How often have we in Grenada and the rest of the Caribbean heard the following statement from those charged with the responsibilities of managing our respective countries’ domestic affairs: “The current economic problems we face are, to a large extent, driven by the global financial and economic recession?”
Implicit in this statement is the recognition that global events, irrespective of their nature or even magnitude, will always have important implications for small, vulnerable, and highly open economies like those in the Caribbean. If we accept that premise, the critical question that arises immediately is: What, if anything, can small economies do to combat the effects of developments taking place in the international community over which they can exercise absolutely no control or influence? The answer to that question is as complex as some of the options available.
Nonetheless, we in Grenada as well as our regional neighbours cannot refuse to fight back. Our mechanisms for doing so are limited by our resources’ constraints; but, since no challenge is impossible to overcome, we are left with little choice but to explore alternative perspectives and hope to stumble on the “right” strategic responses. Despite simple-sounding, this position is shared by international financial institutions as well.
For instance, World Bank Policy Research Working Paper 5637 addresses the important question of how resilient were emerging economies to the global economic crisis of 2008-2009. A portion of the foreword to the paper says this: “The study examines the cross-country macroeconomic incidence of the global crisis, with an emphasis on the differential response of emerging market economies vis-à-vis developed economies. The study documents that, even though emerging market economies were not able to decouple from the global downturn, they faced the crisis with sound macroeconomic fundamentals and were able to implement countercyclical policies to counteract the negative global collapse. Unlike past experiences, emerging economies did not contract more than developed countries and did not experience home-grown crises. In this sense, this report shows that emerging economies have become more resilient to global shocks, and several useful policy lessons can be drawn from this experience.”
A simple glimpse at this extract from the paper reveals several critical issues in relation to the experiences of emerging economies with the recent global meltdown. Among the main issues are the inability of emerging economies to escape the implications of global developments, the implementation of appropriate macroeconomic policies to counteract the effects of the global recession, and the absence of home-grown crises. As a result of these innovations, emerging economies were deemed “more resilient to global shocks.”
Can we in Grenada and the Caribbean relate to the issues documented? Are we satisfied that our leaders did all that they could have to reduce the effects of the global recession from which many economies are still reeling? Did our policy choices in the wake of a pending global collapse make our economies more or less vulnerable?
The next time our leaders decide to use the global financial and economic meltdown of 2008-2009 as the major culprit to our economic woes, please request of them answers to the questions posed in the preceding paragraph!
Only then should we as a people begin to engage those charged with the responsibility of managing our countries’ financial and economic affairs in any serious manner and with any sense of real purpose!
(Dr. Brian Francis, the former Permanent Secretary in the local Ministry of Finance, is a Senior Lecturer in the Department of Economics at the Cave Hill Campus in Bridgetown, Barbados of the University of the West Indies)