It is no secret that the world economy remains in a state of high uncertainty because of the mixed performances of some of the leading economies. For example, while the United States’ economy continues to perform beyond the pundits’ expectations, other economies such as China, Japan, Russia and some in Europe are faced with declining growth rates, reductions in the general price level, and cuts in interest rates.
These developments suggest quite clearly that some adjustments must be made in economic thinking and strategising in the coming months if those economies most negatively affected are to reverse the trends and put themselves back on a sustained economic growth path. But the road to recovery may very well turn out to be more challenging than the countries project if the right approach to growth is not adopted.
You see, generating sustained levels of economic growth requires the formulation and implementation of sound policies as well as an appreciation of circumstances that work in and against a country’s best interest. There must also be a strong marriage between microeconomic and macroeconomic factors as part of the country’s efforts at strategising for growth. For example, it is always said that about 70 per cent of the economic growth in the United States is generated by private consumption. What this means is that domestic activities more so than developments taking place globally are responsible for most of the growth that occurs in the American economy.
But think of it. How could private consumption increase if people are unemployed? How could private consumption increase if workers are faced with high personal income taxes? How could private consumption increase if companies are unable to invest, produce more and hence hire more? The moral of this story is that even when governments are able to identify the main source of economic growth within the economy at the macroeconomic level, several issues must be addressed from a microeconomic perspective to ensure that growth can actually be achieved and hence sustained.
For us here in the Caribbean, the lesson is simple and unambiguous: to get our economies out of their current states of depression and into positions that would allow for medium-to-long-term expansion, we have to develop appropriate strategies for economic growth that incorporate both microeconomic and macroeconomic factors. We cannot, for example, continue to advocate that tourism and international business will form the core of our development efforts without addressing many of the fundamental issues that will make this strategy feasible.
Our strategies have to go beyond the obvious issues such as product development, source markets and marketing strategies. Instead, we have to, for instance, determine the most cost-effective way of service delivery, utilise available technology in a manner that would allow us to reach as wide a cross-section of visitors as possible in a timely fashion and with appropriate information that would spur demand, and we have to foster adequate linkages between our leading industries and other key sectors in the economy to ensure balanced growth.
Clearly, anything short of an appropriate strategy for growth will leave our economies in situations that can only be described as “spinning top in mud.”