an activity that has transformative potential for the Barbadian economy.

It has been shown that Barbados can supply 100 percent of its electric power entirely from wind, solar and pump storage (a form of man-made hydro power), all with the use of technology which is in common use in North America and Europe.  That would be equivalent to a 20 percent increase in the country’s foreign earnings, in perpetuity, once the needed investment is in place.

Contrary to popular belief, emigration is another potential source of growth for the Barbadian economy. The Caribbean diaspora in North America and the UK are an integral part of the Caribbean nation, and the internet and affordable travel have served to cement that bond. Barbadians abroad are a rich potential resource to assist in the growth of our economy: they can market our products and services, expose us to new technologies and useful professional and commercial networks, introduce us to potential clients, provide services and collaboration via telecommunications and periodic visits, and they are an actual and potential source of investment in Barbadian assets, including homes for their retirement.

Barbados has a rich historical legacy, and our cultural practitioners are making a name for us in music, film and video, the festival arts, the culinary arts, dance and theatre. We are learning how we may turn these endowments to our advantage, while at the same time enriching the lives of Barbadians and our visitors.



Independence means that the future of Barbados is firmly in the hands of Barbadians.

Our future is exceptionally promising, but it will not happen unless we make it happen, and like all worthwhile objectives, realizing the vision will take grit, determination and sacrifice.

The first task is to build our capacity to devise and implement strategies that answer to our circumstances, that situate us to take advantage of opportunities as they arise, to avoid the pitfalls that we encounter, and to be flexible in execution, learning as we go what works and should be supported, and what does not work and needs to be tackled differently.

The Barbadian growth strategy is realistic and achievable, focusing as it does on tourism, international business and competitive exports, mainly rum and chemical products for household use. They provide the foreign exchange we need to grow our economy. We know we must tighten fiscal policy when necessary to reduce aggregate demand and balance the demand for imports with the foreign exchange inflows from tourism, other services, exports and foreign borrowings.

In that way we avoid depletion of the Central Bank’s store of foreign reserves, and ensure that there is always enough to meet the day-to-day and week-to-week fluctuations in demand and supply.

In going forward, we should remind ourselves of the many examples of excellence of which Barbados can boast – world renowned hotels and restaurants, outstanding heritage properties, exceptionally talented singers, musicians, writers and artists, highly ranked research institutions such as the Chronic Disease Research Centre, internationally renowned academics and professionals, home grown international conglomerate firms, and many more. Their exceptional achievements to date give us energy to tackle the difficult tasks ahead.