Densil Williams | Unravelling growth: productivity in the digital age

Bad policy choices are not the only factor responsible for high and sustained levels of economic growth to elude Jamaica. There are structural defects in the economy as well. For high levels of economic growth the country must be able to produce outputs that are adding value to people’s lives.

Year over year increase in these value-added outputs constitutes growth in the economy. However, the rate of growth of this output is what will make the difference between countries that have high and sustained levels of growth and those that have anaemic growth. The rate of growth is driven fundamentally by the level of productivity of the citizens of the country.

In Jamaica’s case, the productivity numbers speak loudly. Our productivity has been stagnant for a long time. Put differently, for every dollar that we spend in Jamaica to produce output, the increased output is infinitesimal when compared to the same dollar spent in other locations and giving outputs that substantial and making a difference in peoples’ lives. How do we ensure that the one dollar spend gives us high levels of outputs so that people’s lives can be better? This question is at the heart of unravelling the growth puzzle.

UP-SKILLING HUMAN RESOURCES

To ensure that the dollar spent gives us higher levels of output not just marginal gains, the first order of business is to ensure that the human capital that is spending the dollar has the relevant skills and competencies to; generate ideas to solution big problems, connecting those ideas into meaningful outcomes and, have a method to ensure that these connected ideas are managed to deliver a high value outcome.

This, using the language of the celebrated strategy thinker, Henry Mintzberg, is the art (idea generation), craft (connection of the ideas) and science (method through which ideas are assessed to ensure the connections work to deliver value), the ACS (art, craft and science) of productivity. Generating the human capital with the ACS tool-kit will be a major dent in the productivity puzzle.

At the base of cracking the puzzle, is the role of our education system. Ronald Thwaites in his article; “Delusions about growth” in The Gleaner of October 20, observed that, in the state of the education system, majority of our students are; illiterate, innumerate and ill-socialised. This should not go unnoticed. Human capital is the backbone of productivity not technology. If you have the best technology in the world and the human capital is incapable of using it, productivity will remain low or even decline. So, fixing education in its totality will be critical to deriving the quality human capital needed to drive the ACS of the productivity puzzle.

EDUCATION FIX

Fixing education is not merely about funding. As we know, Jamaica spends a sizeable portion of its budget on Education. But, when over 75 per cent of that budget is used to pay salaries, very little is left for investment in teaching and learning, infrastructure development and governance. Fixing education will mean a reform of the curriculum to meet learners where they are and equip them with the relevant skills and competencies to operate in a complex, volatile and uncertain global economic space. Passing exams from standardized test will not deliver those competencies. Teaching and Learning methods will have to be revamped, assessments will have to be revamped, delivery modes will have to be revamped in order to meet the needs of the learners of today and for the future.

Similarly, governance around education will have to be looked at in a more serious way. Educators trained in the business of education must be at the centre of the governance reform. Without this, reforms will be made but do not meet the needs of the sector and the learners for whom they are intended. In a nutshell, there needs to be a more nuanced national conversation around educational reform beyond the Patterson report, which frankly, is more incremental in its thinking and doesn’t go far enough to make the radical shifts needed to arrest the deterioration in our education system from pre-school to post-secondary and specifically, Tertiary which is critical for a knowledge economy that will drive the high and sustained growth.

NEED FOR NEW INDUSTRY SECTORS

The next major hurdle to overcome in the drive towards high and sustained economic growth is the ability to pivot to new sectors with high value added. A close reading of the structure of the Jamaican economy shows that the traditional sectors which drive growth are not the value-added sectors in the new modern economy driven by digital. For a country of Jamaica’s size, sectors that require scale and scope at the national level to drive competitive advantage in the global economy will not drive high levels of growth. It will be the knowledge sector which requires very little domestic capacity to drive scale and scope, that will become the major pillars on which economic growth will rest.

Make no mistakes about it, AI will change the face and contents of the labour market in very short order. Routine jobs will be gone in less than a decade and also, some complex jobs such as cancer surgeries in the medical field, AI will be able to manage those as well. With these realities, Jamaica has to redirect resources in the high value knowledge sector in order to see high levels of growth.

DATA CENTRES

One sector which requires close attention in Jamaica is build-out of data centres. As AI takes shape, it will require large data centres to facilitate the growth and development of the technology. Jamaica should position itself as the data centre hub in this hemisphere. The country’s strategic location makes it a great place for data centres to be located. Building data centres is big business and have strong multiplier effects on local economies. Companies like Amazon, Google, Meta, Microsoft are projecting to spend hundreds of billions to invest in data centres to support their AI applications.

Gartner is reporting that AI infrastructure spend is to reach US$2 trillion in 2026. This kind of spend will require strong support from data centres in order to meet the advances in the AI revolution. Investment in data centres is not just an increase in infrastructure spend, it is critical for supporting longer-term development in the age of AI and the digital economy. The digital infrastructure will become critical for the new economy in areas of health, education, agriculture, commerce, governance etc.

Jamaica cannot allow this era to pass without getting into the game. Policymakers need to reallocate resources to this vital enabler of the AI revolution so that the country can have the foundation for a take-off in the digital era. Data centres require significant water usage, electricity consumption other renewable energy resources to work well. Jamaica must create the enabling regulatory environment to facilitate this important sector as it seeks long-term sustainable growth.

Densil Williams is a professor of international business at the UWI, Mona. Send feedback to densilw@yahoo.com