Jamaica's last 41 years of economic walk

by Shalman Scott

Sunday, September 02, 2018

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What it is with the Jamaican economy that two bright individuals — Eddie Seaga and Dr Omar Davies — within a period of 20 consecutive years, have both been given the nicknames 'Papa Tax' and 'Fine Ants'?

Seaga served as finance minster in the 1980s, while Dr Omar Davies served in part of the 1990s into the new millennium. And it must be of some interest that while given nicknames, both men did not share the same political beliefs and partisan formation.

At various times claims were made that these men, in their respective capacities as Jamaica's finance minister, were incapable of handling the country's affairs. Sounds familiar? Prior to the 1980 General Election which was won by the Jamaica Labour Party, Eddie Seaga campaigned and sold himself to the Jamaican electorate as a financial wizard (studied sociology at university), promising us that “money would jingle in our pockets”. He inveighed against Michael Manley's Government as having wrecked Jamaica through economic mismanagement as a consequence of misguided socialist policies. These Eddie Seaga claimed were devoid of any consideration for wealth creation. In short, it was Manley's fault!

The oil price massive shocks in 1973 during the Arab-Israeli War and in 1979 due to the overthrow of American puppet the Shah of Iran, as well as the USA's overt destabilisation campaign to overthrow or “underthrow” of the Manley Government, had devastating consequence on the Jamaican people; one from which Jamaica as a country has not recovered. Some, due to shortsightedness and others due to tribalism failing to see that they were mere pawns in a clash of two super powers on Jamaican soil — applauded the simulated food shortages and gas rationing, hospitals running out of medicine and other vital supplies, and the frequent power cuts within a 24-hour cycle. This also affected negatively the regular flow of drinking water, occasioning immeasurable cases of contamination by germs within the population.

On the jobs front, tourism — one of the labour-intensive industries — was affected by the frightening level of political violence in addition to warning by the United States Government for American citizens not to visit Jamaica for vacation or business purposes. The job losses from the industry and its social consequences were horrendous. Jamaica's fiscal drag worsened as the Jamaican economy responded to the distortions and contortions occasioned by the deleterious internal and external shocks.

By 1976 the Bank of Jamaica ran out of foreign exchange completely, forcing the PNP Government, with an anti-American, anti-International Monetary Fund stance to lop its tail and go hat in hand to the IMF for a loan for foreign exchange support. In 1977 Jamaica was to begin a 41-years borrowing relationship with the IMF. During this time, the 15 mixtures of Standby Agreements and Extended Fund Facilities have not worked well for Jamaica, in that the country, over the period under review, failed 11 of the 15 agreements and were assisted with two of the remaining four through devices of debt forgiveness and waivers — to pass. Without those, the country would have failed 13 out of the 15 IMF agreements in 41 years. Why? Our economic fundamentals are weak and after 41 years of IMF 'assistance', those fundamentals have become weaker and remain unchanged, manifesting themselves in the problems of recurring debt, deficit and decline.

But Jamaica's structural deficiencies and vulnerability predated the 41 years of borrowing relationship with the IMF and the global recession of the 1970s, and include, for example: weak growth, a narrow productive structure, external dependence, periodic foreign exchange problems, vulnerability to external shocks, monetary and fiscal policy incongruence, and mismatch between our pattern of consumption and production.

To have corrected these require long-term monetary and fiscal policies, including the structural reconfiguration of the Jamaican economy. And while several attempts by successive political parties (PNP, JLP) alternating in Government were made, we have run fast only to find ourselves lagging behind. So now sweet tamarind imported from Thailand is on our supermarket shelves and imported garlic from China is being sold by higglers at the 'food' markets around Jamaica. This is just to cite two examples, but there exists several of such others.

Our lagging behind is a scenario that the World Bank, after unsuccessful efforts to comprehend and decipher Jamaica's peculiar economic phenomenon, has described as a “paradox of growth”, observing that between 1980 and 2004 — 24 consecutive years — a third of the country's gross domestic product (GDP) was reinvested in the economy, but has produced GDP growth of only 1.6 per cent. So where are we today with our strategy to stabilise, recover and grow the economy?

The new IMF agreement with Jamaica began in April of 2017. It is called a Precautionary Stand-by Agreement. This meant unlike the Standby Agreement and the Extended Fund Facility there will no drawdown of foreign exchange support when we shall have passed the quarterly tests. We are on our own unless there is a case of national disaster, resulting from huge, new and unprecedented internal or external shocks to the Jamaican economy, for which it was not of the country's making or fault. For example, there is a massive rise in oil price on the global market or internally or a deleterious hurricane or devastating earthquake. Without these the country cannot turn to the IMF for foreign exchange support but can go to borrow funds from the international capital market at exorbitant interest rates and not without the imprimatur of the IMF.

I have long argued that the gap between economic expectation and economic education must be closed post-haste. But when I hear certain public utterances in respect to the Jamaican economy, it leaves one to wonder how much have we as a country learnt from the past economic, fiscal and monetary challenges about which both the leadership of the IMF and European Union — two of our major international partners — have not minced words. And it tells me that the real implications of Jamaica's transition into a Precautionary Satnd-by Agreement with the IMF has not been sufficiently digested by the key gatekeepers of the nation's information and education, and consequently the country at large.

Some claim exultantly, though misguidedly or dishonestly, that the reason why we have reached this sorry pass in Jamaica/IMF relationship it is because we are doing so well economically. Prior to this last IMF Agreement, that agency commented publicly about its thoughts on the character of the Jamaica economy, stating that it is “growth resistant

due to social and cultural inhibitors”.

economy continues to remain tepid or anemic resulting in low or no growth or in contraction mode the attendant social deluge that will be visited on this country will cause the pain of the 1970s and 80s to look like child's play to those who were around during those heedless days to witness hospital and business closures, unscheduled power cuts, unscheduled water lock offs, hyper inflationary pressures on the Jamaican consumers, unemployment, disguised unemployment and under employment, unbearable crime and violence, food shortages at the supermarket and the unavailability of prescription medication. Also, gas lines stretching for miles and consumers spending half a day to purchase a maximum of only five gallons of the product, as gasoline was rationed.

Our saving grace is accelerated economic growth and development and not just grand posturing and announcements on television and other forms of communication.

For it seems to now exist in this country an evolving culture in which bold and coherent “talk”, promises and announcements are equated, and even valued more, to exceed a manifestly done job. But our international creditors are not the least duped! We have kept up those appearances and make belief public relations stunts for 41 years but our weak economic fundamentals, the crux of our monetary and fiscal problems, have not changed. That is the root of the problem and it is a dramatic change in our psychology (Anansism and being a victim of our own propaganda and falsehood) and attitude which will determine our economic altitude.

Other serious people have been at pains to make this very same observation ad nauseum.

Prime Minister Andrew Holness and Minister of Finance Nigel Clarke mean this country well . many of us believe ... and so have Dr Omar Davies and Eddie Seaga but the structural deficiencies within the Jamaican economy are still extant and therein lies the country's knotty problems. And so too often undecipherable talking, talking, talking remains unhelpful. I hope Governor of the Bank of Jamaica Mr Brian Wynter especially also takes note. For many of us are at pains to understand the dichotomous argument put forward by him recently that we are not to focus on the exchange rate to impact the inflation rate but rather pay attention to the Central Bank's approach of focusing on lowering the interest rate to impact the inflation rate to accord with Jamaica's projection of 4-6 per cent under the present IMF Agreement. What really does this mean in an economy that historically has been acutely and structurally import dependent?

But even so how many times has the BoJ already adjusted, in the recent past, the signal interest rate? Are these moves by the BoJ helping the commercial banks or borrowers within the productive sector where the monetary policy focus ought to be? The bottom line still remains that not only those who are immediately mentioned in this article and having key responsibilities but our problems belong to the whole nation to solve….. each of us in our own lane and also across lanes.

Nothing else now remains as we walk up to the water's edge... to sink or to swim which is now more than ever our immediate choice. Well-choreographed and high visibility public relations stunts mixed with a high propensity for corruption and dangerous crime will not save Jamaica. But high productivity will. And a modicum of interactive honesty too.

Political historian Shalman Scott is the first mayor of the city of Montego Bay

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