A Guy’s View: Governance is based on trust
Successful governance is dependent on trust. Trust of the governed is the only authority a government has to govern. The best intentions in the world may be lost on those for whom they are intended to benefit if the beneficiaries do not trust the providers.
Generations of Barbadians have been programmed to believe that monies owed to them by our Government would always be paid. The best guarantee of payment one could have was that the responsibility to pay fell on Government. Imperfections aside, we felt safe in the hands of Government. That is why so many people wanted a Government job.
This was no misplaced or uninformed belief. The history of successive Governments was the source of faith in this view. All Barbadians have always known that although you may have to wait on Government money, it was sure to come eventually. This assurance took the edge off of the anxiety people would otherwise have while waiting for payment.
As a result, Barbadians complained about how long they had to wait for money owed to them by the Government but they never had to wonder whether they would be left without what was due to them. The only exception to this rule was payment for lands compulsorily acquired by the state. But alas, this confidence in Government payment has now changed.
Just as reliable as our Governments have been respecting the debt owed to our citizens, they have been to our external partners. We told the financial institutions around the world that we always pay our bills, and we lived up to that billing. As a result, Barbados paper was always thought to be a good investment for international investors.
I remember watching a documentary on the debt profile of Jamaica and hearing the various views expressed on the policies that placed them in that position and why that country continued to be able to borrow, despite being already overburdened with debt. The loudest comment I heard was that whatever that country’s debt, it had, to that time, never defaulted on its debt and, therefore, remained good for borrowing.
Institutional investors are not uninformed of a country’s debt. They do their homework before they invest. The existing debt is one important factor in whether they take up more of a country’s paper, but of equal importance is the country’s willingness to pay its debt.
When an investor is not sure of receiving the return on his investment that he was promised, he looks elsewhere for a more secure arrangement. A man’s word is his bond. So too is a country’s.
For the first time in our history, as far as I know, the Barbados Government has broken its word and promise to both Barbadians and international investors alike. The fallout from this breach of trust may be harsh and long lasting.
Interestingly, Barbadians have been told that the Barbadian economy has been floundering because of a lack of confidence in it. The current administration’s partners in the private sector have helped them to sing this chorus in dulcet tones, and many believe it. For certain, therefore, the new approach to governance would have to be the restoration of confidence, and that is what we were promised. You do not restore confidence by defaulting on your bills.
The holders of our external debt have been expressing their disappointment in what Barbados has done with respect to deceiving them, and they are not unreasonable to feel deceived simply because our Government defaulted without having a conversation with them. How they will respond we do not yet really know.
Many at home were of the view that this was too bad for our external creditors. We thought that domestic lenders were safe. After all, we had no history of Government breaking its promise to honour its payment obligations to us. We were soon to have a rude awakening.
Apologists have put abroad the commentary that after the Government has dashed all confidence in its willingness to pay its debt, the same people that it has shafted will again eventually develop new confidence in it. I understand that this story has to be told to those who expected better of a Barbados Government, but trusting this Government with money again is nowhere on the horizon.
One estimate of a date when people may be asked again to trust us in money matters is 2033. So what will we do till then? What unexpected shocks will impact this country between now and then to further push back that rendezvous with trust? And who is to say that we should not be expecting more of the same going forward: that is, more breaches of promise that further damage our reputation and credibility and sink our prospects of economic health?
The multimillionaires in Barbados can afford to postpone the receipt of monies they invested until 2023. They can even wait longer, for they do not need these funds to live on. The same cannot be said of retirees who benefited from a two hundred thousand dollar gratuity and expected that it would serve them for the rest of their lives, once properly managed.
Barbadians were encouraged to make Government paper an integral part of their investment portfolio, and many did. It is most hurtful, therefore, for a Government of the people to drive an iron stake through the hearts of ordinary Barbadians by withholding their invested funds from them. Many of them will die and never see back their money.
It is true that all investments carry some element of risk, but Government paper was supposed to be the least risky of all investments. The return is not high, but the investment was, until now, thought to be secure. One was always sure to receive the principal and interest when they were due. When this is no longer the case, all trust in Government will disappear.
One possible consequence of this is what Jamaican and Trinidadian commentators have been preaching and longing for over a number of years: devaluation of the Barbados dollar. One Jamaican commentator on our recent state of affairs, almost in glee, declared that Barbados will now have to devalue its dollar. Now, others will be looking forward to this and expecting it. And it could well become a fulfilled prophecy.
Barbadians can no longer have any confidence in our Government when it tells us that it will not devalue the dollar. Its word can no longer be trusted on this or any money issue. From now on, it will be wait and see.