Wage/Price Guidelines for Increasing International Competitiveness in the Caribbean

• Author: Courtney Blackman
• Pages: 289-313

WAGE/PRICE GUIDELINES

289

The invitation from the Caribbean Development Bank to speak

about wage-price policies came to me as a great surprise. Wage-

price policy is a transparent euphemism for wage restraint and

while Governor of the Central Bank of Barbados, my calls for wage

restraint were always met with hostility. A union leader once

described my recommendations on the subject as ‘unwarranted,

untimely and malicious’. Indeed, my own staff frequently advised

me against mentioning the word wage restraint: some disagreed

with me; others feared for my job security — with good reason, as

it turned out.1 Today, not only have I been invited to speak about

wage restraint, I am being paid to do so

It occurred to me as I prepared this paper that my spectacular

lack of success in selling wage restraint might rest in its negative

connotation. I was reminded of the tale of the two monks. Seeing

a brother smoking in the room designated for meditation, one

monk reminded him of the rule against such a practice. The

smoker explained that he had received permission from the abbot.

The monk hurried away only to return later with the news that

his own request had been refused. ‘What did you ask?’ the smoker

enquired. ‘I asked whether I could smoke during meditation.’

‘That was your mistake,’ replied the smoker, ‘I asked whether I

could meditate while smoking.’

15

WAGE/PRICE GUIDELINES FOR

INCREASING INTERNATIONAL

COMPETITIVENESS

IN THE CARIBBEAN

THE PRACTICE OF ECONOMIC MANAGEMENT

290

I have decided that the term ‘incomes policy’ might strike a

more positive tone without doing violence to the spirit of the topic

on ‘Wage-price policies for increasing international

competitiveness in the Caribbean.’ Wage restraint is the

centrepiece of incomes policy and price control its occasional

companion. Furthermore, the substitution of incomes policy for

wage-price policy provides greater pedagogical opportunities in

that it permits the integration of wage-price policy into the

framework of overall macroeconomic management

Failure to treat wage rates as a controllable policy variable,

and hence to recommend an incomes policy, has been a costly

error on the part of Caribbean economists. Professor Eric St Cyr,

for example, regards wages as endogenously determined by

domestic prices and the price of exports.2 In fact, wage rates in

the Caribbean have for a generation been administered by trade

unions, governments and, more recently, by the International

Monetary Fund. Yet only recently have a few Caribbean economists

assigned a role to wage restraint in macroeconomic management.

In his recent book, Small Island Economies, Dr DeLisle Worrell

dismisses incomes policy as unworkable.3 Some economists at the

Cave Hill campus of the University of the West Indies, in mistaken

application of the Keynesian closed-system model, have applauded

inflated wage awards as a means of stimulating aggregate demand.

The Trinidad and Tobago experience has demonstrated

conclusively that the consequence of Keynesian-type remedies in

economies as open as ours is to destroy the balance of payments.

In fact, Sir Arthur Lewis recommended an incomes policy to

Caribbean governments as early as 1964,4 and again, in his brilliant

presidential address at the annual general meeting of the

Caribbean Development Bank in 1972. However, it was fashionable

those days in the region to decry the future Nobel Prize winner

as ‘Afro-Saxon’, ‘neoclassical’, and ‘non-progressive’. We have paid

dearly for our neglect of his work and advice.

Even without the stamp of academic approval, Caribbean

governments have resorted to wage-restraint when nothing else