Economy Economic recovery 101

The government should cut the size of the civil service; it should also raise more revenues without increasing the cost of living or the cost of doing business. It also needs to reduce the level of employment but do so with minimum damage to our pristine environment.

The government should encourage inward investment but should take care not to offer too many concessions to local and international developers. It should maintain a balanced budget, rebuild it’s reserves and avoid selling assets in the process. 

If you were to summarise the ideal statement on the economy by reviewing the sentiments expressed by a range of persons across the community, it would likely read very similar to the paragraph above. 

As tempting as it may be to interpret the first paragraph as sarcasm, it’s purpose is far from that. The only point of the paragraph is to demonstrate the complex balance of issues that need to be addressed to “fix” the Cayman Islands economy. People rarely differ on whether the above considerations exist. They almost always differ on how the balance between these issues is struck. 

So where does all this leave us here in Cayman? Can we agree on the basic approach to economic recovery? Or will we remain victims of the politically charged “debate” expected over the next 12 months that is certain to get us no where?  

This country needs leaders that are willing to speak the truth about the economy. In particular, we need to acknowledge that: 

Unemployment remains high despite reports that demonstrate that the civil service is acting as an employer of last resort. 

There is an increasing sense within sections of the community that Cayman should not compromise or give any concessions in order to attract additional investment.  

The civil service desperately needs reform, including privatisation, and this is unlikely to occur between now and the next election and likely not for the medium term. 

Some would argue that acknowledgement of the above is political suicide for any existing or aspiring politician. But that’s only true if they don’t offer solutions to these issues. And this leads us to a few points around an economic recovery strategy. 

 

Unemployment 

It is no secret that there are some civil servants that can be categorised as unemployable. There is another group of persons that are employable but cannot find a job in the private sector and have been taken on by the civil service.

These two groups likely amount to a minority of civil servants but will still amount to hundreds of persons. One strategy for slowing the increase of the newly unemployed is to work closely with the private sector to implement a variety of options such as part time or flex-time before resorting to cutting jobs.

Even if only a small percentage of firms participate in such an initiative, it could amount to a few hundred jobs saved and less burden on the public purse. The strategy for specific economic initiatives to create jobs is a bit easier as the private sector can take the lead on this, if the country allows it to do so.  

 

Rising anti investment culture/sentiment 

Whether this comes from a minority group or the wider community is irrelevant: There is definitely a perception that “Cayman is not investor friendly at the moment”. Politicians need to put current economic realities ahead of political motivations as tempting (and potentially successful) as that strategy may be. What is needed is an honest communications campaign on the actual state of the economy and in particular the effect of investment on unemployment and government revenues. 

 

Public sector reform 

The lack of any serious attempt at reforming the civil service is by far one of the most important economic challenges. Everyone knows that the main hurdle to implementing a solution in this area is politics, but that’s not an excuse to continue to ignore the problem.

A bankrupt government will simply destroy everything that has been built over the past four decades in one fell swoop. The fact that both the governor’s office and the political leaders have allowed the problem to go unaddressed for so long is not just surprising and worrying; it could turn out to be the most significant lapse among policy makers in the country’s modern history if left unaddressed for the next few years.

If not resolved soon, desperate measures will need to be taken, which could have disastrous consequences for the economy. The country does not need a complex economic recovery strategy. Its recovery hinges on addressing certain basic challenges, some of which unfortunately have plagued the country for over a decade.  

 

NO COMMENTS