Contributing Author Dickson Igwe
The story on capital in the series asks a question relevant to the layperson in economics: what mix of scarce resources best fits in with the outcome and vision of an investor, policy maker, even a consumer looking at starting a business? That is key to why the creative management of capital is vital for prosperity.
What are the best combinations and mixes of the components of capital – land, technology, machinery, equipment, finance, management, enterprise, – that achieve the desired outcome, and drives prosperity?
The term capital has expanded from being simply physical assets that produce wealth such as Land, factories, machinery, finance, and technology, to include the more human factors that drive wealth and productivity, such as management, labor, innovation, risk, and enterprise. Far from fixed, capital possesses variables and differentials.
Now, how a country’s leaders, businesses, and labor force, decide what proportion of one component of capital in relation to the other components is appropriate to achieve an outcome is critical in getting to the desired place: El Dorado. Then, the human factor is king. Wise policy makers fully understand that reality, and never risk the integrity of a country’s capital assets with poor human resource management.
The Virgin Islands is a trading nation. It situates an offshore and financial services economy, with tourism as second pillar of the economy, and main employer. Consequently, ensuring the country possesses the enterprise, labor force, and management to derive maximum productivity and output from these industries is essential. That means adopting all the components of capital in appropriate proportions- capital combining- while investing in the right type of learning to derive the maximum output from that capital.
The Virgin Islands requires specialists and administrators in financial services, such as accountants, bankers, corporate lawyers, trust managers, and middle managers, and more than this writer can name. The education system must drive the preceding tale by directing resources in these areas. Capital in this context is the leadership, management, and skills that when combined with finance, and technology, achieves the specific outcome of increasing revenues from this industry.
It is so too with the travel, maritime, and tourism industry. There is the need for mechanical engineers, civil engineers, architects, marine technicians, navigators, surveyors, oceanographers, chefs and culinary, hotel management, moorings management, restaurateurs, aviators, boat captains, refrigeration, boat engine, sail makers, and so on and so forth.
Not forgetting that the country requires all the additional and appropriate learning and skills that build and drive a society, for example, police, search and rescue, coast guard, public service, agriculture, transportation, building, infrastructure, healthcare, education, and the list goes on. All the preceding are capital that mix to generate wealth individually and corporately, as they aid in overall wealth creation: GDP.
Therefore, how to combine appropriately the various components of capital is crucial to prosperity. For example, the decision where to invest by both government and private sector will take the components of capital into account to mix and derive the best output and outcome, by combining them to the optimum.
There is no attaining a vision without understanding how the best combinations of capital will achieve that vision. There is no point spending huge sums on artwork for a hotel instead of on good furniture and catering, or birdcages instead of comfortable seating and tables, for a restaurant.
How to find the best capital combination or mix? For example, investing in Prospect Reef will factor in most of the components of capital before development, and after. Before development, combining the appropriate mixes, of the components and quantities of capital in the design and construction of a new resort and business park, will require the right amount of debt capital, spending on project management, inputs of enterprise, engineering and construction skills, machinery, innovation, land development, and so on and so forth.
Then after the completed project, capital combination, in the form of debt capital such as cash flow, hotel and moorings management, resort management, marketing, technology, culinary and hotel management skills, maritime skills, security, and more.
Airport expansion will require capital mixing and combining in how the components of capital such as land, buildings, finance, engineering, technology, training, management, combine correctly to form a complete whole. The appropriate combinations of capital will depend on the vision and dream of an expanded facility.
How to combine the various components of capital to derive the best economic and social outcomes is the road to true prosperity, and the main task of the visionary.
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.
