I saw the theme of the 2014 presentation of the Revenues and Expenditure of Grenada for the year 2014 by the Minister of Finance to Parliament on Tuesday 10th December 2013 for the first time. The theme states “Building the New Economy through Higher Productivity and Shared sacrifice for the benefit of all”.
What struck me immediately is why did the minister choose to focus on an increase in productivity and not an increase in production? Does the minister plan to attain higher productivity without having to produce?
To understand my bewilderment we need to dissect the subtle differences between productivity and production.
There are several definitions available but for the purpose of this illustration we shall stick to the simplest and most widely used definition. Productivity is defined as the ratio of inputs to output in a production process. It measures the efficiency of production.
Production on the other hand is easily measured. If you produced 200 bags of nutmegs, that’s what it is. 200 bags of nutmeg, end of story. So therein lies problem one. Whereas production is instantly measurable by normal means productivity is subject to manipulation and requires further analysis.
This brings us to a central question: can you increase productivity without increasing production? Not only is the answer a resounding yes. But that is precisely what the minister is proposing in his presentation. Once again we can become highly technical and strip the inputs to production then examine them one by one in order to prove this point. However the simplistic approach is to use a straight forward calculation.
Given that productivity is measured by the relationship between input and output, then productivity = input : output; therefore where input is 10 and output is 20, the ratio is 1:2. For every one item I put into production I get 2 as my output. Suppose I reduce output to 10 the ratio becomes 1:1. For every 1 item I put into production I get out 1. My productivity has improved but I have not increased my production.
In the event that I had any doubt regarding his intentions, the minister shows his hand in paragraph 6.1 where he lays out his objectives:
“Its key objectives are:
1. To boost growth and job creation;
2. To improve fiscal sustainability; and
3. To improve debt sustainability.”
Not a mention of production. For those who argue that objective 1 is about production I have two words for you; ‘De-bushing and Imani” Further, in the event that you still did not get it, he lays out his hand squarely on table for all to see as he outlines his key success indicators:
“We have identified the key performance indicators that will tell us if we are successful.
For growth and job creation, they are: higher levels of growth; higher employment especially among our youth and an improved ranking on Ease of Doing Business Index…
For fiscal sustainability, they are: higher tax effort; lower non-personnel expenditure compared to 2012; and lower monthly financing shortfall.
For debt sustainability, they are: lower interest payments as a proportion of GDP and lower debt to GDP ratio.”
Further still, even when the minister does get around to listing his investment priorities this is his shopping list:
“In terms of specific projects, Cabinet has endorsed an initial list of approved projects. These are:
• New Hospital
• West Indian Spices
• Port Louis Development
• Mt Hartman and Hog Island Hotel Resort
• St David Town Centre Development”
My conclusion is that the minister and his team were solely concerned about the second section of their theme, sacrificing the few for the benefit of all and instilling severe hardship on the already overburdened law abiding citizens of Grenada without asking the nation to produce more.
The minister will wake up in 2014 to a rude awakening that only production can improve economic wellbeing.
Garvey Louison FCCA