These are the best of times, and the worst of times. This, it seems, has always been life in Saint Lucia. Which way is up or down depends on whether you’re afflicted with jaundice or conjunctivitis. Notwithstanding the evident absurdities that dominate social media discussions, there is much wisdom and sagacity within the population—if only we seek it out.
Given all that has transpired in the year just ended, we should reclaim our 20/20 vision and engage in clear-eyed discussions on our future prospects, which we hope to initiate through a series of articles. This is all the more urgent and critical as general elections are constitutionally due within the next ten months, and politicians and their surrogates will make pitches, some pathetically obtuse, some deliberately aimed at colouring or obfuscating the issues/discussions.
The series makes no pretensions about having the answers to all existing afflictions. It hopes to engage and challenge some received wisdom and put within the public domain some matters reserved for select watering holes. Thus it is hoped that the discussions or understanding of the challenges that lie ahead, and the available options, are broadened. In this first edition, an overview shall be provided. In subsequent editions, we’ll explore in greater depth the sectoral issues and outlooks.
To appreciate the challenges ahead, it is important that we understand where we are and where we’ve been—which is not to suggest a return to the Middle Passage neither the period when colonization or the colonialist may or may not have had consciences; not because such foundational periods are without explanatory relevance. Weary of attention deficit or selective amnesia, we shall attempt to confine ourselves to this millennia.
In the immediate here and now, Covid-19 is having a most profound impact on us. It has and continues to expose many of the social and economic vulnerabilities that many have tried to ignore, mask or plaster over. It is also testing our ingenuity and capacity for adaptation and survival, whether it be at the individual or societal level, or at the level of the firm or economy.
Economic historians are reporting that over the past century, only the two World Wars and the Great Depression caused a global recession deeper than that caused by COVID-19. For perspective, this means that COVID-19 is having a bigger impact than the global financial crisis of 2008, which by some accounts only ended in 2017. Thus business as usual is unlikely for the foreseeable future. However, in the case of Saint Lucia, business as usual was/is an affliction that must be cured. So we may yet say thanks for COVID-19. No doubt some have already done.
It is no secret that Saint Lucia is an open economy that it participates in international trade but its ability to influence world prices, incomes and interest rates is limited by its size. The majority of businesses operating in Saint Lucia are comparatively small in terms of earnings; they operate in different sectors and are few in number. Similarly, there are serious differences in their processes and quality of operations, and thus of their likely performance and prospects.
The economist Joseph Schumpeter claimed that one essential fact about capitalism is its need for creative destruction, wherein the incessant product and process innovation replaces outdated ones. Though we don’t know the balance sheets of many companies, COVID-19 no doubt exposed their frailties, some of which had long been suspected. COVID-19 has initiated some creative destruction, and some businesses shall be denatured or forced out of existence while creating opportunities for those able to survive, either because there are fewer competitors or because they have been able to lower their operating costs. We may even see some business consolidation if some are to survive and remain vibrant. Indeed we can expect all businesses in Saint Lucia to revisit their business plans, presuming they ever had them.
Even prior to the emergence of C-19, a Fourth Industrial Revolution was already on the way before we in Saint Lucia had been fully immersed into the Third. The Third Industrial Revolution used electronics and information technology to automate production, while the Fourth is building on the Third by fusing technologies that are blurring the lines between the physical, digital and biological spheres. Consequently, the businesses with the best chance of surviving are those that have accelerated their digitalization and innovation.
Some segments of the economy, retailers in particular, have been experiencing the impact of the explosion of online commerce. Though the government has been promoting this mode of trade for a while, some businesses were slow to adapt. Notwithstanding, there will be a need for a review of government action and engagement in the area. For those who believe that we have a weak private sector their solution may necessitate greater government intervention. Herein lies the rub: the government may not have the fiscal space to intervene as desired.
Given the already referenced structural weaknesses in the society and its economy, the C-19 may create lasting damage to potential growth as it has undermined investment and human capital. With a small internal market, demand for locally produced goods and services may be insufficient. This is compounded or reinforced by the vicious cycle of high unemployment and a small tax base, which limits the government’s fiscal space to maneuver and help small businesses.
To improve our future prospects, immediate policy priorities should be on limiting the spread of the virus and providing relief for vulnerable populations. When the spread of the virus abates, policymakers would then need to balance the risks from large and growing debt loads with those from slowing the economy through premature fiscal tightening. This will no doubt require that we have stronger institutions. Our impediments to growth is not a function of the ignorance of politicians and policymakers, but the incentives and constraints they face from social, economic and political institutions. Clear-eyed public engagement is vital to robust policymaking, an essential ingredient for growth. Let’s start something.
This article first appeared in the January 2021 edition of the STAR Monthly Review. Be sure to get your printed copy on newsstands or view it here:Â https://issuu.com/starbusinessweek/docs/star_monthly_review_january_2021
