THE ECONOMIC GROWTH INSURANCE POLICY
THE ECONOMIC GROWTH INSURANCE POLICY – BASIL SPRINGER COLUMN TO APPEAR IN THE BARBADOS ADVOCATE’S BUSINESS MONDAY ON 19 JANUARY 2009
“For the protection of wisdom is like the protection of money and the advantage of knowledge is that wisdom preserves the life of him who has it” – Ecclesiastes 7:12
It was reported in the press on January 8, 2009 that former St. Lucia Prime Minister Dr. Kenny Anthony has called on the region to complete the journey towards the creation of a Caribbean Single Market and Economy (CSME) and that the creation of the CSME had been made even more urgent in light of the current global economic downturn.
Barbados’ Prime Minister, who has lead responsibility for the CSME’s creation, held a press conference last week marking his first year in office following his election on January 15, 2008. On that occasion he said that while the perception may exist of a slowing down of the regional integration movement, this is certainly not the case.
In fact, he was reported as saying that the 15-member Caribbean Community (CARICOM) was preparing to embark on a “tight” four-day schedule of meetings in Barbados in late January 2009 with a view to taking forward the regional agenda.
We have had many CARICOM meetings like this before and presumably the pattern will continue. My position still remains that unless there is the creation of a supra-national body, to which each sovereign CARICOM country releases appropriate “policy” space, no sustainable progress will be made as far as the Caribbean Single Economy is concerned. It should be noted that whereas Caribbean unity may be a catalyst or exude positive benefits in many specific areas, it is neither necessary nor sufficient to sustain economic growth in each sovereign Caribbean country.
As far as the current global economic downturn is concerned nobody really knows what the specific impact on the Caribbean will be. The economic forecasters to whom we usually turn for assistance in these matters, based on certain assumptions “on the one hand” and “on the other hand”, are predicting doom and gloom. As a former Prime Minister of Barbados was reported to have said – “Oh, for an armless economist”.
The expected manifestation of this doom and gloom will be a depletion in foreign reserves because our exports will be on the decline and imports may increase; and the possible closure of businesses will result in increasing unemployment.
An analogy, even though not perfect, is the hurricane forecasting system from which we get information year after year. The number of hurricanes is forecast to be larger and of greater intensity but no one knows for sure which country will be hit and how badly.
Once a hurricane is spawned and the conditions are favourable for its development, its growth is inevitable. It is then a question of if, where and when it will make land fall and, if so, how much damage will be done. If we are prepared, the impact will be less than if we are not.
What do we do? We invoke the concept of insurance which is a promise of compensation for specific potential future losses, in exchange for a periodic payment.
The country takes out a socio-economic stabilisation insurance policy. The payment or insurance premium, in this case, is the monthly cost of disaster preparedness and disaster management practices designed to mitigate the impact of a hurricane on the socio-economic life of the countries of the Caribbean.
What should we do when the expectation is impending doom and gloom as a result of the peril induced by the expected global economic downturn? Similarly, we invoke the concept of insurance and take out an economic growth insurance policy, the insurance premium for which is the cost of enterprise development.
Enterprise development can be the result of any entrepreneurial effort from the creation of new enterprises to the redevelopment of existing enterprises, or many activities in between. Specific examples of enterprise development are tourism (exploring new markets) and its linkages (prepare recipes using local food); food security (eat what you grow and grow what you eat); food import substitution (the food import bill is much too high); export agriculture and agro-processing (exploit our exotic horticultural base); business development services (develop our intellectual capital); creative industries (film, music, contemporary art and fashion); education (English as a foreign language, increasing the automaticity of reading and comprehension); ICT (exploit the wonders of the information age); Construction (in support of an expanding tourism industry); renewable energy (develop the abundant solar, wind, geothermal and wave energy sources).
The critical issue is that enterprise development relies on ideas about innovative product initiation that responds to human needs. Enterprise development can mitigate the depletion in foreign reserves (by increasing exports and decreasing imports) and can foster the increase in employment. Are we paying enough attention to this in the light of the impending disaster?
The cost of enterprise development is an amalgam of the cost of shepherding (mentoring) and the cost of seed and venture capital. There is much lip service paid to this but little in terms of putting effective and efficient systems in place for its full implementation.
As we protect our wealth as a resource, so too should we protect our wisdom. Wisdom as a resource energises the owner. Let there be wisdom among our leaders. Let them take out an economic growth insurance policy and pay the premium of enterprise development on time.
(Dr. Basil Springer GCM is Change-Engine Consultant, Caribbean Business Enterprise Trust Inc. – CBET – Columns are archived at www.cbetmodel.org)