The Federation of St. Kitts and Nevis is in its third consecutive year of recession. The adverse impact of the recession is felt throughout the country, with people losing their jobs and those lucky enough to be still employed, uncertain of their employment status. There is a growing spirit of hopelessness, and more and more people are fast becoming unable to plan for the future. This dire situation is trivialized by the rather sophomoric political rhetoric touted by our Prime Minister, who treats us like gullible children unable to understand the true state of the economy.
We are told of how well the economy is performing and of the brilliant economic stewardship of his government. Notwithstanding, that aggregate demand is falling at an alarming rate. Every economy is driven by aggregate demand. This is the total demand for goods and services in the country. It is the lifeblood of the market. As unemployment declines aggregate demand decreases accordingly, worsening the condition of all. Yet the Prime Minister and his spin doctors are feeding us more and more a steady diet of rhetoric.
According to Wikipedia.com, “rhetoric is the art of discourse, an art that aims to improve the facility of speakers or writers who attempt to inform, persuade or motivate particular audiences in specific situations.”One can understand or even tolerate political rhetoric during the “silly season” of a general election, but for this Government or any government to continue to fool its people into believing, during an economic crisis, that all is well and economic growth is just around the corner, is criminal to say the least.
The Government’s effort to reduce the National Debt by seeking debt forgiveness and by reducing the long term investment of private individuals and institutions through the recent “hair cut” may be applauded in some quarters, as smart, without taking in to account the long term adverse effect such a move is bound to have on the economic future of the Federation
We clearly understand that out of necessity, statements coming from the IMF must be measured. They cannot become embroiled in the local politics of member states. However, the Government must be responsible enough not to use the statements from the IMF to buttress its silly political rhetoric. Let us take the recent IMF report dated May 4th 2012, which reads “SKN economic activity registered the third consecutive year of decline in 2011 reflecting an adverse global environment.
The outlook is for a moderate economic recovery supported by Foreign Direct Investment (FDI) related construction projects and an improvement in tourism activity.” The truth of the matter is, a country that is experiencing adverse economic conditions, such as the Federation of St. Kitts and Nevis, tend not to attract reasonable FDI inflows, most foreign investors prefer to adopt a wait and see attitude.
Money has a herd instinct and often gravitates to areas of the world offering the greatest return on investment (ROI). Tourism arrivals in the Caribbean, has been on the decline, in recent years. According to the Caribbean Tourism organization (CTO), cruise arrivals in the region are unlikely to rise by more than two to three percent and that onshore cruise visitor expenditure is expected to remain weak. Economic recovery is weak in the key North American and European markets that feed the Caribbean region.
High energy prices are causing cruise lines to choose home ports closer to populous centres, and significant increases in air fares are causing potential visitors to look at destinations closer to home. When most of the other Caribbean countries are suffering double-digit drops in tourist visit, are we to suddenly believe that somehow investors will flock to St. Kitts and Nevis in their numbers, invest in tourist related projects, and bring about this economic resurgence, touted by the Government using the IMF report as a source of reference? This is nothing more than empty rhetoric.
Housing is an economic stimulus that has been flogged to death. Successive elections have been won, by the Labour Government using housing as its trump card. The question ought to be asked, what is the absorptive capacity of housing in such a small economy? Yet the Government through the SIDF is investing EC$10.5 million in a housing program. How sustainable will this program be? At the end of the construction program there are no long term plans to sustain the economy so as to guarantee that there will be work, on a sustainable basis, for those who would have borrowed the funds.
Alternatively, it would have been more beneficial for the Government to have devised a long term business development plan aimed at creating small manufacturing or semi manufacturing small businesses which would have created long term employment for nationals, and stimulate aggregate demand. This would have gone some way to disrupt the cycle of poverty and dependency and achieving the much talked about poverty reduction goals. The said IMF report went on to say “credit growth has been relatively subdued owing to the more uncertain environment whilst the financial sector remains generally healthy.”
We have heard the Government boasting of how liquid the banks are, as if this is such a wonderful thing. Money sitting in the banks whilst the economy remains anemic is shameful to say the least. We are prepared to accept the fact that commercial banks are by and large risk averse. However, if the commercial banks don’t begin to think outside of the box, and devise creative ways of moving their resources into the real economy, expeditiously, notwithstanding, their liquid position, with suffer the same faith as the rest of us.
Rhetoric can be infectious. The SIDF has also fallen prey to rhetoric. Listen to their slogan “a fund for the realization of economic empowerment through subsidized housing.” The history and legacy of the NHC should have long dispelled the myth that a single economic activity, such as housing, can create a sustainable economic environment.
Plato, the renowned and respected philosopher, described rhetoric as one of the ancient arts of discourse and persuasion. However he criticized its use as a means of deceit instead of discovering truth. There may be a time for rhetoric, but the time is not now.
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