Nowhere to hide – Economic crisis biting

Tue, Aug 9, 2011

Another bold statement by the Government and people of St. Vincent and the Grenadines was made last Sunday with the ground-breaking ceremony for the construction of the terminal building of the international airport at Argyle.{{more}}

This critically-needed transportation infrastructural project is unfortunately the victim of the worst global economic crisis for eight decades, leaving our country in a virtual catch-22 situation. Having chosen tourism as the major engine of economic development, the international airport has become a necessity, but at the same time, the problems in the world economy present severe constraints to the mobilisation of the resources necessary for the completion of this ambitious project.

Even as we optimistically break the sod to commence the construction of the terminal building at Argyle, the international picture is far from rosy. Only last week, the credit rating of the United States, our own economic lodestar, was downgraded. That country faces an economic recession much worse than that at the onset of the last recession, in December 2007. All the major economic indicators are down – jobs, incomes, output and industrial production. A feature writer in the New York Times on Sunday, had this to say about the plight facing Americans: “When the last downturn hit, the credit bubble left Americans with lots of fat to cut, but a new one would force families to cut to the bone.”

It is a most sobering thought that our stable EC dollar is tied to the US dollar and any weakening of the value of the “greenback” will have catastrophic consequences for our own economy. Add to this the steady decline in the fortunes of the banana industry, having negative effects not only on foreign exchange earnings, but also on employment, especially in the rural economy. Additionally, Europe, our major source of external funding, is in dire economic straits. This poses further challenges to both European Union aid flows, as well as to attracting foreign direct investment from that source.

The bleak situation is exacerbated by the continuing rise in fuel costs. Over the past week alone, Government has been forced to accede to demands from economic operators for increases in the price of liquified petroleum gas and bus fares. It will not be long before other sectors which are feeling the squeeze make their demands too. This would include workers, public sector workers especially. But with government revenue shrinking, whence will government find the wherewithal to meet such demands?

In this tight situation, there are those who appear not to understand nor appreciate the dilemma facing countries like ours. In the USA, President Obama has defined his “urgent mission” as being to expand the economy and create jobs. But he faces stout resistance from those who want to preserve the privileges of the rich and to force the working people to bear the brunt of the crisis, through job and salary cuts, as well as reduction in social spending. Those pressures are on governments in this part of the world too, via recommendations from international financial institutions to reduce public spending.

This is the source of the rumours that Government plans to introduce a 10 per cent salary cut for public servants. Fortunately, the Prime Minister has debunked those rumours. The President of the Public Service Union has also said he has no knowledge of any such impending salary cut.

The economic crisis facing St. Vincent and the Grenadines is not unique to our country, nor is it confined to the Caribbean, most countries being much worse off than we are. This situation calls for understanding, patience, sacrifice and hard work, and, above all, unity of our people around a programme of economic salvation.