Social contributor – Dickson Igwe
Austerity is an option in long term economic planning. However, history has given austerity a ‘’bad rap.’’ Austerity ideas present solutions for a long term economic plan for the British Virgin Islands.
Why: because the Virgin Islands economy possesses a number of characteristics of an austere economy. The economy is top down and driven by the wealthy North American and Western European Investor. The Virgin Islands is a very unequal society with enormous gaps between the 1% and the 90%. Then, there is increasing poverty at the base of the social pyramid as wealth continues to concentrate at the top of the wealth pyramid.
Austerity is the belief that fiscal probity boosts business confidence. In other words, miserliness is good for the soul. Cutting debt, and living frugally, is great economic medicine in the world of Jack the Austerity Worshipper.
However, this Economics Layman and writer believe that Austerity is the very last thing the Virgin Islands requires, post the September 2017 natural disasters. Yes, transparency and accountability are critical in how the economy is stimulated. And there must be strict checks in place in how the cash for physical, social, and economic recovery is managed; earned, donated, borrowed. So, stimulus must be tightly audited and managed.
Now, under the austere culture, at the extreme end, governments cut spending and raise taxes simultaneously, all in the name of reducing deficits and national debt. The belief is that achieving the preceding is great for investor and business confidence, and consequently great for everyone else, no matter the social hardships. Austerity is considered a driver of economic efficiency. Whether this is so or not is a matter of opinion.
But, austere cultures, according to the brightest minds in economics, have created unacceptable wealth inequality, the hemorrhaging of the western middle classes, and deflationary pressures, driven by fear and debt. Austerity has rewritten the economics narrative in the favor of the 1%, who own and direct global wealth.
Still, austerity holds ideas and solutions for short, medium, and long term economic planning. And economic planning is a dire necessity if these Virgin Islands are to progress and develop after a September 2017 of disaster.
Milton Friedman. Photo courtesy http://www.walterblock.com/publications/is-milton-friedman-a-libertarian-2/
Stimulus- the economics of John Maynard Keynes and his government intervention, consumer driven model- sits on the opposing polarity. Jack Stimulus views the working men and women who are the 90%, as the true drivers of a sustainable and strong economy. Their consumption of goods and services is omnipotent.
This is the reverse to the thinking of Tom Austere – the disciple of Milton Friedman’s Chicago school. Tom the Austerian holds to the iron rule that the production of goods and services – the supply driven free trading model- is almighty. The wealthy businessman is King of the economy. Trickle Down is the natural order of the Darwinian Economic Model of Jack the Austere.
OK, one result of three decades of austere economics was the supply gap. Goods and services remained on shelves, and elsewhere, in western countries. These abandoned products required buyers, who had been pummeled by uncertainty, unemployment, and debt: the offspring of austere cultures.
As a consequence, prices began to fall. But the goods remained on shelves. Deflation was born. Deflation is a threat to all economies. Deflation is caused by a contraction in demand and is a major factor in long term economic stagnation and depression. Deflation is the result of a number of factors. Austerity is one driver of deflation. But there are further drivers of deflation such as demographics, war, and natural disaster.
And there is some evidence that there is deflation in the Virgin Islands, as traumatized consumers stop their spending post Irma and Maria, and the September floods.
In the territory, deflation pressures are not helped by greedy retailers who essentially sell low quality products at extortionate prices. Goods that sell in dollar stores in the USA are priced as quality items in stores in the Virgin Islands: this is laughable.
There is certainly a need for consumer protection in the Virgin Islands in this Writer’s opinion. But in any event, the market will deal with greedy, inefficient retailers, who will simply go out of business in the age of Amazon, and internet commerce.
Retailers and shop owners who miss the mark will taste from the process termed creative destruction. Competition in economics is unassailable in the age of the microchip. The market is a boss.
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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.
