Today diversification in our economy is on the lips of many, and a significant number sees that the presumed overvalued TT$ is one of the reasons why the private sector may prefer to import and sell, as opposed to competing locally with imports and also export. The argument for this includes that a devaluation would make imported goods much more expensive and people will reduce imports, increase demand for local goods. It will also reduce local production costs as measured in US$s and could make goods made in T&T more competitive on the global market.
The aim, then, as far as exporting is concerned, is to lower production costs by reducing wages, incomes (labour is still considered a substantial cost), etc, by devaluation. It is noteworthy that not all economists agree with such a devaluation and one quoted in particular the case of Jamaica that devalued its currency from 1:1 with the US$ to some 140:1 over the years with little if any impact on the capacity to export. Indeed, if we had taken Dr Delisle Worrell’s advice and dollarised the local economy, then there would be no talk about devaluation or an overvalued currency. Maybe as our stock of US$s dwindled due to imports, the economy would move into deflation, reducing prices in US$s of local goods.
Still, we have to diversify the economy. However, the emerging economic systems in which we are hoping also to build competitive exports are different from the traditional, land, labour capital, in which labour is paramount to all activities and forms in most production systems the predominant cost: note that initially the move to outsource to China was to reduce labour costs. Hence, competitiveness today is still, in many cases, about reducing labour costs as a proportion of costs over our economic activities.
The emerging economic systems are instead being underpinned by the technologies of the Internet, robotics, artificial intelligence and automation (IRAIA), where these are reducing the demand for labour, reducing job types, the number employed and as a result costs. In comparison with our agricultural thrust, one only has to look at the Netherlands, the second largest exporter of food, to identify examples of the new technological trends. Even nearer home, the energy sector is using robots as divers, financial/investment systems are utilising robot-advisers and The UWI Professor Patrick Hosein has received a grant from the National Geographic Society to support AI techniques in climatic effects in agriculture in the Caribbean. Hence the problem locally is not simply “grow what we eat and eat what we grow”, but how!
What should stand out is that competitiveness in the emerging local and international markets is trending towards reducing the need for labour, ie, in the economy there will be a reduction in the number of jobs and with more people competing for them, thus, less money will be in the hands of the population. The impact of Covid-19 on the retail trade is an immediate forerunner of this trend. Even Government taxation methods will have to change to compensate for such a shortfall.
It is clear that we have to prepare adequate human resources, generate knowledge in IRAIA and provide R&D facilities and opportunities such that we can become innovative in the emerging economies. However, our education system is geared to the traditional economic demands and, hence, we will also have to now concentrate on producing human resources that are IRAIA-competent and also many that are skilled in the following areas: complex problem solving, critical thinking, creativity, people management, emotional intelligence, judgement and decision making, service orientation (caregivers, health providers), negotiation, cognitive flexibility (reference World Economic Forum 2018). These areas represent the advantages that humans have over robots and artificial intelligence, and which are based on intellectual capacity.
However, the longer-term problem is that the production system will not employ all of the consumers of its products and services. Hence many will not have the wherewithal to participate in the finances of the economy, afford to live. The literature discusses the award of a free allowance to all in the population, a lifelong pension, earned as it were by the centuries of workers who, by their intellectual property and innovative works, produced the technologies today that have evolved into the IRAIA—a kind of helicopter money so termed by Milton Friedman in 1969 and popularised by Ben Bernanke in 2002.
Our economic transition to the new normal economy has to be such that it still supplies the innovation that, as far back as Schumpeter told us, allows us to continue reconfiguring the economy relentlessly. But we also have to implement the vision that encompasses the innovative use of the IRAIA technologies, the 4IR technologies.
Still, the fundamental and emerging economic concept is that the new economy, in its drive for productivity, is about cutting jobs and job types. This will force the creation of new kinds of employment, ways in which people will spend their time, together with payment systems that ensure societal stability.
• Mary King is an economist