Working out our own salvation

Fri Feb 13, 2015

by C.I. Martin

St Vincent and the Grenadines (SVG) has two major problems. Firstly, because we have a small domestic market and very limited natural resources, we have not, so far, been able to develop a highly productive economy. Secondly, as we are an independent nation, we need a public sector (civil service, police force, teaching service, hospital and prison facilities) to run the place and maintain law and order. One problem impinges on the other.{{more}} If the economy does not yield sufficient revenue to pay for the public sector, then the options are to beg, borrow, not pay your debts or repeatedly call in the IMF.

Several small countries, unable to develop their economies by orthodox means, simply rely on unorthodox ones. For example, it was recently reported that in one small Eastern European country, half the total income, that is, its GDP, comes from the production and export of marijuana. The small country in question has a population of 2 million. In SVG, we have a mere 100,000. It is anyone’s guess what contribution marijuana and other drugs make to our economy.

SVG, of course, joined the global economy as a slave plantation producing commodities for the colonizing power. Even after Emancipation and Independence, we continued to enjoy protected markets for our exports in the UK. However, with the rise of Free Trade, we lost that protection. This, combined with Black Sigatoka disease devastated our banana industry. Barbados, too, has been impacted by the loss of protected markets. It now costs more to produce sugar there than the price at which it can be sold.

OECS countries have also tried to develop by becoming financial centres. It has rarely worked. A foreigner would set up an offshore bank then use it to defraud other foreigners. It could not last. The US has now introduced measures that practically sound the death knell of offshore banks. Even normal banks are feeling the heat.

Two new schemes have recently been put forward for helping OECS economies. They are Reparations for Slavery and Citizenship for Investment Programmes. We have to see how these will pan out. In the meanwhile it is back to controlling the cost of the public sector and the more traditional methods of economic development.

Public sector costs can be controlled by restricting the size of the public service, limiting salary increases to what the economy can afford and sharing services with other islands. Now when times are hard and elections around the corner, politicians do not like discussing matters of this kind. Sooner rather than later, however, these issues will have to be confronted. Meanwhile, we can look at the prospects for development and this involves looking at agriculture, energy and services.

We must be realistic about how much our agriculture sector can achieve. SVG has less than 20,000 acres of cultivable land, much of it mountainous and even worse, highly subdivided. There are some 7,000 holdings, 70 per cent of them less than two acres in size. This, at a time when, worldwide, the tendency is towards consolidation, so as to achieve more viable units. It is hard to see our farm sector being internationally competitive and bringing in a lot of foreign earnings. Indeed, in the Budget Debate, Montgomery Daniel indicated the lack of competitiveness in our agricultural sector in far greater detail and with much more up-to-date data than I have done here.

What the farming sector can certainly do is provide food for local and regional consumption, as well as for the occasional niche market further afield. Even these limited objectives would require much surveillance and application.

SVG imports much of its energy. It has, however, been moving towards reliance on domestic sources. Hydro has long contributed 20 per cent, a start has been made with solar and we are going from talking the talk to walking the walk in geothermal energy. The result should be not 20 per cent renewable energy production, but 80 per cent. The implication of all this is that we should require less foreign exchange for imports. It should also provide more jobs and probably encourage a few more industries.

In the world as a whole, service industries are tending to expand more rapidly than those producing goods. We have to be in on this with our medical schools and above all tourism. SVG is so small that we cannot talk of internal tourism; our ‘island’ does not have land borders with other countries, so tourists cannot simply drive here. They have to come from overseas; hence the very strong case for the airport. It would be interesting to learn of projects which offer greater prospects for SVG than the airport and geothermal energy.

The truth is that our options are so few that ideologically there is little about which to argue. However, because we practise the Anglo-American system of adversarial politics, we waste endless time and precious resources on feuding between political parties. I do not advocate a one party state, since this could easily lead to dictatorship and corruption. We should, however, at least give the more consensual system of democracy practised by the Europeans a chance. This involves having a Government based on a grand coalition of the two leading parties. This is now the case in Germany and has also sometimes been the case in Austria. The Germans and Austrians often do this when they are faced with a crisis. Ironically, during the campaign for Scottish independence, it was argued that one of the few advantages of a small state is that it can more readily achieve political unity. It is only necessary to bang a few heads together. If this is true, then we have squandered one of our greatest assets.