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Poor Governance and Jack the Investor

Dickson C. Igwe. Photo: VINO/File
By Dickson C. Igwe

Investors place their nest egg where there is stability, safety, security, transparency, and predictability. Good governance is critical to Jack the Investor.

Now, under the supply-side economic model, Jack the Investor is King. And Jack the Wealthy Investor’s frugality, hard-headedness, innovation, productivity, and resourcefulness, has placed him in the super wealthy category termed the 1%.

Jack did not become wealthy overnight, not unless Jack is one of those hugely fortunate people who inherit great wealth. No, Jack’s great wealth has followed a historic trajectory.

Wealth has remained in the hands of a privileged few from the time writing began, and the first pages of writing placed on a dusty shelf in Egypt. Economics is essentially the study of wealth, and how wealth is distributed through human activity and enterprise.

The most recognizable origins of Jack’s wealth historically, are the Robber Barons. These were the entrepreneurs, who drove the industrial culture of the late 1800s and early 1900s in the USA. Names such as John D. Rockefeller, Andrew Carnegie, JP Morgan, and Randolph Hearst, were the progenitors of today’s tech, retail, and commercial billionaire, who own two hundred trillion dollars of global wealth.

These are the men and women that drive the present global economy. How? Well, Jack the Wealthy Investor governs the global institutions that decide the trajectory of the global economy: The Federal Reserve; The International Monetary Fund; The European Central bank, and a host of financial and economic institutions that are in the business of lending, and investing, in everything, from technology ideas and commercial innovation, through to commodities and energy.

Governments of every type need Jack’s resources. Most countries today, apart from net exporting nations are borrowers.

And like regular consumers, the ability to borrow easily and cheaply decides the strength of economies. The ability to access Jack’s wealth and the wealth represented by core financial institutions is a benchmark of global economic competence. Trust and confidence are the raw matter of modern finance

Then, investors want maximum returns from minimum risk, that is the basis of the investment. There is a see-saw: the greater the risk the higher the returns and vice versa. The job of the investor is to accurately measure risk.

Risk is good in business. Risk taking is at the centre of the investment culture. However, there is no point investing in countries such as Syria and Libya, unless the investor is in the arms industry. On the other hand, investing in a super corrupt country such as Nigeria, or Venezuela, carries considerable risk in terms of fraud, and outright embezzlement of the investor’s funds.

The road the investor walks is most easily observed when there are volatility and instability in a specific geography or market. The investor, usually on the advice of his financial advisers, swiftly moves his investments in the direction of locations that are stable and predictable. The most popular destination when there is trouble on the horizon is the USA, in the form of the Treasury stock and bond.  This is the major reason western democratic states with historic and credible political and economic institutions are secure and prosperous.

Investors want transparency in governance. This gives Jack confidence the jurisdiction, where his billion-dollar resort sits, will remain the type of economy where the currency is stable and citizens are happy and peaceful. The preceding bodes well for investment and business.

On the other hand, a place of unrest and unpredictability will make Jack nervous. Will projections of economic growth, which will determine the profitability of Jack’s gas and oil refinery, hold? Or will political instability and even internal conflict drive jack’s resort guests away to a more peaceful location, or see the masses set jack’s refineries alight?

Countries that are well-governed host workforces that are stable and productive. That is good for Jack’s bottom line. Jack is able to find the technicians and workers he needs to man his multimillion-dollar boatyard or chemicals factory.

The physical infrastructure in transparent and well-audited jurisdictions is always better than in corrupt and opaque countries. Why: because the national revenues are fully invested in hospitals, schools, security, roads, ports, and national utilities.

In corrupt countries, hundreds of billions of dollars are stolen, leaving those countries in poverty. That is never good for Jack the Investor. In those societies, what Jack may gain from tax benefits, is swiftly lost in costs associated with poverty, poor public utilities, and dire physical and social infrastructure.

That is a good reason the next General Election in the British Virgin Islands should be decided on what political party the voter has confidence, delivers transparency and accountability.

The Investor drives global politics and economics. The reason the Virgin Islands is finding it a challenge to access the funds to recover from the devastation of the 2017 hurricanes Irma and Maria is a lack of trust in the Virgin Islands governing institutions by the global investor who is concerned that governance in the jurisdiction has not been transparent and accountable.

Even post-IRMA there are too many question marks on the transparency of the management of scarce resources, driving recovery process.

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