by Marlon Madden
Barbados and other regional economies are being urged to learn from the recommendations put forward more than 70 years ago by the late economist Sir Arthur Lewis, as they seek to recover from the crippling COVID-19 pandemic.
The recommendation was put forward during the Sir Arthur Lewis Memorial Symposium which was held virtually on Monday. It was organised by the Sir Arthur Lewis Institute of Social and Economic Studies (SALISES).
Speaking on the topic COVID-19: Lessons from Lewis, Research Fellow at SALISES Dr Preeya Mohan said the pandemic made regional economies even more vulnerable given that they were already struggling with low growth, high debt, high unemployment, low investment and high dependency on foreign aid and foreign investment.
She explained that measures that had to be put in place including isolation, quarantine and varying levels of shutdown, created economic shocks “bringing economic activity to a near standstill”.
“Looking at the nature of the economic shock created by COVID-19 three sources are identified. Firstly, we have the purely medical shock where workers are sick and absent from work and are unable to contribute to GDP. This causes a supply shock.
“Secondly, we have economic impact of social distancing measures such as workplace closures, factory closures, travel restrictions and quarantine and this leads to both a supply and demand sock.
Thirdly, there is a very real psychological shock where a lot of attention is not paid. Households and firms tend to embrace a wait and see attitude when faced with massive uncertainty of the unknown, of the type of which COVId-19 is presently presenting itself,” she explained.
She further explained that from these shocks, the region faced disruption in trade of goods and services, supply chains, commodity prices, value chains, tourism and travel, remittance, foreign direct investment and development financing.
Mohan said some pundits have suggested there were four potential economic growth scenarios that could play out as a result.
“Firstly, we could have a steep contraction followed by a steep recovery as shown by a V-shaped growth curve. This is our best case scenario. Secondly, we could have a steep contraction followed by a steep recovery, followed again by a steep contract, as shown by a W-shaped growth curve,” she said.
“Thirdly, we could face a prolonged steep contact, followed by a small recovery, as shown by a U-shaped growth curve, and fourthly, our worst case scenario is a steep contraction followed by a situation of no growth, as shown by the L-shaped growth curve,” added Mohan.
She said: “the question therefore is, how do we recover and what would a new lasting recovery look like?”
With the pandemic creating high levels of unemployment, a lot of uncertainty and exposing more vulnerable populations in the society, Mohan said it was similar during the time of Sir Arthur Lewis’ writings where he called for various economic policies to address similar issues in the region.
Mohan recalled that “Lewis emphasized that we need to focus on international export market with an emphasis on international niche marketing and regional integration should support the export drive to form regional industries”.
Lewis also emphasized that since exports were vital for industrial development, small developing countries needed to pursue policy measures that would make their products internationally competitive.
“Lewis was also of the view that industrial enterprises should seek to utilize local resources where possible and create backward and forward linkages with other sectors of the economy,” said Mohan, adding that there was a need to support trade recovery in the short-term and explore new opportunities in the long-term.
“The region must seek to harness the potential of emerging areas of comparative advantage and facilitate increased value chain participation. Trade based on industrial policy should benefit from economic restructuring which promotes export diversification and upgrading of traditional sectors thereby enabling the region to participate in global value chains,” she recommended.
Other measures to consider, said Mohan, included tweaking of the tourism product to cater more to millennial and ‘generation Z’ travellers, high net worth and ultra-high net worth individuals, whom she said were expected to travel more often post COVID-19.
“This is a highly specialized premium segment which requires attracting very high end hotels and other facilities, a marked improvement in heritage and other sites, the emphasis should be on excellent service, personalized and customized attention and exclusivity,” said Mohan.
She also pointed to the need for the region to close infrastructure, ICT and renewable energy gaps.
“According to Lewis, where there are high levels of unemployment, industrial policy should be designed to provide direct and indirect employment opportunities. Caribbean countries should engage in human resource development and training to match the technological changes and shifts in remote working taking place globally, brought about by COVID-19,” she said, adding that vulnerable groups such as women and small businesses should not be left behind in the process.