Crowding out effect in the merchandizing sector

06.FEB.09

Editor: Some time ago, divine intervention spared the government from any diatribe that may have been leveled against it for the removal of Vendors from Little Tokyo, a timely intervention to the Government’s announcement of the removal of some vendors along the streets of Kingstown and Little Tokyo.{{more}}

It was quite obvious that something had to be done about the vending along the roadside; but it should not be in any way that affects vendors’ ability to eek out a meaningful living and ensure their self-employment to support their material wellbeing and that of their siblings. The question the relevant authorities should be asking themselves is why are there so many vendors along the roadside selling food and garments?

The answer to such is logical and simple. To explain such, one can use an analogy from economic theory – The Crowding Out Effect – which is where public or state borrowing crowds out private domestic borrowing, resulting in higher interest rates to private domestic borrowers in the process. Simply put, if the state is the biggest borrower from the banking sector, the small pie that remains will have to be auctioned at a higher interest rate to private domestic borrowers. Such a theory can be amplified and modified to explain the present state of the merchandize sector and the growing informal economy in this country.

The preponderance of higglers or hawkers selling clothes along the roadside is the result of the unregulated influx of foreigners in the merchandizing sector that has led to an increase in rental prices for commercial office space, thus crowding out local and aspiring Vincentians from renting such office space, hence are forced to ply their trade along the roadside.

St. Vincent is one of the few Caribbean countries where the merchandizing sector is virtually dominated by an expatriate community. Recently, I had to return an item to a store in Middle Street, but I had difficulty remembering and locating which one of the stores because all the stores look the same and sell the same items.

In some Caribbean countries a foreigner can only establish a business if they have a local partner, irrespective of the fact that the foreigner has to furnish 100 percent of the start-up capital.

No one should be xenophobic about our expatriate business community and seek to deny the tremendous contribution that they have made by making clothes, shoes and other house utensils affordable to poor Vincentians. As a result of their entrepreneurial spirit – gone are the days of the 1970s when a sizable number of students went to school bare feet. However, there are simply too many of the same businesses occupying all available commercial office space in Kingstown.

Empowering the poor through self employment is also essential to national development through the promulgation of social justice and equity in society. Hence, the need for proper and adequate infrastructure to facilitate the activities of these vendors.

The Vegetable Market is an ideal and convenient location to provide an arcade where such vendors can ply their trade, but it is too expensive a building to sell just fruits and vegetables.

The ability to recoup that investment is virtually impossible if they are going to tax those vendors at $2.00 or $3.00 a day. Instead, such vending needs a large expanse with protective covering and storage capacity rather than in an enclosed building, enabling these vendors to be empowered through self employment.

Small Man