We are the World
The Caribbean is home to people from across the planet — from our first inhabitants centuries (maybe millennia?) ago, to global digital nomads and expats now — we are a microcosm of humanity. And in this vein, most if not all of the world’s major developments manifest in one way or another right here in the Caribbean. We are the world’s most at-risk region for natural disasters and the climate crisis, but we are also the world’s hotbed for central bank digital currencies and renewable energy. We are arguably the world’s most resourceful and resilient people — maybe because of our vast gene pool, and maybe because life generally has not been easy for us in the Caribbean. And what I see developing in this region, is what I think the world needs more of, and may be where we are already heading.
When I travel around this region and meet people, observe the way they live, how we do what we have to do to survive, and how things are changing, it occurred to me that our resourcefulness and resilience are derived from our real superpower — hedging. Put simply, hedging is a strategy that tries to limit risks. We hedge because we have to, since we face so much risk, and this hedging is increasingly evident in the way we live, the way we do business, and the way Caribbean people and nations relate and cooperate.
Hedging is how Cubans have not just survived, but managed to produce FIVE covid-19 vaccines despite the US embargo that has been in place for more than half a century. Proof that embargos don’t work by the way, but I digress. Cubans knew they would not be able to easily access vaccines from abroad so they had to make their own or risk losing precious lives unnecessarily.
Hedging is evident everywhere in Haiti, where every square inch of pavement in Port-au-Prince is occupied from dawn with vendors offering everything from alcohol to auto parts. Haitians must be the most industrious and resourceful people on earth. Nothing and nobody stands still, let alone wait on the state — or worse yet, reparations (even though they deserve this probably more than anyone else on Earth). Everyone is busy doing what they have to do to survive and/or leave Haiti.
Hedging gave birth to a solar powered vehicle to escape gas shortages in Venezuela — the country with the largest crude oil reserves in the world. Also, hedging is why in that supposedly socialist country, everyone is looking after themselves and again, not relying on the broken state — because they have no choice.
Hedging is why in Dominica, I took TWO ziplines to reach my (most blissfully restorative) vacation cottage at Banana Lama, because two bridges lost to Hurricane Maria’s floods in 2017 have not yet been rebuilt. Talk about making lemonade from life’s lemons! Everyone in Dominica just gets on with the business of survival and building resilience if not redundancy, hence almost everyone is ‘off the grid’ to some extent.
Hedging is why, in some Caribbean countries I will not mention, some cross border payments are settled in cash sent on boats and airplanes, because blacklisting and/or (deliberately) inefficient banking practices make wire transfers prohibitive (for legitimate transactions).
Yes I have highlighted countries that are highly nuanced and yes I have done so deliberately — because their hedging superpower is perhaps more developed than those of us in say Barbados, or Cayman, or Trinidad and Tobago for example, where the latter have more choices and freedoms and arguably face less risk. But I believe we ALL need to hone our hedging skills to better prepare for what lies ahead, and we can learn a lot from each other. But we can all learn the most from those who have not had an easy ride, those who are not afforded the luxury of waiting for their Government or anyone else to solve their problems.
A confluence of factors — higher cost of living thanks to rising interest rates, Russia-Ukraine supply-driven inflation, AND the ever increasing pressure from Governments to increase their revenue (see chart above); a strong and rising USD which takes all our pegged currencies with it, making our exports (including tourism) less price competitive; 1% US growth and a global recession expected this year; the worsening climate crisis which already costs us on average about 1.7% of GDP per annum; the ubiquitous but poorly-identified or understood social effects of the pandemic — just to name a few, suggest that more hedging is in order.
So let’s go back to Dominica — which some believe is the only country in the Caribbean that Christopher Columbus would recognize if he were to return today. I visited Dominica in August 2022, and it has left my head spinning. Dominica has made everything else seem boring, too restrictive, too busy, too hot, too cold, and not green enough (except for Ireland!). As a friend Nancy Nassief, a Jamaican living in Dominica for over 30 years put it: “It is either the most undeveloped or the most pure, depending on how you look at it. I prefer the most pure.”
On September 18th 2017, Category 5+ Hurricane Maria destroyed 224% of Dominica’s GDP in a matter of minutes, costing over USD1 billion in damages. This was a mere 2 years after Tropical Storm Erika, which destroyed 90% of GDP and 10 years after Hurricane Dean which cost 58% of GDP. One can imagine that Dominicans and their Government must be completely fed up with rebuilding. However, in Dominica I found a people who just simply get on with it. No bridge? Ok, we zipline! No zipline? Ok, we cross the river on foot. Dominicans eat what they grow and grow what they eat. There is an abundance of clean spring and river water — literally one river for every day of the year, and NINE volcanoes! And there is a strong sense of community, sensibility, simplicity, solutions, and sustainability I have not witnessed anywhere else. Dominicans are hedgers and problem-solvers extraordinaire!
Dominica’s economy is dominated by agriculture, tourism, and a citizenship by investment program — not unlike other small states in the Eastern Caribbean. Early in the pandemic, Dominica established its own digital nomad “work in nature” program. The tourism product in Dominica is dominated by eco / sustainably-minded smaller-scale properties, and because of this and the strong linkages between the tourism sector and other sectors, especially agriculture, Dominica’s tourism sector is probably one of the more sustainable from a net foreign exchange flow standpoint. In addition, because so many of Dominica’s people and businesses operate “off the grid”, the strain of the tourism sector (directly and indirectly) on the public sector and utility services, is likely to be much less than those which rely completely on the state’s water, electricity, port / shipping, waste disposal, foreign exchange reserves, and other services for example.
Many of Dominica’s residents have to access their basic needs — food, building supplies, clothing and medicine — literally by carrying them on their backs across the rivers — and not always by zipline. There is therefore an acute and urgent need for further investment in transportation infrastructure, which will support food security, further foreign direct investment, and the overall wellbeing of Dominicans. One idea is to use Bailey bridges left from the post-Hurricane Maria reconstruction efforts, which can be quickly installed before being replaced by more permanent structures, as has been done in some other areas on the island. But some have resorted to building private bridges and undertaking repairs to other ‘public goods’ at their own expense, rather than continue to wait. Of course, this is not something everyone can or should have to do. But those who are solution oriented, find a way.
And this is the ultimate hedge, in my opinion. Reducing one’s reliance on the state to solve our problems and just getting on with life is probably not what many people think is the best approach. It probably is not socially or culturally promoted or accepted in many places. It is probably not what’s discussed around the dinner table, or in school for that matter. But I believe that in the future, the most successful people will be those who hedge by building and relying on themselves and their communities more so than the state — because they are likely to be the most resilient and sustainable.
Don’t get me wrong — the state has an important role to play in creating and maintaining safety, security and stability, rule of law, ease of doing business, and using tax revenue to provide these and other truly public goods that the private sector and citizens can’t. But as more and more governments falter in satisfying some of these fundamental needs, less and less taxpayers are willing to comply, the tax base and/or the level of tax revenue/GDP shrinks (per capita), the quantity and quality of Government institutions and/or output suffers, and therefore, so does the trust and confidence of the people in their Governments. This is the vicious cycle that many countries in this hemisphere are stuck in. Also see the Laffer Curve, which I believe many of us in the Caribbean are already on the ‘dark side’ of.
The fact that, globally, tax rates seem to be on the rise suggests that Governments are in search of additional revenue. But are they providing more goods and services in return? Are we better off for the additional taxes we pay? These questions are fundamental to the willingness and ability of taxpayers to comply, especially in an economic downturn.
Residing in Barbados, which has the highest tax/GDP ratio in the Caribbean and Latin America at 35.2% after Cuba at 37.5% (according to the OECD), brings these questions into clear focus — especially since Barbados has the world’s 4th highest cost of living. Furthermore, nominal taxes fell by less than nominal GDP between 2019 and 2020 in Antigua and Barbuda and Barbados, leading to an increase in the tax/GDP ratio. Beyond this, Barbados’ underfunded NIS offers benefits that are reputedly the most generous in the region, but there seems to be little public support for adjusting contributions up and/or benefits down to resolve the problem. Rather, the contribution amnesty and ‘making the rich’ cover the deficit, seem to be gaining traction. Bottom line, taxes on individuals and the cost of living almost never come down.
Irrespective of the rising cost of living and poverty levels, governments globally are searching for ways to increase their revenues, hence the Global Minimum Tax which only 4 brave nations have not signed (Barbados was one of the last countries to sign) — perhaps in recognition of what this tax is really about. Let’s see how much of the expected USD150 billion in revenue from this tax trickles down to the most vulnerable taxpayers, making their lives better somehow.
Again, in the Caribbean, We are the World. But nobody is going to sing a song and raise funds or awareness to help solve our problems. We have to solve our mounting problems ourselves. And we have to secure our food, fuel, and financial security ourselves. Together — One Caribbean.
But I sense a movement is already underway, here in the Caribbean for sure, in Latin America, and perhaps spreading globally, to hedge — to become more self-reliant, more personally resilient, more sustainable, more off-the-grid, more like Dominica. And I think this is exactly what the world needs.
