Some time in the next two to three years the global recession will end. Although the bankers and speculators who brought the financial system close to collapse may continue to act as if little of long-term significance has happened, the world will be a different place. The balance of economic power will have changed. The US will be in a slow decline and, no longer the lone global super-power, it will have to find ways to share responsibility with a rising China with a burgeoning economy and a growing military reach.
The effect will be to change the way we see the world and demand new thinking about the ways in which nations manage their economic and political interests. This will require states everywhere to consider carefully how best to prepare for the new world order they will face when they emerge from recession.
In the last few weeks it has become apparent that China’s recovery is accelerating as a result of a huge stimulus package. In the first nine months of 2009 its economy grew by 7.7 per cent, a rate far ahead of any other economy. Although to secure its recovery, it will require a sustained growth in external demand and careful measures to guard against inflation, it is likely to emerge from the economic crisis with its currency stronger, its holdings in US dollars significantly increased and a global portfolio of investments that will make its continuing economic strength of importance to us all.
This dramatic change in the balance of global power has been formally recognised in the emergence of the Group of Twenty (the G20) leading economies and the demise of the developed world’s Group of Eight (the G8). This means that in addition to China, other advanced developing economies that are likely to emerge from the recession relatively unscathed, now have a seat at the top table alongside the developed world’s economies. In parallel other overlapping groups are forming. In the East this includes the emergence of a new forum linking Russia and China and other groupings that bring together nations seeing value in new trading or strategic partnerships.
Where this is leading smaller developing nations is to a realisation that while countries like China, India and Brazil may have much in common in their thinking with regions like the Caribbean, these nations’ future strategic interest lies more in finding accommodations with the developed world than with smaller less powerful partners.
These developments are occurring as the Caribbean is still trying to come to terms with the impact of the slow burn effect of a global recession that began in early 2008.
Only belatedly it seems, Caribbean governments, faced with economic collapse, without the luxury of time and unable to prosper within a viable single economy, have realised that that they have no option other than to achieve unilaterally with the IMF whatever is necessary for survival; even if it means setting aside aspects of their commitment to regionalism.
What is becoming apparent in all of this is that the ending of the global recession may pose a new and unpredictable challenge to small nations in a region that has not only failed to make work its single market and economy but also shows little sign of being able to do so in the near future.
It begs the question just what type of economic activity it is that nations and the region should aim for to generate sustainable growth that is unique, competitive and credible.
The old economic model of using cheap labour to grow or produce crops or primary products has no future; nor has a reliance on a basic tourism product. Tourism has become a highly diversified and competitive global commodity and there is little that the Caribbean can grow or produce more competitively than Brazil or other Latin neighbours.
A new economic model suggests looking at new approaches to tourism; adding significant value to agricultural products like sugar and rum through branding, ageing, packaging and marketing; linking all that is best in the region in entertainment, sport and cuisine to the tourism product; and finding ways to develop the non-tourism services sector in ways that recognise that here the focus needs to be in helping micro industries make the linkages that will enable them to grow: but all this requires planning, new approaches and human capital.
Speaking recently in Barbados to the island’s Human Resource Management Association, Prime Minister David Thompson suggested that for the Caribbean the way out of a recession was to invest heavily in human resources. It was also a time, he said, to revisit the relationship between the employer and the employee. “Can we afford the luxury of perceiving that relationship as a war between two implacable foes? Can we afford to be pulling in different directions in times of crisis?” he asked.
At the heart of a new and competitive Caribbean economy ought to be the creation of social partnerships that seek to identify solutions of equal pain, built around a consensus that changes public sector and private sector relationships and sweeps away old style bureaucracies and unionism, in return for a social contract on education, health care and social services.
However, this is easier said than done. Recent evidence from the Organisation for Economic Cooperation and Development (the OECD) suggests that spending on education and other social programmes will inevitably be cut as all countries address the high levels of debt incurred in the wake of the financial crisis and recession.
For the Caribbean the way the world is changing poses an enormous challenge. Cushioned against global economic reality by Britain before independence, subsequently supported by Commonwealth preference, and then aided during the cold war by European Treaties and Conventions on trade, it has never had to face a situation where it alone has to make its future.
What this suggests is that this is the time as Prime Minister Thompson recently noted “to think outside the box” and understand that after the recession it will not be business as usual.
David Jessop can be contacted at david.jessop@caribbean-council.org
Previous columns can be found at www.caribbean-council.org
