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No stone should be left unturned if we're to successfully rebuild the economy - from reconsidering the competition watchdog to political parties, the high street, and the creation of an 'enterprise tsar.'
That's the view of economist, Dr Michael Oliver, who last week set the scene for a series of articles on Jersey post-covid-19.
In his second focus piece for Express, he considers how businesses and the public sector can work together in the future...
"Jersey’s public finances are facing their biggest shortfall since 1945. Post-covid-19, the natural instinct for many Jersey politicians will be to reduce government expenditure and implement tax rises.
Any business losing money also has to cut expenditure, but a dynamic business will seize the opportunity to do things differently and will seek to boost its revenues by looking at the resources available to it and reconfigure them to adapt to the new reality. It will become more experimental in the short-run and take risks as it seeks to become more competitive.
Pictured: Jersey's public finances are facing their biggest shortfall since just after Liberation.
The word ‘competition’ is often associated with choice, lower prices and an abundance of goods for the consumer. It is a word also associated with free markets. A totally untrammelled free market does not exist other than in economic textbooks and instead, governments allow various degrees of competition before the state intervenes in some way. Even the USA, often seen as the bastion of the free market, has lots of regulation and government intrusion to protect the market.
By protecting the market, this means safeguarding consumers and businesses.
Government sets the laws and regulations for business to operate, and history has shown that without this, consumers can become harmed by unfettered free markets. Conflicts invariably begin to arise in any market when firms have to contend with too much ‘red tape’ which prevents them from doing business and consumers are deprived of fair prices for goods and services by cartels.
In jurisdictions like Jersey, there are clearly constraints on the size of the market for goods and services.
For example, consumers who complain about the choice of retail shops in St. Helier and want dedicated stores such as Russell and Bromley, Gucci and Armani, have to recognise there is not the regular local demand to makes these stores viable for these businesses to set-up shop in Jersey.
Pictured: Consumers who want high-end stores in Jersey should realise there isn't the demand.
Likewise, businesses who complain that codes of practice have been replaced by legislation to compel them to behave in certain ways have forgotten that they might have abused the market in the past and the legislation is designed to keep them on the straight and narrow.
There is an old adage that no one likes a monopoly until they have one. This is particularly pertinent for small jurisdictions where cartels and other vested interests, if left unfettered, can develop. That’s why consumer watchdogs and competition authorities are so important for smaller markets.
Unfortunately, over the years the Jersey Competition Regulatory Authority (JCRA) spent an inordinate amount of time investigating telecommunications issues rather than looking at other barriers to competition more generally. This did not improve when the JCRA joined forces with Guernsey as the Channel Islands Competition and Regulatory Authority. If Jersey is serious about competition it needs to have a competition authority which leaves no stone unturned in the interests of the consumer.
Businesses like certainty, stability, confidence and leadership. For many years the States Assembly gave them all of this. We have all heard the stories about how unpaid businesspeople would give up their time to sit once a week and guide the island through any troubled times. Whether apocryphal or not, it is certainly the case now that the fragmented system of government and the absence of serious political parties is generating increasing uncertainty and instability. Political parties encourage scrutiny, can galvanise a supine media, and can give people the strength to put their heads above the parapet.
Pictured: The merging of Guernsey and Jersey's competition watchdogs - which recently de-merged - did little to remove barriers to competition in the island.
Businesses also like to ‘get things done’ and we often hear criticism that the government refuses to accept that it lacks business acumen which in turn prompts the call for more businesspeople to become politicians. The retort from businesspeople is that they don’t have the time to sit in the Assembly and listen to endless debates nor the inclination to take a salary cut.
This misses the point.
If businesspeople do not get involved in politics and bring their experiences to bear, they can hardly complain that States members and civil servants don’t understand how business works. In any case, when it puts it mind to it, the States Assembly can get things done. The Chief Minister pointed out last week the urgency with which the Assembly passed 40 pieces of legislation over 15 weeks due to covid-19. The same sense of urgency needs to be adopted now for the economy: whether it is for a short-run fiscal stimulus or for changes which will generate longer-run gains (e.g. amending the 1948 Tourism Jersey Law for hospitality).
The timetable for urgency is lacking. The next few months will be spent with business ideas coming from government committees, think tanks and individuals. Scores of them will be cast aside as unworkable (probably for reasons of cost and sustainability); several will reach the next stage through a committee-like process (where they might die a death because of lack of will to push them through) and very few of them will be put into action (where they will still need champions to be completed).
As John Henwood pointed out earlier this week, Ministers have had mixed experiences when taking advice from the private sector, particularly insofar as innovation is concerned. Doesn’t this point to Jersey having its own business or enterprise tsar? This should not be a token appointment and it needs someone who has the energy, determination, knowledge and flair which the island requires. They would be the eyes and ears on the business scene and could be the cog which is missing between business and government and would energise innovation.
Pictured: Jersey needs its own "enterprise tsar" to drive forward innovation.
There are a number of industries where innovation is possible now because of our long association in the areas of agriculture, tourism and finance. There are also industries where we don’t have the expertise to get involved, no matter how appealing it sounds. For example, for years we heard endless talk about how the States could harness tidal power. These talks have come to nothing. In any case, what does Jersey know about harnessing tidal power commercially? Why not licence this to a private company and charge them for using this natural resource as a laboratory? Job done. If we want to wrap around wider ideas associated with this, such as marine conservation and set up educational courses and so on, then this might be something where the States can get involved.
More widely, how can the public sector get involved with business?
The most obvious way to engage the public sector in supporting business is through what have been called the ‘parastatal entities’. The list appears endless but includes Digital Jersey, Jersey Finance, Royal Jersey Agriculture and Horticultural Association, Jersey Business, Ports of Jersey and so on.
Former Senator Philip Ozouf, who was integral in the setting up of some of these parastatal entities, has proposed a number of ideas on Twitter recently which show excellent promise. For instance, he has suggested using the Howard Davis Farm as an experimental centre of excellence and the place to go for future developments in AgriTech and other Eco Green recovery initiatives. As he points out, TB Davies gave the farm for that purpose.
4. Make the Howard Davis Farm as an Experimental Centre of Excellence
— Philip Ozouf (@philipozouf) June 13, 2020
The place to go for future developments in AgriTech & other Eco Green Recovery initiatives
TB Davies gave it to the island for that purpose - in 2020 let’s use as he intended pic.twitter.com/5tZaTYQS8S
We need to make sure that the parastatal entities don’t become parasitical entities and encourage rent seeking behaviour. We also need to make sure that they balance making money commercially with looking after Jersey businesses. For instance, Jersey Post has lost business in the traditional market of delivering letters but has gained a new market in delivering parcels from Amazon. One retailer has recently criticised the turnaround with Jersey Post, where the delivery of Amazon parcels is given priority over local business. It’s contract with Amazon is financially lucrative, but as a parastatal entity it also has a duty to look after its local base in Jersey.
The late Colin Powell used to remark that Jersey didn’t need to capture all of the world’s finance industry to become prosperous – it just needed a small percent. In the golden age of finance during the last quarter of the 20th century, banking provided Jersey with super normal profits. Banking became Jersey’s natural monopoly.
If policymakers are serious about wanting to help businesses become as successful as banking, then let’s not overlook what we have already set up; let’s take advantage of what is inherently natural for Jersey to do and then leverage this to the island’s advantage.
This article has been published in association with the Jersey Chamber of Commerce.
John Henwood: "Another year, another economic plan - this time make it work"
James Linder: "The 100 days that changed Jersey"
Dr Michael Oliver: "New ideas and some luck are urgently required"
Pierre Horsfall: "The situation that Jersey is facing is without precedent in scale"
James Filleul: "Courage vs caution"
