THE current economic situation in Jamaica is one that nobody is happy with, other than those who are politically aligned to the governing party and re benefiting via the corruption route.
None existent growth and a structural reform program that is solely geared towards passing IMF tests without accompanying growth initiatives to stimulate the economy cannot be the way forward for this country. The blind can see that. In the Senate recently, the Opposition JLP, Chairman, Bobby Montague, making his contribution to the state of the Nation, rightly compared the Government’s economic (or alack thereof) policy to a man “high” on cocaine. He rightly pointed out that the present economic program with the IMF is destroying the country, as things like social services and infrastructure development are being neglected to the point where public safety is being endangered.
One wonders if the Government is “high” on something why they continue to pursue a policy that is contractionary in every way possible. Tax returns are under performing as expected, because of this simple fact: their is a taxable limit in an economy whereby their is no growth and taxes and cost of living are going up. Jamaica has reached that taxable limit. Shrinking incomes cannot sustain a government tax program as we currently have, because the Government is sucking money out of the economy that otherwise would have gone to the buying of goods and services, and is not being replaced or supplemented by another means. Remittances aren’t what they used to be. The global economy for the large part hasn’t recovered sufficiently, to create jobs for Jamaicans overseas who have traditionally supported their love ones here by sending money home regularly.
And to drive home that point, from in the 1990’s, the only form of monetary activity that brought money into this economy-other than tourism, was remittances. That has propped up a government economic model, of stifling economic growth in favor of borrowing. This is what has caused our present crisis.
In the 1980`s, the Jamaican economy recovered from the devastation brought on by the communist lap dance, instituted by a man that either was smoking cocaine, or suffering from some form of degenerative disease, and was producing impressive growth rates. But what must be noted, is that those growth rates were not brought about by the waving of a magic wand, but by simply doing the basics right such as producing things other countries are willing to buy. We had a thriving clothes manufacturing sector, coming out of the Caribbean Basin Initiative (CBI), and other forms of Manufacturing. Those industries alongside bauxite to a lesser extent, produced those impressive growth rates of 5 or more per cent per annum. After the JLP was voted out of office, we saw those growth rates dip precipitously and haven’t recovered since. The question now that has to be asked is why on earth did Mr. Patterson and Omar Davies deviate from the economic policy that was enriching the nation? That question may not be answered for the rest of our life time. What makes it even more astonishing, is that in 1996, the same Government came up with what became known the National Industrial Policy (NIP)- Yes i know many of you reading this have never heard of such a policy before now-that was geared towards and I quote from the foreword:
” the goal of achieving a per ca-pita income of $4,000 by the year 2010″.
How will this be acheived? I quote again:”
‘This requires an average annual growth in GDP of six percent. (p. iii) … At the same time, the government is committed to developing an integrated and structured approach to economic policy. … Accordingly, policies for stabilization of the macro economy must be integrated with policies for promoting growth and diversification of production”.
Wonderful aint it? Oh yes. Growth rates of 6% were needed to allow Jamaicans to enjoy a per ca-pita income of $4000 US dollars by 2010. But why was there such a need for growth rates of that magnitude? Simple. The PNP abandoned a growth policy that was export oriented, and substituted in its place, a debt accumulation policy, and not only that, but the systematic, and well thought out destruction of the financial sector, wiping out yet again a substantial part of the Jamaican economy. It wasn’t just the banks that went under but alot of other businesses that just couldn’t manage the ridiculous interest rates that were being charged to barrow money. But even then, the PNP understood the need to get Jamaica back on the growth track. So the obvious question is why didn’t they do it? They didn’t do it for two reasons: (a) they place a larger emphasis on winning elections rather than governing well and (B) they didn’t know how to do it. They still don’t know how to do it decades after. While the NIP called for such impressive growth rates, the government then didn’t see it fit to do what was necessary to produce such growth rates. What they did was they started on the policy of deficit spending. Not only was money wasted on ill conceived projects like NETSERV, but alot of it was siphoned off to win elections. In the run up to the 2002 general election, state resources were mobilized in such away as to secure a win at the polls even though the Government knew it was ruinous economically! Talk about wicked! Then Omar Davies by some providence of God or just sheer contempt for Jamaicans made it known in his now infamous “run wid it” speech. Not to mention, the many millions went into the pockets of many persons in the form of cost overruns on various projects.
So its pretty plain to me that the Government deviated from the NIP not by coincidence but by design. They knew that if they were to produce such economic prosperity, there is no way under heaven certain people who are essential to winning elections, could get rich, without working. You see the PNP understands economics this way: If I can’t make the money fast enough I am going to barrow until I have enough. Now the cost of all those bad policies, destroying the economic foundation left by Mr. Seaga, the dumping in file 13 of the NIP, is what we are seeing now- a failing state. In some sectors a failed state.
The current IMF policy is only postponing the inevitable- a total collapse of the economic base of the country and a decent into total anarchy. That only can be averted by totally re-thinking of the present economic strategy.