Business Page – August 25th, 2002

The Barbados Social Compact - Model for Guyana


As we grope for solutions in what passes for life and politics in Guyana, we often hear references and suggestions in connection with the Barbados Social Compact. Barbados is of course special among Caricom countries which makes it a hard act to follow. It is the highest ranked of those countries by reference to Human Development Index in the UNDP Human Development Report 2002; it’s a country where everything work; a country GDP makes its stand respectably among even developed countries; a country where “normal politics” as defined by Mr. Henry Jeffrey, prevails. It does not have the racial problems as Guyana or Trinidad nor does it suffer from the same debilitating divide as we have not only in the labour movement but among and within our churches, mosques and mandirs. 

Notwithstanding these difficulties and differences Business Page considers it timely as Guyanese seek alternative modes of governance including a place and space for civil society, to look at the Barbados experience and consider whether the seeds of a solution may lie in what has turned out to be a most successful experiment in restoring economic growth and social development.

In Business Page today we begin the reproduction of an article done by Dr. P. I. Gomes, a Guyanese attached to CARICAD, which first appeared in Caricom Perspective No. 69 Vol. II, July 2000 and which is also included in Kenneth O. Hall’s The Caribbean Community: Beyond Survival. That article will appear in full but it may be useful to note three salient points:1) the compact has been adopted and continued even after changes in political administrations; 2) it is now in its tenth year and has just been extended for a further two years; and 3) it has produced the desired results of restoration of macro-economic stability including the retention of the US$1=B’dos$2 despite pressure from the international lending agencies.

While we in Guyana quibble and argue over who should be included and who should be excluded the Barbados Compact involves just three groups: the employers’ organization, the employees’ organization and the government all with an equal number of representatives. Despite its high churches to population ratio, the church is not included nor are women’s group, professional group or youth group. It is clearly a case of trust and keeping it simple.

Over to Dr.Gomes to whom Business Page expresses its appreciation for his ready permission to use in whole or in part his article.

The Barbados Context

With a substantial financial deficit in 1991 and a spate of industrial unrest, intensified by an IMF-linked Structural Adjustment Programme (SAP) that required a reduction in public servant wages and salaries by eight per cent, the Barbados dollar with its exchange rate ($2.00=US$1.0O) came under severe pressure for a devaluation. The industrial unrest was extensive and mass public demonstrations demanded that the cut in public service pay be restored. Unemployment was already as high as 20 per cent and thousands of temporary workers were being severed.

Retention of the exchange rate in its current state was an inescapable imperative, in the view of the majority of the population. Currency devalu­ation in an economy extremely dependent on imports for basic necessities, particularly major food items for the domestic population as well as the tourist sector, would amount to economic and social dislocation. Such circumstances of enormous national significance could not be adequately addressed by partisan responses. Neither the trade unions continuing demands to reverse programmes of severance and reduced pay nor the government opting for an IMP imposed solution, requiring the currency devaluation, would be effective as a means of arresting the fiscal crisis.

A response based on a recognition of a collective responsibility by both labour and government was, therefore, essential if the national interest was not to be imperilled. Intense and innovative discussions were initiated to explore ways to contain the crisis. With public sector wages already reduced, a proposal to the unions, representing private sector workers to also undergo a cut in salaries, was rejected with a counter-proposal that a freeze on wages could be entertained, if controls on prices were instituted. It was, therefore, recognised that involve­ment of the private sector would have to be integral to any national adjustment process. This was evident on account of two main factors. The reduction of salaries and retrenchment of public sector workers implied a slow down of demand for goods and services and reduced capacity to purchase basic necessities on the part of a significant proportion of the working population. By convention, such a situation would have prompted a reaction by the commercial class to increase the price of goods, placing further pressure on the cost of living for that section of the working population whose livelihood is predominantly derived from wage labour. This did not happen.

The prevailing circumstances, fortunately, were encouraging enough to inspire a tripartite approach, with a view to ensuring that mutual gains were derived on the basis of enlightened negotiations for the overall management of the economy by the state; the avoidance of industrial disputes and wide­spread hardships on the working population; and the survival of local business with modest returns from commercial transactions.

The negotiating of a national adjustment process was perceived by all the stakeholders to be the only viable option for an economy so heavily dependent on foreign imports for basic necessities, and so reliant on a tourism market that could not allow uncompetitive prices for its services. A period of pro­tracted negotiations had been initiated late 1991 to 1992. It was to the credit of the leadership of the labour movement that, faced with a proposal for a cut of private sector employees wages and salaries, comparable to the eight per cent settlement with public servants, the counter-proposal from the unions was the acceptance of a wage/salaries freeze. Simultaneous with that offer was a mutual understanding to have productivity as the central criterion for future increases in wages and salaries.

The bare-bones of an Income and Prices Protocol with an essential link to productivity, were now advanced as central guiding principles for macro economic stability and a new approach to collective bargaining. Efforts were undertaken to garner experiences from outside of Barbados, on productivity-related pay schemes and mechanisms by which to promote and measure productivity. The subsequent establishment of a National Productivity Board is a direct outcome of this enlightened tripartite approach in cooperation between the social partners.

Protocol One (1993-95)

A period of protracted negotiations and public debate in 1992 and early 1993 reached a critical watershed in August 1993 when the Parliament of Barbados adopted a resolution in support of a protocol for the implementation of a Prices and Incomes Policy, endorsed by the social partners. For the purposes of the protocol, the social partners referred to were the Government, the employers’ representatives and the workers’ representatives. It was explicitly stated in a August 1993 resolution that: ”the Prices and Incomes Policy shall have as its major objectives the safeguarding of the existing parity of the exchange rate and the creation and expansion of a more competitive economy which would provide for greater employment opportunities and make Barbados goods and services more competitive at home and abroad.

Attention should also be directed at the very distinct and precise objectives which had been agreed upon viz, safeguarding the existing parity of the exchange rate and measures for a more competitive economy. The latter was of course not an end in itself but to provide greater employment opportunities.

It may be instructive to note here that despite public protest demonstrations of almost two years previously, national consensus had been hammered out on a common objective for the larger good of the society, as a whole, — a fixed exchange rate of the Barbados dollar, and employment creation.

Seven years later, the Barbadian society can reflect, with understandable relief, that the exchange rate has remained constant and unemployment, almost 20 per cent in 1992, has declined in 1999, to less than 10 per cent. In general terms, the fundamental objective and intention of the 1993 Protocol has been realised in an admirable manner. The broadening of the basis of governance by means of a protocol binding by mutual consent and for the common good, above partisan interests is an enormous tribute to the social partners of Barbados, given the record of eight years of macroeconomic stability and substantial increase in gainful employment.

A distinctive feature of the political maturity in the society must be also recognised. The core tenets of the inaugural 1993 protocol not only continued after electoral defeat of the government in 1994, but also received a reaffirmation for commitment and consolidation in a successor arrangement that brought into existence an expanded protocol.

Business Page will conclude The Barbados Social Compact – Model for Guyana? by which time I hope to receive a copy of the Protocol signed earlier this year extending the compact for another two years.

Protocol Two (1995-97)

The encouraging success of what amounted to a national adjustment process, in rejection of an IMF demand for a currency devaluation, provided an attitudinal platform on which to explore the main tenets of Protocol 2. The preamble of this protocol stated that the tripartite approach to industrial relations has been a vital component of a Barbados macroeconomic programme for the realisation of sustained economic growth and development through increased competitiveness.

Among seven factors in the protocol, responsible for reversing the gradual erosion of Barbados competitiveness, four should be highlighted for their significance and applicability, as prerequisites for sustainable economic growth and development, in all CARICOM member states. These are:

   Establishment of an environment of greater dialogue among the Social Partners within which fundamental issues of economic and social policy may be discussed;

   Stability and sustainability of the industrial relations climate. Opportunities for improved access to employment, thereby reducing the risk of social dislocation, particularly among young people;

   National commitment to improve productivity increase efficiency, reduce wastage and enhance performance in the economy.

Such factors should not be treated as hard and fast rules or magical principles. They were the outcome of a process of building national commit­ment, in the context of a vision for sustained economic growth, and develop­ment of a service economy which was being restructured for competitiveness in the face of intense, international trade liberalisation.

The capacity to resolve the conflicting demands of a traditionally strong commercial class and dominant tourism sector, with the majority of Barbadi­ans occupying low-paying jobs on the one hand, and a dynamic and well organised union movement, on the other hand, was severely tested. Business interests were represented by a private sector agency, as an umbrella body, while the labour movement had been consolidated under the Congress of Trade Unions and Staff Associations of Barbados (CTUSAB)

For Protocol Two, the social partners made explicit references to circum­stances in which the contrasting interests of business and labour had to make a clear commitment to work together in the national interest. The commitment should be based on mutual respect for each other, discipline, and a commit­ment to security of tenure on the one hand and reduction of labour disputes on the other.

The details of such a framework are not necessary for this discussion. It is sufficient to note that Protocol Two recognised that the entire process was to be understood in the context of the country’s search for a new mode of governance. It stated that: “…the implementation of all aspects . . . will be undertaken in a manner that fully acknowledges the spirit into which it has been entered and which honours the principles of transparency and objectivity.

Acknowledging that this protocol marked another stage in the advance­ment of a process for alternative modes of governance, the social partners accepted and agreed that: ‘Steps will be taken to effect the deepening and widening of the social partnership.’

Protocol Three and Beyond

With the signing of Protocol Two in August 1995, a major step towards institutionalisation of the restructured relations of governance in Barbados, was the agreement to administer the protocol by a sub-committee of the social partners who would meet once per month or as often as necessary. This became the first time of consultation regarding all aspects of the implementation of the protocol. The sub-committee comprised six Government representatives, two of whom are Ministers, with an equal number of representatives from the umbrella bodies of unions and employers.

The organisational basis for the current Protocol Three (1998-2000) has proven to be an effective tripartite mechanism in that there has been no major industrial dispute of a protracted nature. Quarterly meetings, under the chairmanship of the Prime Minister have been maintained, close working relations have developed and a prominent role is carried out by the National Productivity Board.

Nevertheless, instances have arisen to test the tenacity of purpose and the capacity for participatory democracy, on the matter of securing na­tional consensus on wage restraint and a prices policy, sensitive to unavoid­able or legitimate cost increases. In early 1999, for example, a strike at a state-owned corporation was vigorously supported by the largest union in the Congress. Despite public differences and harsh language in heated exchanges between union representatives and management, consultation at the highest level of government, and the spirit of the social partnership prevailed.

It would be naive not to expect incidents, in the future, that will test the nature of the relations tat require partisan interests to be subordinate to the preservation of a macro policy framework of economic and industrial stability. It appears however, that the understanding of governance that is participatory, and premised on inclusion, has become an integral element of the public consciousness in l3arbadian society.

The formulation and upholding in practical circumstances of the current Protocol for the Implementation of a Social Partnership 1998-2000, capture the spirit and modalities by which the record of economic and social advance­ment has been demonstrated.

At least four indicators are instructive. The rate of growth of the economy over the last five years has been consistently 3.5-4.0 per cent; per capita GDP is US$8,200. On the Human Development Index of UNDP, in 1999, Bar­bados was the only Caribbean country rated among the top 30 countries of the world, on the basis of quality of life on a composite index, reflecting life expectancy, adult literacy, school enrolment and per capita GDP. Also the fixed exchange rate has been maintained at BdsS2 = US$1.00.

With the observance of Protocol Three, relations among the social partners have evolved into a formal structure governing their continued collaboration and consultation on fundamental issues affecting their individual and collec­tive contributions to all aspects of national development. This has been entered into as a Social Compact for a two-year period. Now it is being considered for further extension.

The document has a format which begins with a preamble, acknowledging a mutuality of interests among the social partners and the evolving process of the preceding five years, as well as a restatement of the intent on which a policy of industrial harmony is grounded.

The seven-year success of Barbados social partnerships cannot necessarily be taken as a blueprint or template for other CARICOM member states to achieve similar economic and social results. But what Barbados has demon­strated is a capacity to pursue a vision for sustained economic growth and development, predicated on specific major objectives. These objectives In­clude political and economic values that are indispensable to the survival of every CARICOM member state. They should be debated nationally, formu­lated and incorporated as basic tenets without which the likelihood of main­taining even a modicum of current survival patterns might be questionable. These tenets are imperatives of the conjuncture of the external environment and internal polarisation of inequities to which most member states are subjected. Therefore, the Barbados protocols offer useful guidelines and lessons for adaptation in the search for alternative modes of governance in the rest of the region.


The necessity of a stable industrial relations climate; the pursuit of sustain­able expansion of the economy through its competitiveness; reduction of social disparities through increased employment; national commitment to increased productivity; and consolidation of the process of tripartite consultation should not be dismissed with cynicism, and Barbados’ success seen as being merely fortuitous. On the contrary, one should hope that the lessons of consistent and deliberate efforts to make participatory democracy a reality in a small Caribbean State can, and will, bear fruit that will enhance the life of the individual.