A story of political and economic success from Barbados

Parliament building of Barbados where in 1991 the people came up with a remarkable solution to a common big problem.

This episode of This American Life (episode: 410 Social Contract) from June 2010 deals with "the social contract and what happend to it during dire economic times."  The first act looks at a classical case of what usually happens when a government is faced with a shrinking budget, increasing defecates and must make budget cuts, the current (2010) state of New York state's budget and the political gridlock that is preventing the state from making the nessersary compromises, both political and economic, to save the states finances.

The second act, 37miniuts into the show, is more interesting.  It looks at one of those rare cases when people came together to make the necessary compromises to save the government from a almost going bankrupt.  Although in this case it was more a matter of running out of foreign exchange then a classical bankruptcy.  But for a small island nation such as Barbados, the subject of this segment of the show, running out of foreign currency can be just as bad.  

The segment goes on to make a startling comparison between Jamaca and Barbados.  Two very similar Afro-Caribbean countries in terms of economic well being at independence and with a similar parliamentary political system and culture.   Today one is poor, corrupt and politically intolerant of opposition, the other is inclusive, united and has strong social institutions to build compromises that enhance the welfare of everyone on the island.  Needless to say, the troubled nation is Jamaica and the successful one is Barbados.

The account of Barbados's problem, a fiscal problem brought about by an economic recession, and the way in which different segments of society (labour unions, employers, government, and others) can together to solve this problem and the positive social institutions that remain from the crisis that serve as a forum for dialogue and cooperation between these groups today is nothing short of inspiring. 

Prologue of act II:

We hear recordings from all over the country—and the world—of politicians arguing over budgets. (2 minutes) 

Act Two. If You Were Stranded on a Desert Island and Could Only Bring One Economic Plan...  Why is it that Barbados and Jamaica faced almost identical financial crises, but now Jamaica is incredibly poor and Barbados is prospering? Alex Blumberg reports on the surprising strategy Barbados used to survive its crisis. Alex first learned about this story from a paper by Peter Blair Henry, the dean of the Stern School of Business at New York University. (22 minutes)

 Listen to the show here: