Just when most people in Cayman were
hopeful there was an end in sight to the long slump in the local economy, the
possibility of a double-dip recession in the US now looms after major losses in
the global securities markets on Monday. This followed last Friday’s historic
downgrade of the United States’ credit rating by Standard and Poor’s.
While there is no consensus among
economists on the long-term effects of these events, no one thinks they are
Economist Richard Rahn noted Monday that
Cayman was largely a “prisoner of events” occurring in the United States and
Europe. While this is true, it doesn’t mean that Cayman is completely helpless.
As Mr. Rahn pointed out, Cayman’s financial services industry can help itself
by offering innovative products that appeal to nervous Western investors and
new money from Asia and emerging markets.
Cayman’s government can also help to
position the country to withstand another potential economic downturn in the US
First, it has to address the same issues
that other countries are facing, namely controlling debt. In times of decreased
revenues this entails reducing operating costs and expenditure on capital
projects. In the US, social programmes called entitlements have come under
scrutiny. Considering we’ve learned in the last week that the Cayman government
is giving millions of dollars to churches and paying mortgages for citizens,
entitlement spending should probably be under scrutiny here, too.
In addition, there have been many proposed
economy-stimulating projects announced by government, however, none have
actually started. One reason is an over-burdening bureaucracy, but it’s also
the result of an irresolute government that can’t seem to decide what it wants.
Both of these issues need to be resolved if the projects are to move forward.
Then there’s also the element of the public that objects to everything
suggested that would bring change. Change is happening whether people want it
or not. It’s better to choose the change we can live with than being prisoners
of our fears and having less desirable changes thrust upon us.