Three key lessons on institutions in Barbados from IDB’s “Nurturing Institutions for a Resilient Caribbean”

The IDB’s Caribbean Country Department recently published a book entitled, “Nurturing Institutions for a Resilient Caribbean.” While exploring the general importance of institutions for growth and equitable development, the book also includes country-specific chapters that provide a detailed overview for six Caribbean countries and indicate areas that would benefit from reforms and improvements. With respect to institutions in Barbados, “Nurturing Institutions for a Resilient Caribbean” offers three key takeaways (you can download the book here):

1. Institutions matter. While this point is not specific to Barbados, the book provides ample evidence that the root cause of differences in development between poor and rich countries is to a large extent due to the differences in institutional strength that makes countries with strong institutions more stable, more competitive, and perhaps most important, better able to manage external shocks.
2. Institutions are – for the most part – strong in Barbados. Barbados enjoys a stable parliamentary democracy based on a bipartisan political system. The country has a colonial legacy of political stability, as well as an ethnic homogeneity of the population, that have enabled the absence of strong or persistent social or political conflict. This has translated into strength in other important institutions, such as the ones concerning the rule of law, the protection of fundamental human rights, the administration of justice on the principle of equality before the law, and institutions covering the accumulation of human capital. As a result, Barbados scores high in several indicators used to assess and compare institutions, including the ones for Public Regardedness, Control of Corruption, Judicial Independence, Strength of Property Rights, and several indicators regarding human development outcomes.
3. Economic Institutions should be strengthened. Despite the general strength of its institutions, Barbados lags behind other countries in terms of its economic institutions. Monetary institutions (such as the independence and transparency of its central bank) and fiscal institutions (such as fiscal responsibility legislation, debt rules and independent fiscal councils) are important as they remove discretionary behavior from policymakers. These constraints are especially important in times of shocks and stress, given that they constrain short-term measures in support of long-term sustainability. These institutions also give credibility and effectiveness in the implementation of economic policies, thus reassuring investors and consumers about Barbados’ consistency in policy-making. The business environment is another area where Barbados is trailing behind other countries. Bureaucratic red tape constrains investment and the regulatory framework for the private sector is weak, as reflected in its 132^nd rank in the World Bank’s most recent Doing Business survey, which is low for a country of Barbados’s level of income and sophistication.

Institutions evolve slowly. “Nurturing Institutions” describes how today’s institutions have been shaped to an important extent by history and small changes over extended periods of time. Institutions are generally strong in Barbados, but the country should not rest on its laurels. The institutions for which Barbados lags behind other countries today are not weaker because they started off worse, but rather, because other countries improved their institutions during recent decades. Addressing some of the issues found in the book aligns with the reforms set forth under the Barbados Economic Reform and Transformation Programme. In addition, Barbados should continue to build on its strengths. For instance, in education and health, a stronger focus could be put on enabling mechanisms for objective and standard monitoring of performance to calculate individual value-added measures for teachers and health practitioners, which could make the country progress even further along its path in human development.