Innovation is the new buzzword.
Everybody’s for it.
Innovation is linked to the notion that ideas, more than resources, power economic growth.
Paul Romer, the American economist, expressed it this way: “Economic growth occurs whenever people take resources and rearrange them in ways that are more valuable. A useful metaphor for production in an economy comes from the kitchen. To create valuable final products, we mix . . . ingredients together according to a recipe . . . . Economic growth springs from better recipes, not just from more ingredients.
“Every generation has . . . underestimated the potential for finding new recipes and ideas. We consistently fail to grasp how many ideas remain to be discovered. Possibilities do not add up. They multiply.”
This is good news for a resource-poor economy like ours. It means that innovation or new practicable ideas can propel us into a prosperous future. But there’re a couple of questions we have to ask and answer.
First, how do we achieve innovation? Can it be taught? Is it a product of a cultural environment? And, most important, does it depend on specific social and economic conditions?
Secondly, do we currently have what it takes to innovate?
It seems there’re several broad obstacles to innovation in Barbados.
We have a long history of a culture of commercial enterprises that have survived not by innovation but by dominating the market and suppressing competition where possible.
For example, our sugar industry has shown itself incapable of innovation. Its mission statement is 300 years old: export raw sugar in bulk to preferred markets in Europe. When this proved to be unprofitable, the industry did not innovate. Instead it sought Government subsidies and protection at the expense of the taxpayer and the consumer.
Our telecommunications sector has been dominated by a monopoly that has retarded innovation in this area for decades while extracting enormous profits.
Our legal profession, because of the archaic rules that protect it, not only fails to innovate, but continues to indulge in inefficient and shoddy business practices. In view of the role of lawyers in the international business sector, this too restricts our development.
There are, of course, brilliant exceptions to these gloomy trends in all areas of our economy. Classic examples that buck the trend are the large supermarket chain that originated in the old mercantile model, and the diversified enterprise running the major retail outlet on Broad Street. They’re both well managed and innovative.
Unfortunately, this lack of a dominant entrepreneurial culture, coupled with an unhealthy dependence on Government by all sectors of the society, has led to our being both risk-averse and insistent on Government compensating us for our bad investment decisions. Even in the tourism sector, which has not been a traditionally protected or subsidized area of economic activity, we see evidence in recent years of enterprises that are failing because of bad management seeking protection and subsidy instead of innovating.
In Barbados it’s not “too big to fail”, but apparently “too small to fail”.
The moral of this story is that we should let greater market discipline apply to all sectors and enterprises; bad business decisions must be allowed to suffer the consequences.
In addition to market discipline, the regulatory framework for business activity must be effective, transparent, simple, fair and speedily accessed and applied.
Our economy must be highly open to technology and skills transfer. We should deliberately go after the skills and capital of the Barbadian diaspora, CARICOM nationals and foreigners. They don’t take away jobs, they create jobs.
And we must resolve the paradox posed by a social democratic state whose policy interventions over the decades have created the social equity and high level of trust of a successful, stable society, and an overly bureaucratic state that now stifles innovation and has led to excessive dependence on Government for everything.
The good news is we’re small enough to change direction rapidly if we have the wisdom and the will.
