By Derrick Miller: Published on June 17, 2014
Reflection: A little over 60 months ago, the US elected its first African American president, Barack Obama. His election was not only an historic event; it was believed to be a new paradigm shift where collaboration on a new union emerged. His election had the prescriptions for equality, social and economic justice, and even racial harmony.
Despite the celebration worldwide, several economies had already collapsed a few months before in the 2008 economic meltdown. The Caribbean economy caught the economic virus, as a major economic bloc, Europe and the United States, suffered the most. This was what most economists called a “flatting of the global economy.”
Global investments diminished and vital social services suffered as austerity became the focus on government budgets. Counties that were unable to manage became welfare recipients disguised as investments. The economic collapse created an opportunity, especially for China. Countries such as Jamaica, Guyana, and Trinidad and Tobago as major developed countries in the region were forced even into more marriages with China, and others finally brought their relationship out in the open.
China used the opportunity to expand its conquest. Countries such as Dominica, Grenada, St Lucia, and Jamaica, received community-based stadiums, schools and hospitals and other monetary contributions throughout the regions. As reported, China’s quest is both economic and political. However, we will have to see how what amounted to an arranged marriage evolves after the honeymoon period is over when China’s real motive is revealed.
The region’s once colonial powers such as the Spanish, English, French, and Dutch that once held possession over these islands, at the time of great need to restore stability seemed to have closed their checkbooks. Many workers from the region played a pivotal role in building their own industrial economies. I believe they could have done more despite their own problems. Even if the US wanted to help, the political divide along ideology would have made it difficult to offer much needed financial support.
Moving: In May 2014, the Bureau of Labor Statistics reported that almost every job lost has been recovered in the US. I am not sure if the same can be said in the region. We can debate if they are all full-time, or if enough jobs are being created to reach everyone.
Today’s data has provided some hope, especially in countries relying heavily on tourism. They suffered tremendously during the economic meltdown, including some devaluation of local currencies that made hope an elusive word.
US rules now must that banks be better capitalized. The law minimizes risks from complexity of these financial derivatives where only few understood the financial dispersion.
However, questions remain if new financial laws have worked for average people. Today about 1 percent of the population holds 99 percent of the wealth. The gap between the rich and the poor has widened further.
Many have now joined Pope Francis’ call for the redistribution wealth to the poor. Can the region’s leaders consider this without being called a Marxist? On the other hand, most of the wealthy people are hardworking and employed. Nevertheless, more needs to be done through collaboration.
Even McDonald, the world biggest fast food chain, has agreed to increase its minimum wage under from pressure. Many of today’s fast food workers are now older men and women with mortgages, and kids in schools. It is my hope that this shift becomes universal and reaches the Caribbean.
The economic meltdown I believe was a good lesson. It has provided a crash course for the region that it cannot continue to use its credit cards without generating income to cover its expenses.
Five years later, glimpses of hope are on the horizon for the region.
Key Indicators: A (2014) Business Analysis Report: Despite turbulence in the financial system, the Caribbean remains stable. The islands still have a strong business environment, well-educated people, and strong labor force, social and political stability with a stable banking system. It is still a prime place for financial services.
Corruption Indexes: It remains high, but trending in the right direction. According to Business Monitor International Ltd and Transparency International’s 2012, Corruption Perceptions Index: Guyana 133rd place out of 183 countries), the Dominican Republic (119th), and Jamaica (83rd).
Between 2014 and 2018, the increase in real gross domestic product (GDP) is projected to be about 2.5 percent with an inflation rate that will be about 6.4%. There are no quick solutions, as one IMF study noted. Any weak global condition can deteriorate these growth prospects according to the East Caribbean Business Forecast.
The International Monetary Fund’s goal is to lower the debt ratios to GDP of many countries by 2020. For example, Jamaica’s debt-to-GDP ratio is about 130 percent, and the IMF is working that it can reach about 96 percent by 2020. While some of the region’s regressive tax system made modest adjustments to attract more investments. Although Moody has lowered some of their credit ratings in the region due to lukewarm economic activities, and rising debts, recent reports have shown some revisions.
Concerning the IMF, it has a love and hate relationship in the region like a logistic regression analysis that is always predictable. IMF operates like the drug dealer next door. It continues to supply goods knowing they are serious problems. IMF should make sure rehabilitation and holding most of these countries on leash with tremendous debts will not change anytime soon. What happen to debt forgiveness?
On the other side, drug trafficking through the area remains an issue as a main hub to US, Europe, and Canada, including safety and crimes that have stymied investments.
Are We There: As the region throttles ahead, it is still subjected to significant economic risks, low credit ratings, high crime, poor infrastructure, and unemployment remains high.
Even people, who are gainfully employed, are still having difficulties in the recovery. Wages remains stagnant, several young people are still out of work and buried in student loans. The main solution in reversing poverty is an education. However, tuition costs often make it just an idea to develop the talent pools needed to become a practical job candidate in the new world.
Manufacturing and start-up businesses are very difficult to sustain. Moreover, where few jobs are located, the cost of living is extremely high. This also makes it difficult for teachers, police officers, and private employees to find affordable homes.
Christine Lagarde, managing director of the IMF praised the UK’s recovery, but warned of increasing house prices according to The Telegraph. Today there are questions being raised if the US and the United Kingdom are becoming too reliant on real estate and the same is clear in the Caribbean region.
Government and private businesses have to collaborate. They cannot ignore the local residents. They are the long-term driving force in the economy. These leaders must find a way of recreating and connecting locally, and rebuilding a system that balances personal fulfillment and a sense of community.
If local exclusion continues, many will become emotionally disconnected. Furthermore, racial and economic division and polarization will take decades to reverse and that is far worse than the lack of jobs.
Some of the economic developments in the region can be good. However, some recent reports have suggested that many have created conflicts when residents are being priced and routed out of some areas. Some local residents no longer have free access to beaches. They are being locked out in the name of development.
It is gentrification disguised as investments. Sadly, and as troubling as this paradigm shift has been, the Caribbean is not alone.
Too often homes and residential lots for sale remain stagnant for years. There seems to be a lack of incentive to help local farmers, as imports have taken over locally produced products. The stories are endless of only a few can afford to be approved for low interest loans to make an investment in a new home, or start a small business.
This only widens the divide between the haves and the have-nots. Home ownership not only creates pride, and a good investment, it supports local goods and services. For example, the local hardware, grocery and repair stores will benefit tremendously. In the end, it creates more employment and wealth across the board.
Often massive marketing campaigns target returning residents. Nothing is wrong in maximizing one’s return on investment in a capitalistic society, but equally important one has to realize that economic activities from returning residents often generate far less than the local residents.
The future looks bright in the region; however, it must revisit an attitude of taking care of people, the community, and their values as the new world emerges.
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