The Real Issue, Tackling the Unemployment Problem!

by Nilio Gumbs 02.OCT.09

After the constitutional debate and referendum settles, Vincentians like fellow CARICOM nationals will be confronted by the same old problems which we seem to ignore and hardly debate in town hall meetings, public forum or in the media. Fiscal deficit, rising debt to GDP ratios, declining economic growth and high unemployment.

While the constitution is an improvement on the old and predisposes one to vote in the affirmative, one can’t but repeat the adage: the more things change, the more they remain the same.{{more}}

While much is talked about the various preambles of the constitution, the greatest fundamental right is the right to work, obtain food, clothing and shelter.

The high unemployment situation denies many such humanistic rights, which can only be practically attainable through sustainable economic and development policies that increase employment opportunities for Vincentians domestically; not a better or worse constitution.

The very fabric of the said new constitution will be undermined if we do not have a sustainable economic and productive base to tackle the high unemployment rate and ensure our survival as a nation state. The global recession has exposed the vagaries of these small economies with populations that can hold in the Maracana or Azteca stadium in Brazil and Mexico respectively.

The unemployment rate hovers around 16 to 20 per cent of the labour force. This may be higher, if those who count themselves as farmers (even though of a kind forbidden in the hills) are to be excluded.

The diversification and expansion of the economy, the encouragement of new industries, the expansion of the private sector and managed migration will have to be looked at in tackling unemployment after constitutional dust settles.

The high rate of unemployment does have socio-economic implications for national development. Unemployment is a loss of labour productivity and output in an economy. Socially, it impacts on poverty levels and creates an attending social malaise: crime, drug cultivation and trafficking, prostitution and sexually transmitted diseases.

In micro state economies, the public sector is the largest employer. In this country, the private sector remains small with limited diversification potential. However, the public sector can only absorb so much of the labour force.

The growing informal economy in this country is a direct response to the inability of the formal economy to absorb new entrants to the labour force.

In an article, some weeks ago, a columnist noted that “he would not like to see what this country would like in 10 years down the road”. Clearly there will be serious problem facing this country in several years to come, if policies are not put in place to deal with the unemployment situation.

Rightly, a lot of emphasis is placed on social policies, such as poverty reduction, low income housing, education and health, but such policies cannot be sustainable without a sound economic footing.

Hence, the logical question to be asked is: “Is the economy creating enough jobs to meet the demands of new entrants to the labour force?” In other words, how many jobs are created annually in the economy? If not, what practical measures can be put in place to achieve such?

The British Military has been an escape and employment route for many young people. However, it is fallacious for any government to place emigration consideration as a factor in tackling unemployment. Emigration is an exogenous factor – one which this country doesn’t have control over. The host government can introduce strictures inhibiting migration.

Clearly defined developmental goals with clarity of purpose must be adopted to position the economy of this country. Clearly defined industry and sectoral goals must be identified and specified for developmental objectives.

The Milton Cato administration, through the policy of import substitution, attempted to create a diversified economic base, through the establishment of the Flour Mill, Diamond Diary, the Sugar factory, the Campden Park Industrial Estate for light manufacturers, the Brewery and the boxing plant. Today we import Pine Hill juices.

The decline of the Banana industry with creation of the European Union, which meant that big banana importers from other European countries can now enter the British market, led the James Mitchell administration to diversify the economy away from agriculture into tourism and financial services.

One should not ignore the fact that the import substitution policies were possible then because globalization was not in motion, while China and India were still closed markets prohibiting the exploitation of an abundance of cheap labor.

However, similar examples of diversification to create a sustainable economic base can be found internationally. The collapse of the Soviet Union and its negative impact on Cuba’s economy, forced the Cuban government to reposition the economy and develop its tourist industry. So, too, later, its bio-technology industry. It now boast many patents and license such to major drug firms.

Vietnam, has become a global player in the coffee industry in the last ten years, to the point of depressing global coffee prices.

An economy that is based entirely on tourism receipts will suffer the same cyclical downturn that is being experienced in countries like Barbados and Bahamas as result of the global recession.

So to, the imposition of strict reporting and disclosures by the Organization for Economic Cooperation and Development may make offshore financial centres less attractive havens for high net worth individuals and parking profits by big institutions and corporations.

Despite the old cliché which states that greatest resource of any country is its people, our territorial waters and Economic Exclusive Zone (EEZ) is this country’s largest natural resource.

Most developing countries lack the capacity to exploit their EEZ, instead they opt to license out fishing rights to develop nations fishing fleet instead of trying develop their own fishing and exporting fishing industry.

Seychelles, the Indian Ocean microstate is the best example of seeking to maximize the economic returns from its Exclusive Economic Zone. It boasts the secondary largest cannery on Earth.

The government of The Seychelles has called for a revision of such licensing agreements with the European Union. The President argues that the current arrangement where the Seychelles received US$15 million and the EU’s fishing fleet exploiting $1 billion worth of fish stocks, is unworkable.

Our diplomatic relations with countries should move beyond political support and economic largesse to that of technological transfer. The provisions of grants for buildings, bridges and a few scholarships, though of practical benefit, do not put us on the path to a sustainable economic base. As it is said, don’t give us fish, teach us to fish.