Working Papers

Development and Underperformance in the Barbados Economy, 1946-2018

In the years since World War II Barbados was transformed from a desperately poor society, with only a tiny middle class, to today's economy of mostly middle-income earners, which is ranked by the UNDP among the highest level of human development globally. In this chapter we discover that the transformation took place, for the most part, in the 1950s and 1960s. Thereafter, economic development gains were modest, and the economy has performed well below its economic potential. The chapter tells the story of the changeover from sugar to tourism as the mainstay of the economy, and the factors that affected investment and growth. The phases of growth, the pressures on the balance of payments and the economic crises that have occurred are analysed, and the impact of Government policies on growth and economic stability is explored in depth. The chapter concludes with thoughts on the way forward for Barbados and the Caribbean.

An Alternative Policy Approach to Growth and Stabilisation in Small Open Economies

This chapter recommends an alternative to the standard approach to economic stabilisation and growth policy for small open economies. The standard view, reflected in the analyses of the IMF, other international institutions, most think tanks and the media, is that a combination of credible inflation targetting regimes, flexible exchange rates, and fiscal sustainability are the core elements of a policy regime that is appropriate for all countries, regardless of size. Instead, for small open economies we propose the use of fiscal management to maintain and improve the international competitiveness of the economy, to maximise the inflow of private foreign capital motivated by attractive rates of return, and to stabilise inflation expectations by anchoring the exchange rate to an international reserve currency. This chapter explains the alternative policy framework, and compares it with the standard approach.

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