Social contributor – Dickson Igwe
Effective long term strategic economic planning, specific to a country’s customs, traditions, and culture, is great for everyone: national stakeholders, citizens, employees, employers, businessmen, investors, and governments. However, any type of economic planning for the British Virgin Islands must take into account the various nuances, arguments, and discussions, of contemporary western economics.
The proceeding story continues the assessment of austere thinking in economics. The narrative assesses austerity as a model in strategic economic planning, in a post disaster British Virgin Islands.
Austerity is top down and asserts that the wealthy are the key drivers of an economy. Stimulus does not necessarily oppose the austerity culture of top down. However, stimulus argues that the masses at the base and middle of the wealth pyramid are the key drivers of the economy.
Austerity is the idea that ‘’unfettered private enterprise’’ is the answer to growing an economy, from recession, to growth.
Preceding stories in the series of articles on Post Disaster Economics, have asserted that austere economic thinking is the belief that deregulation, and tax and public spending cuts, lead to reductions in national debt and annual deficits. Austerity creates a competitive economy.
There is a bias towards austerity in certain powerful circles. Austerity is simply another name for supply side economics.
Austerity drives the thinking that business and the entrepreneur are omnipotent in the odyssey to prosperity. Austerity remains a powerful idea in western economic thinking. Austere thinking, ‘’a perverse belief that economic hardship is good for the soul,’’ has led to a number of observable outcomes in western democracies: number one is a great increase in wealth inequality; two, the destruction of the idea of a middle and working class; and three, a divergence of demand and output, in favor of output.
Output has increased with the triumph of capitalism. Public policy in the west favors the investor over the consumer, the businessman over the customer. The common term used: trade liberalization. Austere thinking birthed globalization. And globalization was further strengthened by the information revolution.
Photo courtesy theconversation.com
Now, Austerity is a belief in top down, trickle down. It is a culture that has increased the output of goods and services. Businesses have been encouraged in a super friendly business environment that places free enterprise on the proverbial pedestal.
However, austerity has also brought about a fall in consumer demand in real terms since the end of the Great Recession in 2009. This is an imbalance driven by the impoverishment of the middle and working classes, by a massive transfer of wealth from the base and bottom of the wealth pyramid to the pinnacle.
Trickle Down- the idea of wealth trickling down from the 1% to the 90%- is an austere narrative that has threatened the western economy with deflation, as consumer demand has contracted, as a result. Then, consumer debt has increased, making for a ‘’double whammy.’’
Deflation occurs when there is an excess of supply over demand, leading to falling prices. Deflation is further strengthened by burdened debtors who keep their spending down, their wallets zipped. Deflation is not considered healthy by economists who see a healthy economy as one where a small rise in inflation points to strong consumer demand and an ability of businesses to meet that demand.
To solve the problem of deflation, economic policy makers in western capitals allowed for the growth in credit to bridge the gap between falling demand and increasing supply. A highly leveraged economy was the result. Credit rises increased the profits of both the banks and the businesses where credit purchases are made.
But, consumers and businesses borrowed heavily to meet demand and investment needs. However, the businesses owned by the one percent, increased profitability, and the owners of those businesses grew enormously wealthy, as consumers and borrowers became increasingly indebted.
This was a see saw invariably weighted towards Jack the billionaire corporation owner.
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Dickson Igwe is an education official in the Virgin Islands. He is also a national sea safety instructor. He writes a national column across media and has authored a story book on the Caribbean: 'The Adventures of a West Indian Villager'. Dickson is focused on economics articles, and he believes economics holds the answer to the full economic and social development of the Caribbean. He is of both West African and Caribbean heritage. Dickson is married with one son.
