The recent utterances of a UWI economist about our economy (‘dire straits’) had me scampering for a Lloyd Best quote: ‘Palpably, we lack the pegs on which to hang ongoing events, and which would allow us to convert arbitrary detail into a systematic pattern, arithmetic into algebra, the specific into the general.’
Best meant that many variables could influence an outcome. There is a vast difference between hitting a speed bump on the Solomon Hochoy Highway and the one in your neighbourhood lane. The same is true of the economy and financial matters.
While conscious thought is essential, we form most of our expectations through processing information in subconscious ways. Emotions play a central part in framing them.
John Keynes coined the term ‘animal spirits’ to refer to emotional mindsets which cause spending booms or busts. As we have seen in the Donald Trump presidency, a sharp partisan divide fuelled by emotions drove an extreme change in expectations among supporters. It triggered the opposite reaction upon the Joe Biden election.
In the process, civility and social cohesion got hurt—but more importantly, it inhibited sound policymaking. Emotions and reason are both necessary to make rational decisions.
The year 2020, with its Covid-19 experience, was an emotion-laden one. Most of those emotions were negative, superseding economic concerns. Life and death questions topped the agenda.
The domestic Stock Exchange momentum dropped by 5.2% from its 2019 ‘high’, with its capital raising and acquisition activities. This performance reflects a market that entirely mirrored the IMF estimates of 2020 GDP.
In their 2014 Article IV consultation report, the IMF admonished us for wasting our opportunity for development. That report spoke to the ills of the structure of our economy. The 2021 IMF outlook, which is subject to the post-pandemic global recovery, considers our years of recession.
The IMF did not just arrive at the party. They have seen our worse.
When we talk about economic health, we need to think about how our people are faring and not only the GDP. To their credit, the government did this.
But there can be no complete renewal of economic growth without the assured defeat of the virus, which prompts the considerable examination of the vaccination programme. Through stoking unrealistic expectations about the vaccine rollout, the government has made a significant misstep.
In contemplating the future, it is naïve to ignore the impact of our GATE programme on labour force participation figures. Our young are in school for a more extended period, even as a large cohort retires.
The UWI leadership debate is not a mere battle between the institution’s elites; it has real-world effects on possible returns on our investment in education. An important unanswered question: will our future be better because of our education expenditure?
To assess our economic future, we also need to factor in our structural issues.
Why is there an increase in some quarters of our real estate market? Why is there no fire sale of assets to preserve capital? Has the 2014 hoarding of foreign exchange turned into a 2021 capital flight? The answers may speak to the significant threat posed by our growing economic inequality.
We cannot simply ask textbook questions about our economy without discussing our unique challenges. We cannot choose to be silent conveniently or conflate circumstances over a period if we wish to be analytical about the country’s situation. To do this says more about the commentator than the problem.
Let us be thankful for our fiscal space, which can help us create a new future. As a country, we are better placed than most in the region. We should release our ‘animal spirits’ and push for growth opportunities.
Waiting on the government is not an entrepreneurial activity.
As Colin Powell said: “Each of us must work to become a hard-headed realist, or else we risk wasting our time and energy on pursuing impossible dreams. Yet constant naysayers pursue no less impossible dreams. Their fear and cynicism move nothing forward. They kill progress.
“How many cynics have built empires, great cities, or powerful corporations?”