Saturday, March 2, 2024

NOT ALL BLACK AND WHITE: Economic wasteland


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WE LIVE IN A COUNTRY THAT, apart from a handful of success stories, is strewn with collapsing businesses caused by failed economic policy.

These nearly departed include many in the food, retail and tourism-related sectors, businesses which have been denied nourishment over the years because they try to function in the toxic wasteland of an import substitution regime, which denies them the ability to compete on a level playing field.

Because they must import certain inputs at exorbitant and totally unreasonable rates of duty, or get licences to operate which are denied in order to protect the not-yet-dead “ancien régime”, they either fail or barely eke out a living, with no profit margin of the level that would allow them to grow.

Barbados’ Opposition Leader, Mia Mottley may have been channelling these businesses when she spoke recently at a conference in Montego Bay.

Addressing the 3rd EU-CARIFORUM Business meeting, hosted by Caribbean Export and the ACP Business Climate facility, Ms Mottley said that over the last 50 years the region had tried industrialisation and import substitution, both of which were aimed at bringing people out of poverty, and while some had succeeded and there had been modernisation, the gains were coming too slowly.

She said governments and businesses needed to create policies and programmes which would “allow our very citizens to become engines of the wealth that we want to create for sustainable growth in the region”.

It seems to me that the Opposition Leader has read the latest Inter-American Development Bank report on the Caribbean and Latin America, which depicts the dystopia that will be our future in this region unless we can find some way out.

She said that the economic sectors that would carry the region to the next level of development were all based on “human capital.”

In a press release on the report, titled Rethinking Productive Development, Development In The Americas 2014, the IDB said the region needed to adopt “modern policies” towards innovation, improvement in human capital and entrepreneurship.

Said the bank: “This fresh perspective departs from the traditional approach of import substitution, state-owned companies and subsidies as triggers of productive transformation.”

All of a sudden everybody is talking about “human capital”. I wonder what it means.

It is defined by as follows: “The collective skills, knowledge, or other intangible assets of individuals that can be used to create economic value for the individuals, their employers, or their community.”

Encyclopedia Brittanica says: “Human capital (comprises) intangible collective resources possessed by individuals and groups within a given population.”

It is apparently based on the “economic model of human-resource capitalism,” which says productivity will improve if you develop people over the long-term.

Under this model, says Britannica, human capital is distinct from the “more traditional and instrumental approach where human resources are primarily seen as a cost to be contained beyond immediate and short-term needs”. That approach is often “used as a justification for keeping wages down, contracting out, and automating jobs”.

Well, I’m glad we got that one explained.

How we are going to unleash human capital to create all this new wealth for us still escapes me, but the fact that the big lending institutions like the IDB are now talking about a post-import substitution era is a good start. 

It suggests to me that they may lace their new policy-based loans with edicts like “Thou must remove thy trade barriers, impossibly high import duties, luxury tax lists and all of thine other protectionist edicts which stop entrepreneurs from taking your country into the modern age.”

Then, boy, would you see the human capital flow, like lava down a mountain, red hot and deadly.

Patrick Hoyos is a journalist and publisher specialising in business.


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