Where is the Jamaican economy heading?

by Shalman Scott

Sunday, September 16, 2018

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THE above topic is a follow up to my article two Sundays ago entitled: 'Jamaica's last 41 years of economic walk'.

This week's topic is in response that economic walk, exploring where the country is likely to be heading in the face of the hype and good news talking, talking, talking, ironically led by Mr Michael Lee Chin who incidentally, publicly disagreed with Prime Minister Andrew Holness when he addressed the nation and declared that the “5 in 4” economic growth trajectory cannot be achieved.

Lee Chin subsequently and in short order came out publicly and said the economic growth timetable of “5 in 4” can be achieved. I was expecting an immediate dismissal of Lee Chin by the Government but oh, how times have changed?

Since the economic and financial crisis in Greece, there has been intense discussions taking place here in Jamaica about how, despite the talking, talking, talking ad nauseum, a similarly tepid economic structure of ours might end up along the same pathway. As the economic and financial crisis ripened in Greece, the BBC reports on that country's deteriorating economy was and remain disturbing to say the least even though there has been, since very recently, minor improvements in the macro-economic indicators. But these slight macro-economic improvements have come at a cost of increasing national indebtedness of that European country.

The micro and macro economic disarray and myriad social challenges with the various economic indices of Greece continues to fit perfectly into our Jamaican situation and vice versa. Greece pulling slightly back from total collapse and disaster resembles the very struggles, past and present, that our own Jamaican economy has undergone. And may I remind us how Greece had come to the water's edge and sinking? One third of the Automated Teller Machines had ran out of cash. Several major banks had closed and withdrawals from savings accounts per individual were restricted to 60 Euros regardless of the amount of money an individual had in his or her account. Fifty-nine businesses closed every day! The job losses, both among public sector, workers and the private sector were projected to run into the hundreds of thousands.

Greece, very recently, officially exited the last of three bailout programmes that saved it from going bust and abandoning the Euro. But the bailouts from the International Monetary Fund, the European Central Bank and European Commission came at a huge cost that will still be felt for years to come. In exchange for money, Greece agreed to drastically cut spending, and implement painful economic reforms. Government employees had their salaries slashed, their pensions frozen, and their retirement age pushed higher. Consumer spending fell drastically, unemployment spiked and many businesses shut down.

The Greek economy as I write is now three quarters of the size it was in 2007, before the crises started. And it still faces a range of challenges. The economy is expanding again but at a “half-satisfactory pace”, said Holger Schmieding, Chief Economist Berenberg Bank. Public debt is forecasted to peak this year at over 188 per cent of Gross Domestic Product before declining to 151 per cent by 2023, the year Greece is due for another review and possible debt relief but plenty of problems remain.

“There are a number of economic issues that have not been resolved throughout the bailout programme despite the supervision in the past eight years, said Mujtaba Rahman, Eurasia Group's managing director. Rahman said: “I think it is a stretch to call the rescue programme a success. It has not restored economic health”.

The question being asked here is if Jamaica with its bloated debt overhang and structurally anaemic economic growth path will go the way of Greece? A parallel question being asked by those who experienced the shocks of the 70s, 80s and 1990s is… Will Jamaica go back to those heedless days of hospitals running out of medicines, bandages, electrical power and failing standby generators, resulting in crucial surgeries being done with flashlights and tilly lamps in several operating theatres across the island? That on being accepted as a patient to most hospitals including Cornwall Regional Hospital you were required to carry your own sheet, Dettol and soap as these items were in short supply or non-existent as the Ministry of Health ran out of money and could not buy these vital and critical items. Or when the gas line at service stations stretched for sometimes two miles for motorists to buy five gallons of gasoline — the limit that was allowed. The waiting time in the gas lines would be on the average of half-a-day. There was just not enough foreign exchange at the Bank of Jamaica to purchase the needed national demand.

It was a time when the supermarket shelves were empty and “marrying” of goods became commonplace. This was a practice of one being forced to purchase goods that were not needed, as quid pro quo to get what the customer wanted. There were multiple occasions when public sector workers could not get their pay on time as the national coffers were empty. A time when “scheduled” electrical power cuts across the island was a minimum of five per day as the Old Harbour turbines buckled under the demand. And a time too when there was a limit of how much could be drawn from an individual's savings account similar to what happened in Greece.

Interestingly, all these experiences in varying degrees and intensity were as a result of the consequences of major economic shocks, internal and external, that reverberated to the very foundation of the Jamaican economy, eventuating untold hardships to the widest cross section of the society. Between 1970 and 1995 the Jamaican economy received vicious economic body blows occasioned by the steep rise in oil prices from the Organization of Petroleum Exporting Countries, during the Arab-Israeli War in 1973 and again in 1978, which exacerbated the overthrow of the American-backed Shah of Iran by the Ayatollah Khomeini in the Revolution of 1979.

The next decade saw a convergence of the battering forces of 1970 precipitating a debt crisis which continued throughout the 1980s. And as the economy succumbed to the various contortions, distortions and reconfigurations the weakening in its internal capacities continued into 1995 which saw the collapse of the financial system, with depositors losing their savings and investments in many of the commercial banks due to failures and closures.

It was indeed a sad, sad time particularly for the aged and pensioners of untold hardships. In light of the foregoing, what is the likelihood of Jamaica reaching the stage from which Greece now tries to extricate itself ? Whichever choice you make on the question, the answer would not be pleasant. We have a narrow window which is fast closing, unlike Greece, to still band together, to stay the course ... for a change, and save ourselves and our children and grandchildren's future.

The sugar, coffee and bauxite industries, two of the country's structural economic and social mainstays contributing to robust economic growth, foreign exchange earnings, and job creation particularly in the 1950s and 1960s have all but collapsed. And what is left of those once premier industries is being exaggerated by carefully crafted public relations stunts with a narrative far removed from national reality and diametrically opposite to the experiences of the people directly affected and in the communities where these sugar factories and bauxite plants once operated.

The question is also imported: What are the consequences and implications politically relative to the next general election campaign between the ruling Jamaica Labour Party and the Opposition People's National Party? And in a country where voter apathy, cynicism, mistrust and disaffection towards the political process have been coalescing even as they are rising? The evidence of which saw a voter turnout in the last general election of only 47.7% of the Jamaican electorate, the lowest since 1944 in contested general elections. The fundamental determinants , in my view, of the outcome of the next parliamentary contest is less about what some commentators and political point men are inclined to place their focus on … which is a cosmetic consideration of a “personality and beauty contest” between leaders Andrew Holness and Peter Phillips and their respective parties. But the next general election will be more about the Jamaican people's level of satisfaction or dissatisfaction with the quality of their lives. What they have experienced in real time… and not a plethora of promises and expressions of good intentions in the face of growing mistrust on the part of so many Jamaicans with the political culture.

As usual, some politicians and their financiers are barking up the wrong tree — victims of their own self-mesmerism ... or propaganda?

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