Because the territory’s economy often rises and falls with the success of the United States, recent political struggles between US Republicans and Democrats have caused major concern in the Virgin Islands.
Though the US Congress eked out a last-minute deal on New Year’s Eve to avoid the “fiscal cliff,” a series of drastic spending cuts and sharp tax rises that could have threatened the fragile economic recovery, major issues were left unresolved, and more fights loom in the months to come.
Neera Tanden told an audience of several dozen VI businesspeople and community leaders yesterday that if they think the current political situation in the US is “crazy,” they shouldn’t feel bad about the judgment.
“It doesn’t seem any less crazy to the American public,” she said, evoking laughter from the attendees of BVI Business Outlook 2013, an annual conference held at Scrub Island Resort.
Ms. Tanden, the president of a left-leaning Washington DC think tank, the Center for American Process, spent about an hour on stage discussing trends in US politics and economics with conference organiser Russell Harrigan, who is also the Beacon’s majority owner.
She said that while a lot of political and media attention is focused on the US’s large national debt and government budget deficits, she sees a decline in economic conditions for the middle class as a more pressing issue that will have to be addressed in the near future.
“We can innovate and we can innovate well and that creates really high-wage jobs for not only the CEOs at Apple but also the designers who stay in the United States,” she said. “But for the production, when production moves to China a lot of the middle class jobs have been lost.”
Unlike other major economies that are highly dependent on exports, a middle class in decline will translate directly into a weaker economy, Ms. Tanden said.
“Wages have declined. We are a 70 percent consumption — a demand— economy, so when wages decline we’re not like Germany [a major exporter]. When wages decline in the United States there’s less to buy,” she said.
Uncertainties
The annual conference, which was first held in 2011, focused this year on the uncertainties facing the major sectors of the VI’s economy — tourism and financial services — as well as other topics, such as social media for businesses, economic diversification and entrepreneurship.
Speakers included Allen Chastenet, a former tourism minister for St. Lucia; Stephen Vanterpool, a Virgin Islander who works as a software developer for NBC News; Ray Wearmouth, the managing partner in the VI office of the law firm Ogier; and Lisa Lake, the chief development officer for the Branson Centre for Entrepreneurship; among several others.
Addressing attendees at the start of the conference, VI Premier Dr. Orlando Smith said his administration remains focused on creating the necessary conditions and developing the territory’s infrastructure to grow the economy.
But, referencing the conference’s theme of “thinking outside the box,” he urged attendees to adapt to the changing conditions.
“We must face up to the glaring reality that the increasing pressures from the onshore jurisdictions stem from their respective governments’ obvious and understandable desire to see greater revenue and business back on their shores,” he said. “These pressures, coupled with increasingly innovative vacation products from our competition, mean that our current way of life is under serious threat. Clearly the time is ripe for us to review our business models.”
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