Articles

Thu 27th Oct 2005

Economic decay and dismay

It is with much dismay that I look on from abroad the demise on my beloved country, more specifically the economy of our country. As has already been pointed out, under the NDP debt has doubled and now under the ULP it seems to have quadrupled. So what? some may say. Is there a problem? Life on the outside seems to carry on as usual.

There is in fact a problem, a serious problem which the ULP is either not aware of or is not concerned about. The problem lies with the ratio of national debt to national GDP. Without getting too technical, at a certain point of ratio of debt being that much larger then the national GDP, our nation's economy will be declared dangerously unstable and in need of fixing. So who will fix it? The Economy Doctor, the International Monetary Fund (IMF).

The IMF was set up shortly after the second World War to help the economies of countries devastated in the war. In more recent decades, in the 70s and 80s especially, the IMF has intervened to help many developing nations in Africa and Asia. It's purpose is to provide funds for countries which have an unfavourable debt to GDP ratio or whose economies are in crisis. It appears to me that the IMF is looming at the shores of St. Vincent & the Grenadines, due to our debt to GDP ratio reaching a critical point. So, the IMF comes and lends us money - why the panic?

In order for the IMF to lend the money and to reassure itself that it will get the money back, it imposes Structural Adjustment Programs (SAPs). These SAPs, now traversing the poor countries of the world under a new acronym due their detrimental effect, have made poor countries poorer and had a disastrous effect on the people in these countries. The SAPs have two main components, to increase the influence of market forces and reduce government public spending.

(i) Market forces

The usual way to let market forces have a greater influence on an economy is to open up institutions to foreign corporations. Policies that restrict the ability of or discourage foreign companies from entering the economy of St. Vincent will be either abolished or seriously weakened. The usual course of action is to reduce workers' rights, reduce minimum wage levels, and privatise schools, hospitals and other public institutions. This means that foreign companies that may come in will treat employees badly, pay them a very minimum wage and that children and ill people will be required to pay to use the newly private-owned schools and hospitals.

(ii) Reduce government public spending

Government's big expenses are usually wages and funding educational and social services institutions. So, to comply with the SAPs imposed by the IMF, one can expect the ULP to severely curtail spending in these areas. In real terms, this means laying-off public sector workers, that is, sacking the majority of teachers, nurses, police officers, custom officers, administration workers, civil servants and the many others paid by the government, until the bare minimum is left for the government to function.

The effects of (i) and (ii) above will bring our country to a state of despair. History has shown that in countries such as Zimbabwe, Lusaka, Zambia and Honduras, wage levels fell dramatically, unemployment shot up, and the number of children not attending school went through the roof.

In country after country, structural adjustment programs (SAPs) have reversed the development successes of the 1960s and 1970s, with ... millions sliding into poverty every year. Even the World Bank has had to accept that SAPs have failed the poor, with a special burden falling on women and children. Yet together with the IMF it still demands that developing countries persist with SAPs. (see http://www.oneworld.org/guides/sap/index.html)

And then, the rioting starts as food prices rise, fuel prices rise, etc!

So, my dismay from abroad is well founded and I fear, will be the dismay of the nation before long unless the population takes action.

But don't take my word for it, see

http://www.whirledbank.org/development/sap.html

http://www.globalissues.org/TradeRelated/SAP.asp

http://www.doublestandards.org/sap1.html

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