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Professor Leiba Ononuju of the Mona-based University of the West Indies (UWI) defines a model as an oversimplification of a complex problem. An economic model is therefore a simple framework on which an economy is to be managed. It sets out the modus operandi to be used to achieve the major objective of macro economic model, which Cambridge University’s John Maynard Keynes asserts is to generate the highest levels of growth and employment possible with price stability.
The devil is however always in the details and Harvard University’s Professor Joseph Schumpeter contends that the entrepreneur, the promoter, the risk taker is a dynamic actor in a capitalist system. This dynamic acting is referred to as Schumpetarian innovation or creative destruction.
The phrase Creative destruction was first mentioned in Schumpeter’s book “Capitalism, Socialism and Democracy” which was published in 1942. Creative destruction, which was originally posited by Friedrich Nietzsche describes the process of industrial transformation that accompanies radical innovation.
Schumpetarian Innovation
In Schumpeter’s vision of capitalism, innovative entry by new entrepreneurs is the force which will lead to sustained long-term growth and development because it forces established companies to compete aggressively for market share through greater investments in training, research/development and new technologies. This is because the failure to compete through innovation in a globalised environment will lead to destruction.
Large sections of the established local private sector lack Schumpetarian innovative capacity because of historical, cultural and academic reasons. Their view of capitalism is driven by the notion of making as much profits as possible without any of the capital outlays which make Schumpetarian innovation possible. Unlike metropolitan capitalists such as, Kirk Kerkorian, Carl Icahn and Donald Trump, they have very little regard for empirical analysis or understanding of complex matters.
They want to pay less taxes, but they want the government to balance the budget while spending more on every sector, from national security, to education, at the same time. They also blame government policies exclusively for their inability to compete in a rapidly changing global environment, driven by information communications technology and investments in science/technology and research, as well as new product development.
Rather than address their inability or unwillingness to develop their Schumpetarian innovative capacity many of our private sector leaders, particularly those at the helm of the umbrella organizations, seek to impose outside models on the country.
First it was the Singaporean model, then the Irish Model and now they have taken it to the ridiculous level of holding up the Turks and Caicos, a tiny British protectorate of 33,000 people as a model. That’s rubbish! No multilateral agency has ever held-up this country as a model to follow, not even Transparency International.
Finally and perhaps most importantly, many of our established local private leaders suffer from what Harvard University’s Professor Frank Tausigg referred to in 1929 as the fallacy composition, that is, what is good for them is good for all Jamaica. This is definitely not true, as the Air Jamaica debacle amply demonstrated.
Therefore, while we vehemently support the need for public sector rationalision and a reduction of the cumbersome bureaucracy which is stifling development, we believe the lack of private sector Schumpetarian innovative capacity is equally culpable.
Holding up different countries as models to follow is not good enough because a viable economy is a viable economy whatever the political system characteristics. Production, efficiency and growth are driven by an optimal combination of an appropriate business environment and investments in people, technology and research/development, as outlined by the Solow/Swan, Cobb Douglas and Harrod/Domar growth models. You cannot just replicate a model from one country to another because each country as its own economic and cultural peculiarities.
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