Caribbean Export OUTLOOK 3rd Edition

Pulse of the Caribbean 16

and tax rules that they have devised and enforced but not on themselves. Remittances are diminishing sources of funding as the immigration landscape in developed countries changes. The old countries have replaced open doors with high walls. We cannot try to get more juice by squeezing the old model harder. More public expenditures on the same things, done in the same way, financed by more taxes and debt does not produce more growth. Conditions have irretrievably altered. We need a new model, or for the more cautious, an updated model. At the heart of any new development model must be the question of how can individuals be empowered to live the life they choose to live. Development is freedom. The essential challenge in the Caribbean is not a shortage of local ideas or international examples of what to do. It is the political economy. But in a world in which wealth, assets and income are maldistributed, the freedoms we are talking about are those of the poor. Governments around the world have tried new public service models such as giving the choice of schools to parents, giving schools more independence at responding to the particular learning needs of their students and more transparent, meaningful measures of teaching and student performance. We can raise taxes on carbon emissions and foods with high sugar content and trans fats, indirectly supporting local agriculture, and use the funds to build safe ways for people to walk or cycle to work, lowering their chances of needing expensive treatments for diabetes and coronary disease. We can replace costly systems of delivering welfare by giving cash-starved people cash and help to promote the delivery of affordable housing and care. There are many successful, tried and tested examples. Caribbean governments also need to go digital and strive to provide as much of their services as possible through a free Internet connection 24 hours per day, seven days a week. The private sector needs to hop on board too.

TheCaribbeanhas high savings and low investment.Most of the savings earn nothing at banks and fund credit-card borrowing. Economic success will depend on mobilizing domestic savings more productively. Government investment in growth, supporting infrastructure, is one response, but then we must hold government projects to higher tests of their developmental impact. There is relatively too much emphasis by international agencies on imposing fiscal rules to reduce deficits, which has led to a reduction in government investment and growth and rising debt to GDP ratios. We need fiscal-rules that support more, better quality, investment. There are times when Government investment is the only viable option, but it is essential that at other times as much investment is private- led as possible. We can support that with the introduction of new financial instruments to better tap local and diaspora savings such as crowd financing platforms and collective investment schemes. In return for enduring high regulations and taxes, Caribbean businesses demand that Governments protect them from outside competition. “Where will tax revenues and employment come from if governments let in foreign competition?”, they cry. It has led to a high-cost, inefficient private sector. We need a new social covenant and a more aggressive competition policy. More competition will make our businesses fitter for exports, will lower the cost of living and will provide economic space for local entrepreneurs. The essential challenge in the Caribbean is not a shortage of local ideas or international examples of what to do. It is the political economy. Many feel threatened by change. The most powerful will feel most threatened by these changes. It is essential that governments invest in disarming the opposition to change. They can do so in many ways. Governments must give each displaced worker a real retraining and retooling option, they must give temporary jobs to ease the adjustment and, they must offer genuine enfranchisement opportunities for workers to be empowered and have an equity stake in new ways to deliver public services. Changes to the business environment must be transparent, fair, transitioned and sequenced. This is an existentialist moment for the Caribbean. Change is coming. What is required are not new economic ideas, they are there already, but bold politicians to find the achievable political path for positive change.

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