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COMMENTARY: The Austerity Club

By Dickson Igwe, BVI News Contributor

The floods and hurricanes of September 2017 were the worst disaster to visit the Virgin Islands since the 1800s. September 2017 was a crossroads for the Virgin Islands – an inflection point, and a time of great change.

The country and its residents together, must decide the way ahead. The proceeding story discusses the economics of Hurricanes Irma and Maria.

A visionary macroeconomic policy linked to a long term development plan will deliver prosperity to the Virgin Islands in due course.

And there can be no question that small, medium, and large businesses are critical to bringing the British Virgin Islands back to normality after the natural disasters of September 2017.

Private enterprise is vital to the Virgin Islands disaster recovery effort.

The primacy of private enterprise in the affairs of counties has been governed by austere economic theory.

From when President Ronald Reagan and Prime Minister Margret Thatcher ruled the roost in the early 1980s, the idea of liberal economics – laissez faire – has driven globalisation, and created a world in which 100 families control global wealth.

The Grocers Daughter and the Actor with Old World Charm were the protagonists of unfettered free trade – also called austerity and trickle-town after the era of Keynes ended at the end of the 1970s.

But, can austere economic policy – the belief that free trade and small government are omnipotent – rescue the Virgin Islands economy from long term economic contraction, a clear and present danger of Hurricanes Irma and Maria?

It is clear that a long recession in the territory will become reality, if disaster recovery fails to generate economic recovery.

Now, austerity is the pole opposite of stimulus. However, both economic doctrines contain useful ideas, even solutions, for these Virgin Islands.

Austerity allows for an economy to self correct. Austerity and laissez faire are synonyms. Free trade is the panacea that fixes every economy. For the austere economist, the businessman is king.

Austerity inhabits a cycle. This cycle is an invisible world that takes a country from economic contraction to economic expansion, and then back to slower growth, stagnation, and eventual decline. The cycle repeats itself into perpetuity. Economic history has proven that the economic cycle exists. It has been a consistent factor in western economics.

And clearly, post the September 2017 natural disasters, the Virgin Islands economy is in a state of contraction. The Virgin Islands economy has been placed at the very start of the cycle – a low point, from which growth must start. But the economy could also get worse. No one wants that.

Now, under the Austere Economic Model, economic growth is driven by private enterprise. The businessman is the key to any disaster recovery, post-Hurricane Irma. Business growth and business confidence are the critical components for economic growth. Business confidence precedes consumer confidence.

With the Austere economic model, the consumer – also known as the customer – is secondary. Nonetheless, consumer demand remains critical for economic growth.

However, consumer demand is decided by what Jack the Industrialist and Jill the retailer are capable of putting on the breakfast table. The businessman is at the top of the food chain. Economic growth depends on what the businessman decides to sell to Tom the customer.

Consequently, for the economist, who still holds to the belief that free trade is omnipotent, and the most critical idea in scarce resource management, adopting political and economic policies that allow the entrepreneur and businessman to maximise his profits, is the way to go in the Virgin Islands, Post Hurricane Irma.

To be continued

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