There is an ap­par­ent odd­i­ty in our econ­o­my at present, ie, the high liq­uid­i­ty (sav­ings) with low pri­vate sec­tor in­vest­ment and low con­sumer spend­ing ac­com­pa­nied by rel­a­tive­ly high in­ter­est rates with a large spread be­tween the banks' bor­row­ing and lend­ing rates. This low eco­nom­ic ac­tiv­i­ty is be­ing put down by com­men­ta­tors to a re­cent­ly de­vel­oped lack of con­fi­dence by con­sumers and the busi­ness sec­tor in the econ­o­my and in my Gov­ern­ment; it is noth­ing of the sort. It is a char­ac­ter­is­tic of this plan­ta­tion econ­o­my.

When I was at UWI I was taught that "sav­ings equals in­vest­ment." I wrote an ar­ti­cle many years ago say­ing that this sim­ple equa­tion does not hold in our econ­o­my. A char­ac­ter­is­tic of this plan­ta­tion econ­o­my is that in­vest­ment, pri­vate sec­tor bor­row­ing, is dri­ven by na­tion­al cash flow, ie tax­es from the en­er­gy sec­tor etc to the Gov­ern­ment, gov­ern­ment spend­ing so in­creas­ing the ve­loc­i­ty of mon­ey and in­ter­nal liq­uid­i­ty.

Stop this cash flow, even with sav­ings avail­able, and the pri­vate sec­tor clos­es up shop. Sav­ings, with such high cash flow, dri­ve lo­cal mark-up in­fla­tion as we saw so dra­mat­i­cal­ly in the last boom. There is very lit­tle risk-based in­vest­ment to cre­ate or sup­port ideas which then can cre­ate new cash flow and wealth (ie in­no­va­tion). Hence the on­ly last­ing so­lu­tion is our Gov­ern­ment's im­ple­men­ta­tion of a na­tion­al in­no­va­tion sys­tem. We are all pin­ning our im­me­di­ate hopes on Min­is­ter Jack Warn­er and oth­ers whose spend­ing on in­fra­struc­ture will in­crease this cash flow, putting mon­ey in­to the hands of those who will spend via em­ploy­ment, but who can­not af­ford to go to the bank.

Mary K King

Min­is­ter of Plan­ning, Eco­nom­ic

and So­cial Re­struc­tur­ing

and Gen­der Af­fairs