The fallacy of aid rather than trade in Dominica
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The fallacy of aid rather than trade in Dominica

By Thomson Fontaine
January 19, 2016 11:48 A.M

In Dubai last December Skerrit tried to woo ivestors to invest i the Kempinsky Hotel.

Roseau, Dominica (TDN) In today’s Dominica it is fashionable for high ranking government and Dominica Labour Party (DLP) operatives to laud the virtues of aid over trade. To hear them relate it “Aid is preferred to Trade.” And so it goes where trade at least outward trade has ceased and with it the country’s fortunes.

It is no accident that this fallacy been forced upon the people of Dominica is one that has seen a DLP bankrupt of ideas and forced to sell the notion to an increasingly skeptical public that they have made headway after more than 15 years in office.

The truth is this policy has condemned to country to subpar growth, rising unemployment and rampaging poverty. Indeed after more than 15 years of DLP rule the country is buckling under the weight of an idiotic policy perpetuated by persons who are neither informed nor competent to handle the task of developing a country like Dominica.

Any student doing an introductory course in economics would know that trade is what makes the world turn. One country utilizing its comparative advantage produces a good or service that it can then sell to the rest of the world. So Japan perfected motor vehicles and distributes it around the world. Similarly, the Chinese have mastered the art of producing cheap manufactured goods and so have benefited from its sale.

The impact has been strong economic growth for Japan and China lifting millions out of poverty. For some strange reason Dominica’s government is content to sit on its hands and count the flow of aid dollars into the country.

For a brief while that worked. The Chinese eager to gain a foothold into the country pledged $300 million in 2004, Venezuela chipped in with generous contributions as Chavez’s Venezuela benefited from oil windfalls with the price per barrel skyrocketing to over $100.

And so for a time the good times seemingly rolled. Skerrit opened up a red clinic inviting all and sundry to simply stop by his office on a Wednesday morning and have their needs met. And so they came. In the meantime the once productive agriculture sector was neglected.

Exports, which had reached a high of close to $200 million during the short rein of the United Workers Party in 1998 began falling steadily crashing to under USD $ 5 million by 2014. With aid as the answer rather than trade no effort was made to boost the services and tourism sectors. After all, the government surmised what did they have to offer.

A noted local historian even went as far as saying that its really no use, Dominica can never produce anything cheaper than the rest of the world so why try?

No doubt he adhered to the DLP notion of aid rather than trade and missed the point of production based on a comparative advantage. It does not necessarily mean that you produce something cheaper than everyone else just that you produce something that everyone desires.

Dominica’s agriculture was for more than a hundred years the envy of the world. From coffee to limes, vanilla and bananas the Dominica produced goods made their way across the globe. In 1924 Dominica shipped the equivalence of US $100 million in today’s dollars to the U.K, almost 20 times what we export today.

And so the country is being quickly reduced to the dustbin of economic irrelevance, a case study no doubt for economists. In the meantime faced with a failing economy, dwindling aid flows, which moved from a high of US $ 50 million ten years ago to a miserly sum of US $ 15 in 2014 the government feels compelled to act.

The chief architect of the country’s demise and the man who without a shred of training in business or economics installed himself as finance minister in 2004 is scrambling like a headless chicken across the globe.

Prime minister Roosevelt Skerrit strikes a pathetic figure those days reducing himself to be chief salesman for newly minted moneymen quickly gorging themselves on the sale of our passports. There is Dominica Holdings, My Dominica Trade House and others.

At a conference in Malaysia in 2015, the country’s prime minister begged and pleaded with investors to put their monies into some hotel scheme in Dominica, which may get off the ground in the future. Indeed this mad rush into hotel building is in full swing.

Correction, not in hotel building but in proposed hotel projects. Of the five publicly declared projects under the country’s Citizenship By Investment Program (CBIP), five are hotels. To the curious observer this is odd. Why would you build five additional hotels when the country’s 800 hotel rooms routinely see around 30 percent occupancy rates.

Getting into Dominica appears more challenging than scaling Mount Everest. The problem of access has still not been addressed. Just months before the December 2014 general elections the same master of the fallacy, Roosevelt Skerrit announced to deliriously cheering crowds that he had solid interest from Chinese investors to build an international airport and once elected more good times would roll.

And so the depressing saga of Dominica held on life support by the generous inflows of the hastily migrating population continues. Seventy percent of young people who left school in the past ten years do not know what it is like to work at a job.

Those who can migrate, others simply will away their days playing dominoes or sitting at a rum shop. One would have hoped that the DLP government would realize the folly of their ways. What about approaching the international community for assistance in kick starting the agriculture sector. Build two or three processing plants to process fresh juices, make flour from the myriad number of starchy tubers, and ferment fine perfumes from our essential oils .

What about diverting resources from the pie in the sky hotel investments to growing the services sector, develop renewable energy resources, and provide finance for small entrepreneurs. At the very least begin the task of juggling for trade.

Our neighbors envy our water, rich soil, geothermal potential; everything necessary to set the country on a path to sustained growth if properly utilized. With aid gone and unlikely to return it’s time to begin to trade. With rapid investment in agriculture and the services sectors we can reverse the ugly trend in unemployment, stop the outward flow of our best minds and talent and begin to entice those who have gone, back to our shores.

This is workable and can be accomplished but first what about getting rid of a government that has heaped so much pain and suffering on this country in their blind quest to prove that aid is preferred to trade.

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