Mon | Sep 24, 2018

Standard & Poor's does not rate the poor

Published:Friday | September 26, 2014 | 12:00 AM
File Prime Minister Portia Simpson Miller.

The headline of this article is a truism. In the real sense and in the real world, Standard & Poor's (S&P) rate the bonds of big and generally rich corporations, and securities - more bonds - of whole countries.

This rating agency does not deal with poor people.

So, it was with a wry smile I greeted the announcement by the champion-of-the-poor-in-chief, Prime Minister Portia Simpson Miller, quoting the S&P's positive outlook on Jamaica's credit rating published last week before her party's annual conference.

S&P reaffirmed its 'B-/B' credit rating for Jamaica, but said there was potential for an upgrade in six to 18 months.

The prime minister really trumpeted the release from a rating agency that does not rate the poor - in more ways than one. For sure, a rating upgrade by S&P is generally a good thing, especially in our fiscal bind buttressed by poor economic growth where any piece of good news is a fillip to Minister Peter Phillips, his party leader and, in this case, to Jamaica too.

Except for the spectacular and lasting publicity surrounding the rescheduling of the country's bonds and their payment arrangements under the JDX, NDX and NDX-private, and the deserving wall-to-wall coverage of the events in our local press - and especially on radio - the poor would know little or nothing about bonds. They know considerably less about Standard & Poor's.

Poor people do not have enough cash most times to buy food on a regular basis. Bonds, stocks and similar securities which are the stuff rating agencies like S&P rates are not on poor people's menu.

The prime minister called the S&P upgraded outlook as "good news" and repeated, with added emphasis, that it was "big news". It may have been both of those things for big banks and insurance companies - rich companies and their owners - and a relatively small portion of the Jamaican citizenry who are fortunate enough to be included in pension funds.

However, to the vast majority of Jamaicans, including a majority of those who were cheering on Mrs Simpson Miller as she spoke, they would feel only the big pain of the sacrifices that had to be made to make S&P happy to issue its new positive outlook.

The tight money and tighter job situation are not "good news".


It was refreshing to hear our prime minister speak in public about matters "on the macroeconomic front". She was lyrical about the "narrowing fiscal deficit", the "growing primary surplus", the fact that "we are importing less" and, alas, in spite of our huge and unmanageable debt stock, she heralded "our recent re-entry into the international bond market" - Standard & Poor's home, but a very distant and painful place for our poor who must pay back the debt - to, you guessed it, borrow more money.

The prime minister and her party seem almost bent only on pleasing multilateral lending agencies like the IMF, the World Bank, and the Inter-American Development Bank and are effusive when praised by Mrs Lagarde of the IMF, the S&P, and organisations like the World Economic Forum which publishes the Global Competitiveness Report.

She was pleased to report to the party faithful that others from overseas are piling on "solid expressions" of confidence. Clearly, all of us would rather hear these expressions in a time of severe economic and financial difficulty.

My concern is that this solid expression of confidence is coming from a very small group of persons, influential they may be, who do not live here and, therefore, do not have to deal with the relentless micro-economic pain of insufficient jobs and a dearth of cash to buy services and food, and so can afford to laud the macroeconomic targets which are the result of our pain.

Their praise is wrapped in a strong and strangling band of self-interest. The intense micro-pain the poor is suffering translates into macroeconomic terms like "primary surplus" which signal that these multilaterals and their foreign institutional friends' debts will be repaid.

They have very sturdy reasons to sing praises to those who have their hands on Jamaica's economic levers and love to hear the foreign songs.

The number of those who beg have increased. Those who do have jobs are very fearful of losing them, almost everyone has cut his and her spending, and very many business persons complain with distress that their sales volume are drastically down on last year.

I was told the day this column is being written that GCT collections are also down from last year.

How can GCT collections increase when economic demand is so down and people have so little cash to spend? Reduced GCT collections by the Government is a harbinger of low or no growth where it matters most - among ordinary and especially poor Jamaican people who have to spend pretty much all they would have earned if they had jobs.

Standard & Poor's may upgrade Jamaica and that is good. The prime minister and her economic managers must not forget how negative that upgrade can be on the poor, and others in the Jamaican society, who have to live without economic growth and the attendant jobs and cash.

The prime minister and her ministers are responsible for engendering a much more efficient government to facilitate economic and jobs growth.

Aubyn Hill is CEO of Corporate Strategies Ltd and chairman of the Opposition Leader's Economic Advisory Council.Email: writerhill@gmail.comTwitter: @HillaubynFacebook: