ECONOMIC CRISIS – PART 1 For the past decade we have enjoyed a thriving global economy and St. Kittts-Nevis has been a direct recipient of a strong U.S. dollar. The American economy which supports the global market has seen its worst economic downturn since the 1930s Great Depression. The world market is in dire crisis and our homeland, which is directly related to tourism, is adversely affected. Economists and other financial experts are currently debating the direct effect of a government stimulus package that should in theory put a jolt of life into the U.S. economy and subsequently the rest of the world. As we battle with our own questions surrounding the stability of the St. Kitts and Nevis economy, we need to first understand the impact of certain world events on our home front. America has reported the loss of over three million jobs since the downturn began. A total of over three hundred thousand jobs were sacrificed only in the month of January. Of this amount, 217,000 of these jobs were from cost saving techniques in the manufacturing industry and over 100,000 in the service industry. A further analysis implies that an average of 10,000 American jobs have been lost per day, with more job cuts forecasted for the coming months. How does this affect our Federation, one may ask? Our primary source of support is driven by the tourism industry, which in turn supports the government and private sectors which includes banks and other major companies such as TDC, Horsfords, etc. Everything being constant, January and February are very heavy traffic months for our tourism industry as many individuals are trying to beat the cold weather thus coming to places such as ours. The present circumstances, however, leave vacationers reluctant to spend an additional dollar on luxury items such as vacations as the opportunity cost of such activities far outweighs the benefit associated with feeding the family and likewise keeping a heated winter roof over one’s ‘head”. Without the influx of this cash, our Federation will likely inherit a domino effect of job cuts as a direct result of the stagnant world economy. The implications of a worldwide contracting personal income have already impacted many. My analysis on forecasted hotel sales found drastic declines as compared to prior years. The widespread repercussion follows, as half of our country’s labor force which is supported by the tourism industry (Nevis in this instance) becomes unable to make deposits into banks; the banks in turn suffer decreases in quarterly profits which is as a result of little operating revenue needed to sustain the current level of administrative and other general expenses that may encompass operating cost. The domino effect continues as our booming construction industry will suffer as local residents who have lost their jobs will be forced to put such development on hold. In contrast, the construction sector in Nevis that caters to the international community will also be affected, as most of the wealthy international customers who had been adversely affected by billions of dollars of lost income in the global banking crisis will also be forced to abandon plans of having a second or third vacation home in the tropical climate. It is imperative that accredited investors such as banking institutions and other sophisticated investors who hold investment for speculative purposes be very cautious with over leveraging on financial investments. We need to remember that part of the reason that many of the banks in the United States have and continue to fail is as a result of overpriced real estate that the banks had given loans to. Further, an analysis of the government sector indicates that as current and future revenue streams decrease as a result of reductions in imports and other taxing agents that are necessary to sustain public services, many of the services attained through government aides will either be reduced or completely eliminated. My recommendations (see my complete government recommendations with complete data analysis in the next month issue of the continuation of this article called Economic Crisis – Part II) are not intended to create an atmosphere of anxiety, but rather to stimulate our thinking to become more of an economy of self-reliance than US-reliant. It is purely a strategic input that will foster future economic certainty and ultimately higher standard of living for our citizens, cultivated by our competitive advantage rather than a ‘checklist advantage”. Decades ago, our Federation was a major player in the export of cotton and sugar. Recently the Federal government has abandoned the harvesting of sugar and substituted this for a tourist attraction train ride. It is true that over the years our sugar industry has seen constant decreasing economies of scale, but rather than looking ahead with effective consultations of restoring growth and profits within that industry, we chose to once again be more reliant on tourism. Look at the impact that the global economy currently has on that decision, then, consider the effects of constant jobs growth and global recognition had we figure out a solution that would have embraced efficient production and essentially economies of scale. After all, ‘people need sugar the world over, regardless of race, religion, etc.” We have spent millions of dollars on advertising campaigns that should one way or the other induce North American citizens to visit our heavenly paradise. Brilliant, as the additional dollar spent on advertising brought consistent revenue growth. This, however, is untrue in the uncertain economic times that presently surround us. With that in mind, however, our notion of depending on tourism as the primary driving force that facilitates our economy should be looked at as more a major player of the past and we should seek other opportunities whether through some service medium or through other manufacturing capabilities that can support our GDP and ultimately our citizens. See my complete government recommendations with complete data analysis in the continuation of this article called Economic Crisis – Part II.
