This pandemic has taught many lessons, but an important one not to miss is that the centralized business approach is flawed and developing economies should continue to adopt the concept of decentralization for local industries and markets.
Decentralization is the even distribution of power and authority at every level of management. Taking this approach is often done with blockchain technology, which is a non-destructive way to record data in an ever-changing database that allows for transparency across all sectors of a business. Decentralization and blockchain is often linked because it creates an autonomous organization, which as a result of COVID-19 appears to be the new way of working for many businesses and organizations. A decentralized economy will lead to an institutional revolution because blockchain is an institution technology. This segment will explore how a decentralized economy would promote social and economic development for the Family Islands.
Decentralized Economy: the role of Family Islands
Decision making in a decentralized economy is performed in a peer-to-peer manner, rather relying on a central command. But human civilization has operated and relied on centralized operations because it was deemed to be organized and cost effective. Some of these include automation, games, banking, securities exchanges, media, currency, security, retail and logistics. The point is that everything around us has been restricted to some form of control. In developing economies like The Bahamas, this approach can be very restrictive to the ease of business, administrative functions and fiscal/monetary operations. But as we enter into the new era of a technology revolution, more processes are expected to become decentralized due to decentralized technologies such as blockchain. But the first major technology shift towards decentralization came from the Internet, which opened doors to new business models that changed the brick-and-mortar approach to business. However, the Internet is still a part of the centralized economy because information on websites are sent from a server. A decentralized Internet means that everyone controls the Internet rather than a particular entity (i.e. government) which offers more protection for data and privacy.
To summarize what a decentralized economy looks like, Chief Executive Officer of Monetas Johann Gevers outlines the four pillars of decentralization which include decentralized communication, which is communication without censorship, through the Internet. The second is decentralized law, which speaks to the choice of our law, judge and our enforcer. Thirdly, decentralized production, which means that anyone is allowed to make products like using solar panels to get your own energy. Lastly, decentralized finance, which means decentralization over currency, digital financial products and services and legal contracting platforms.
Using these guidelines and expanding on them would help developing countries to transition to a decentralized economy, which then takes a step back from giving power to a central authority when making decisions. The Bahamas could adopt this approach, considering it has 14 inhabited islands, which means that running a decentralized economy on a family island should be easy to do with proper planning in place. The option of decentralization is favorable for those in the Family Islands because their contribution to the nation is as significant as those in the capital. Some projects should not require years of approval or political interference if proven to bring about greater economic and social development. That is why it is important for each family island to have its own development plan. The initiative of each family island having its own plan has actually made some headway. In fact, there are 11 pending drafts created under the government’s national development team. There has been no public update on the status of these drafts, however, Andros and Eleuthera’s plans were partially privately funded. This progress indicates that the government understands the importance of each island having its own development plan.
Decentralization: survivability of small businesses on Family Islands
As a result of COVID-19, the Small Business Development Centre (SBDC) rolled out the government’s $20 million response, targeted to provide loans to small businesses, ranging from $5,000 to $300,000 with approved loans having a grace period of four months. While these efforts are commendable, it also highlights the significance of gross domestic product (GDP) contribution made by small to medium-sized enterprises (SMEs) and on the Family Islands, this reality becomes more heightened. But even in providing loans and applying forgiveness programs to business owners, taking a decentralized approach of the lending process could increase supply by crowdsourcing capital. According to an article on COVID-19 and lending, accessibility to crowdsourcing capital would require the efficient structuring of two different processes: becoming an eligible lender and processing loan applications. In addition, businesses that adopt decentralization technology, such as blockchain, can cut overhead costs by creating smart contracts and platforms that better track the performance, shipment and purchases of goods/services.
In closing, whether COVID-19 occurred or not, the country is no stranger to disasters and should already be in the process of taking steps towards a decentralized economy. Any planning should consider this approach because it is the future and economies will either have to adapt or be left behind. Decentralization will allow for more inclusiveness and collaboration among Family Islands and can play a pivotal role in accentuating each island’s ability to do business.
• Roderick A. Simms II is an advocate for sustainable family island growth and development. Email: RASII@ME.com.