Economies that depend upon a single product and a single market for their existence put all their eggs into a single basket. When that basket takes a hit, all hell breaks loose. Economies uniquely vulnerable to sudden shock have common features. For example, economies that are the first to go into downturn after a natural or manmade crisis tend to be overwhelmingly dependent on a single product and single market for existence.
This dependence on a single product or service for national revenue becomes monolithic. It is crystallised. A mould is set that is difficult to remould.
In other words, the single source of revenue becomes a “golden goose.” But when the goose stops laying its golden eggs, there is terrible trouble.
The greatest examples of mono economic cultures are oil-producing nations. Offshore financial services share a similar dynamic with a single caveat: Financial services are more prone to shock, as offshore financial services industries are made up of entities that can easily move to an alternate jurisdiction.
This fragile nature of financial services is made worse if the jurisdiction is unable to fend for itself and provide the bare essentials for survival within its boundaries.
Monocultures possess populations that camp around one single economic polarity. Then a “single hit” pulls a single product economy to its knees. The result is recession and economic downturn.
Conversely, diversified, resilient economies that possess varied revenue streams have a degree of self-sufficiency, and they are capable of withstanding physical and economic trauma.
Resilient and diversified economies swiftly bounce back to normal after disaster strikes. Single-product cultures, by contrast, recover much more slowly, especially when the “golden goose” has been crippled. There is no strong economic foundation to support strong and robust economic recovery. Recovery depends on importation and charity.
The huge increase in imports after a disaster creates a backlog at the ports. There is a sudden and massive increase in the need for the import of everything from construction materials to basic foodstuff. There is a slowdown at the ports and prices rise. There are balance-of-payment issues and growing deficits and national debt.
One-product economies become all-consuming monocultures. Alternative generators of national revenue and gross domestic product are nonexistent. Investment decisions are made to further prop up the single economic generator.
Alternative sources of national income — such as agricultural production, maritime commerce, fishing, local craft making, food production, and ecotourism in the Virgin Islands model — are under-supported or completely ignored.
All local businesses are pulled into the vortex of the single product and become overly dependent on it.
Poor decision-making by policy makers and economic mismanagement are a common denominator of economies that lack diversity. This is the result of a “comfort zone” that deceives the population into thinking that the “gravy train” will always be in existence.