Locally owned small businesses are critical for getting the Virgin Islands out of recession. Small business is at the core of the VI economic engine.
Building strong small businesses is a bottom-up type economics. Why? Small businesses are overwhelmingly owned by working and middle class consumers. When small businesses prosper, the working and middle classes prosper.
Okay. Two recent fires on Tortola — one at the R&R Malone Complex and the other at VI Motors — were national setbacks. Both fires, together with the fire at the Cox Heath dump, were not helpful for getting the VI out of an economic recession brought about by the natural disasters of September 2017.
Both businesses are critical to VI commerce, and both are measures of how well the local economy is performing, together with a host of similar type small businesses. Small businesses are a critical component of an economy, especially a tiny economy.
Preceding these two fires, small businesses in the territory had suffered terribly. Hundreds of jobs and critical skills were lost to the VI as a result of the devastation of September 2017’s floods, and the two hurricanes that followed practically destroyed the territory.
Then businesses were further damaged when a subset of the population appeared to go mad, smashing and looting businesses after Hurricane Irma departed the territory’s shores.
Notwithstanding which economic model and development strategy the territory decides to adopt to get back to sustainable economic growth, small businesses will be the driver of any type of economic recovery in every way imaginable.
Why? Because small businesses in the services-oriented economy are the key engines of economic growth. In part because they employ the vast majority of the workforce, they are the bellwether of how the economy is performing and they define the full scope and type of the economy.
If the majority of small businesses, for example, are motels, hotels, bars and car rental firms, then that is a clear indication that the economy is tourism oriented. Government economic planning will take that metric into account when managing scarce resources for best outcomes.
On the other hand, an economy that employs a majority of financial workers and white-collar types shows the extent to which the financial sector drives economic growth. Consequently, government will invest in an education model that may further prop up the financial services sector.
When critical food imports are handled by a tiny number of businesses, and the balance of payments weighted towards food importation is high, as is the case with the VI, then this is an indication that the agricultural sector requires greater investment and effort. Agricultural commerce in the territory requires sustainable investment and innovation in order to drive down the massive food import bill and create hundreds of new jobs.
Post Irma, the swift bounce-back and growth of the construction sector is an indicator that the construction economy is enjoying a boom owing to the need for reconstruction. The list goes on and on of reasons why reviving the small business sector is the most vital component of recovery. Small businesses define the VI economy.
Even within sectors — for example, VI tourism — the number, scope and type of firm involved in the maritime industry give indication of the size and nature of the maritime industry when juxtaposed with tourism assets such as hotels, motels and guesthouses that are static geographically.
Most VI businesses employ less than 50 people, which is the definition of a small business.
Consequently, for driving a successful recovery the majority of effort and resources must be placed within the orbit of the small business.
All major contracts must have small business as a critical component for the simple reason that cash earned by small business drives macroeconomic growth better than any other type of entity.
Foreign investors may place cash into the territory. However, experience has shown that this benefits a tiny minority who do deals with these investors to ensure that the return on capital is well above what will be received had the investor stayed in their own country of origin and invested — or as in the Chinese totalitarian dictatorship model, which is driven by the Chinese government’s ambition to expand its influence in the Caribbean and to mitigate US influence in the region.
In any event, the best place to invest for full recovery is in the small business economy run by Virgin Islanders, belongers and other residents.
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