Pursuing a national vision for a prosperous Virgin Islands means adopting an understanding of the territory’s capital mix — land, human resources, technology and other wealth-generating assets — as the tool of change.

Gross domestic product is insufficient as a measure of productivity in an economy. And it is productivity — the human effort in the capital mix — that drives the specific outcome that achieves a nation’s vision.

Therefore, pursuing productivity is more important to achieving prosperity than simply gazing at increasing GDP.

 

Useful measure

This is not to say that GDP is not a useful economic measure. GDP gauges output in terms of all the products and services of the various sectors of the economy. It is in essence the value of all the goods and services produced in the VI in a single year. GDP, therefore, evaluates economic cycles and activities within a fixed period. It compares present and past economic cycles, and then economists and statisticians evaluate that information to answer specific questions and offer reasons to why the economy behaves in a specific manner.

However, GDP does not measure a nation’s wealth-generating assets — only the products generated by its capital mix.

Productivity, on the other hand, speaks to the human effort in producing goods and services. Productivity is the human element in the capital mix. GDP and productivity are different things, albeit linked to each other.

 

Measuring productivity

One measure of productivity is national output divided by labour hours. However, this measure is uncertain and ambiguous in my opinion. This is a traditional productivity measure that does not evaluate productivity sufficiently to make the measure meaningful.

Then there are the asymmetric external factors that hinder a labour force no matter how efficient the symmetry in the value-supply chains. Asymmetric factors such as poor weather, fiscal and monetary anomalies, and war can stifle GDP. But that does not mean the workforce is inefficient. Ukraine is an example of asymmetric factors devastating the economy.

GDP measures the total value of products and services produced in the VI in terms of revenue only. However, GDP cannot measure productivity effectively, even with knowledge of hours worked in relation to GDP and the unique culture of the workforce.

Productivity is more than rent or revenue earned from this or that economic sector over a specific period. Productivity is the human effort that drives up or down the territory’s GDP: its prosperity.