Edgar Leonard. Photo: Provided

Creative Destruction

Joseph Schumpeter, an Austrian and Harvard economist, coined the term in the 1940s. According to Investopedia, creative destruction is the dismantling of long-standing practices to make way for innovation and is a driving force of capitalism. Further, it describes the purposeful dismantling of set processes to make way for improving methods of production. Moreover, it is about economic growth and technological change. And according to Daron Acemoglu and James A. Robinson in Why Nations Fail, it supplants the old with new, takes away resources from the old, new business takes business away from the old, and modern technologies make existing obsolete. It creates winners and losers in the political arena and the economic marketplace. Fear of creative destruction is often at the root of opposition to inclusive political and economic institutions.

As opposed to extractive political and economic institutions, inclusive economic and political institutions foster economic activity, productivity growth, and economic prosperity, working with creative destruction. Through creative destruction, innovators/innovation contribute immensely to processes, practices, procedures, and products improvement, contributing to economic growth and development, improved service delivery, enhanced public and private sector agencies operation, etc. Moreover, it is an adage or an urban legend, 'if it looks good, works fine, leaves it alone." That works well for the minority that will continue to benefit or lose by keeping things as they are.

Simply, creative destruction is taking and evaluating something that already exists or is created, making it perform better and more productive, i.e., technology and so on.

Current VI Economic Platforms

The [British] Virgin Islands (VI) is a small fifty-nine (59) square mile, thirty-six (36) islands, and resource-poor island chain, lacking the resources to develop either a primary or secondary economy; its economy is service-based. It transitioned from a fragile and vulnerable subsistence agricultural economy in the mid-60s to another fragile and vulnerable sector---Tourism. Tourism, along with financial services, forms the VI's economic twin pillars. Both combine to contribute to over 80% of GDP. Further, financial services generate over 50% of government revenue; tourism, a substantial portion of the rest. Tourism, though, provides more direct, indirect, and induced employment.

Both sectors have contributed to an improved standard of living, quality of life, and per capita income (~$34,000). The VI has one of the highest living standards and quality of life in the region. Nonetheless, the economy is highly fragile and vulnerable, and susceptible to external economic shocks. For example, Coronavirus (Covid-19) exposed and laid bare the economy's fragility, vulnerability, and structural weakness. Consequently, the economy needs to be strengthened, deepen, and diversify. The hard truth is that the current economic platforms are not sustainable in their existing structures; the structures need to be overhauled and revamped.

Economic Sustainability & Resiliency

The VI’s inclusive political and economic institutions are in place and, for the most part, functional. Nonetheless, to construct/build economic sustainability and resiliency, the VI requires formidable, strong, structural economic diversification. However, in addition to being natural resources poor, the VI faces a myriad of other challenges. These challenges include a) small size (59 square miles) and population (approximately 30,000), b) limited export capacity/capability but with high import needs/cost, c) narrow resource base with heavy reliance on external markets, d) remoteness from major markets, e) high transportation cost, f) small local workforce, g) lack of energy sources, h) susceptibility to global economic shocks, i) medium level infrastructure (water, wastewater, stormwater, electricity, roads, and telecommunications) development, j) food insecurity and food-price volatility, k) impact of climate change/global warming, and natural disasters (hurricanes, earthquakes, tsunamis), i)  land ownership, and land use challenges (gentrification/regentrification), and environmental resources protection and preservation.

Moreover, the current economic sectors---tourism and financial services---are fragile and highly vulnerable to external shocks and cannot stand alone and be sustainable for the long term. This myriad of challenges posed a heavy lift for the VI to build economic sustainability and resiliency. Nonetheless, the VI economic sectors need to be reworked and added to; they need creative destruction review and innovation.

Technology & Education

The VI must fully embrace and leverage technology in its economic growth and development plan to fuel, boost, and drive the sustainability and resiliency train. Moreover, human capital is VI's primary and most critical and valuable resource. And education is a vital means in fueling, boosting, and driving the sustainable economic growth train. A highly educated populace/workforce. is needed to embrace and leverage technology fully and effectively in the VI's continued growth and development. Thus, education needs different approaches to chart a new course forward. Consequently, the VI must invest heavily and effectively in education, training, skills, and competencies.

Moreover, the VI must re-imagine and completely revamp/reconstruct the whole education system to meet 21^st Century growth and development needs. The system needs bold and deliberate creative destruction. Technology and education are essential paths to building a new, strong, and sustainable economy.

Benchmarking

The VI does not need to reinvent the growth and development wheel for small locales. For example, it can benchmark Singapore, a former British colony. Singapore, a small, 270 square miles and resource-poor island in the China Sea, at independence in 1965, had a GDP per capita of approximately $500.00 and a low education level. Today, it is an Asian Tiger and an economic powerhouse with a GDP per capita of over $60,000. Additionally, it typically is at the top or near the top in educational achievements. Much of its economic success and quick transformation resulted from educational improvements. Singapore has done well with limited natural and human resources.

Standard Management Operations Practices

Standard typical management practices entail periodically reviewing operational processes for currency, proper management control, vulnerability assessment, efficiency, effectiveness, cost, etc. And as such, periodic planned, programmed, phased, etc., reviews should be conducted on all public sector systems, employing, and utilising the process of creative destruction. Programmes, policies, procedures, plans, products, and so on are dynamic, not static, activities. But too often, they are rolled out and let run/languish for the long terms without review; sometimes, they are forgotten. However, they must be reviewed periodically or more often as needed. Reviews identify opportunities to innovate to deliver better performance and outcomes. Creative destruction is a helpful review and innovation tool/process. It should be a standard tool/process to innovate to improve and grow the economy, redistribute income, promote progress, and build prosperity.