OH FOR “CHRISTMAS IN AUGUST”

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By admin September 16, 2011 09:43

OH FOR “CHRISTMAS IN AUGUST”

Many of us are tired of recession blues and wonder how much longer we will have to wait before we will be able to sing once more “Happy days are here again.” For five years, from 2004 – 2008, we had money in our pockets and many of us enjoyed “Christmas in August”. We spent as if the good times were here to stay and would be sustained for a long time to come.
And then, in September 2008, it happened. The world economy almost ran off its tracks. Its wheels almost came off. The world financial system came close to collapse and threatened to take all of us down with it into poverty and misery – into another severe economic depression on the scale of the Great Depression of eight decades earlier.

We in Anguilla went overnight from enjoying double digit record economic growth rates into a major slump in growth. Many of us were in denial. Could not believe it! We were caught off guard. Yet we failed to carefully update our assumptions about how the economy would perform and therefore how we would be affected economically and financially. Many of us assumed that somehow we would be immune to the harmful effects of the economic turmoil taking place in the USA and in European economies in particular and the rest of the world in general. We thought that we would quickly return to the unprecedented prosperity and growth enjoyed since 2004 – that we would quickly return to “Christmas in August”.

“Christmas in August”? Yes! In 2004 – 2008 more jobs than workers to fill them, the ability to pick and choose and to jump from employer to employer, some people holding down up to three jobs, wages increasing. The banking system expanding, loanable funds readily available to qualified borrowers. Some people on a spending spree as if money was hot in their hands. The casinos of St. Maarten welcomed many an Anguillian guest on weekends. The cruise ships became the floating playgrounds of many. It seemed possible to have it all – the lifestyle of the prosperous.

Saving for a rainy day would have to wait. If ill health were to be suffered and significant costs incurred, the easy solution would be to borrow what is needed to pay the medical bills. After all, that is what banks are there for. There would be ample time later on to save for a rainy day. The good times were not about to end any time soon.

Everyone was not caught up in the consumer spending spree that accompanied the rapid growth of the middle years of the first decade of the 21st Century. Some individuals admirably pursued their ambitions to own their own businesses, experiencing significant success and growth. Regrettably some of the new class of businessman became intoxicated with their success. With dollars in their eyes and big profits on their minds, they impatiently sought to take advantage of multiple opportunities for business, which appeared to have the potential to earn large profits.

Investment overreach? Yes! The drive for and haste to achieve profits, wealth, economic power and independence caused some local entrepreneurs to borrow to the limits of their capacities in their quests to increase the volume and diversity of the business activities in which they engaged. Assuming that the boom in the economy would continue for an extended period of years, a number of business owners, especially new businessmen, overestimated the potential of the new business ventures into which they invested. Some failed to carefully assess the risks of a major economic downturn and the challenges with which their businesses would be faced as a result. Indications are that the levels of reserves, which businesses built up during the boom years to protect against unfavourable swings in the economy, proved to be inadequate once the Great Recession set in 2008 and became full blown in 2009 and 2010.

Some of our people have been in denial of the impacts of the Great Recession on our Anguillian economy and community. This reflects a deeply held view among some segments of the population that somehow much of what goes on in the rest of the world has little or no impact on Anguilla. Such a view is unrealistic. It contradicts reality. Contrary to this view, Anguilla is not uniquely protected from the harmful consequences of economic shocks that beset other countries from time to time. We have to face the same shocks and impacts.

Some of our people conveniently possess selective memory. Without doubt they are greatly influenced by the need to interpret facts and reality to suit their own immediate and narrow purposes. Failure to face facts and to accept the truth about the behavior and performance of the Anguillian economy and society has contributed to some people finding themselves facing personal financial crises at this time and suffering severe reductions in their living standards.

The belief that prosperity would continue at the high levels experienced, in 2006 and 2007 in particular, was highly misplaced. While few would have foreseen the suddenness with which the boom came to a halt, the thoughtful among us should have had no difficulty in assessing that at least the steam would all but have been expelled from the Anguillian economic boom within two to three years after 2007 and that the growth rate would have significantly reduced.

Prudence should have dictated caution. Alas prudence and caution were absent from the vocabulary of some venturers who became somewhat tipsy with success. Even with the greatest of prudence and caution, however, it would not have been possible to substantially avoid the harmful effects of the economic decline of the past three years on Anguillian businesses. This is a consequence particularly of the dependence of Anguilla’s tourism-driven economy on the US and European tourist markets.

Anguillian households and families have been hard hit. There can be no denying the harsh consequences on the living standards of households and families resulting from the steep economic decline that Anguilla has experienced over the past three years. People are living on reduced income (wages reduced, second jobs dried up), a significant number are burdened by high debt and high loan payments. Their budgets for food, household expenses, transportation, health and education have been severely squeezed. Savings have been used up. Many have been reduced to living from pay cheque to pay cheque. Many have at best limited means on their own to take care of the smallest unexpected but unavoidable expenses.

This state of affairs cannot be attributed to the failings of the AUF Government of 2000 to 2010. If that were the case, then the rest of the world, especially the USA and Europe on which Anguilla’s economy depends, would be enjoying prosperity. Those economies would not have come close to suffering a second economic depression.

The rest of the Caribbean, including the robust economy of Trinidad and Tobago, would not be suffering from economic recession today. The CLICO/BAICO insurance collapse would not have happened in 2009.

Anguilla’s economic status is not unique no matter how much it may be tempting, popular and politically convenient to think so and to so assert. It is time we stop fooling ourselves and be realistic about our potential, opportunities and constraints. It is time for the Government to lead the way in promoting a return to growth and prosperity in addition to balancing its budget.

The depression in Anguilla’s economy over the past three years was not caused by the AUF Government and the policy decisions they took or the fiscal policy they pursued. If that were the case, then the present AUM Government of Chief Minister Hubert Hughes should have had no major challenges in restoring Anguilla to a path of prosperity within 18 months. By now Chief Minister Hughes’ secret plan for Anguilla should have been revealed and beginning to have positive impacts. By now Anguillians should have received a jolt of optimism that “Christmas in August” would soon be restored. They should be able to feel that a return to prosperity was just around the corner.

Instead our people are pining for the good old days of “Christmas in August” enjoyed from 2004 to the middle of 2008. If you listen carefully to the gentle breeze you will hear the faint and longing cry: “Oh for ‘Christmas in August’”.

Marcel Fahie

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By admin September 16, 2011 09:43

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