Fri | Dec 9, 2016

The IMF's political challenge

Published:Sunday | October 19, 2014 | 12:00 AM
Cedric Blair (left), managing director of Red Stripe, shares information on the bottling process with Prime Minister Portia Simpson Miller on her tour of the brewery on October 8. The PM's dramatic fall in the Bill Johnson opinion polls bodes very negatively for the Government's ability to continue its austerity programme, writes Claude Clarke. - Jermaine Barnaby/Photographer

Claude Clarke, Guest Columnist

On hearing that I was Jamaican, the old economics professor I met in Guyana some years ago insisted on telling me about his encounter with Jamaica's national hero Alexander Bustamante when he was chief minister.

In a tone betraying both admiration and amusement, he told me he had met Bustamante when a team of economists to which he belonged presented him with an economic development plan which the chief minister had commissioned. After flipping through it briefly, Bustamante pushed it back across the table to them, saying, "I see you raising taxes on the people. No. Go do it again without the taxes."

When I supported the present prime minister for leadership of the PNP, I believed that in her was a Bustamante: uncomplicated and unyielding in her core beliefs. Portia Simpson Miller is unquestionably known for her love of the poor and her commitment to the well-being of the ordinary people of Jamaica. This, I thought, would have been the distinguishing quality of her administration.

Having witnessed the economic sinkhole into which the country had fallen since the 1990s, I had expected that her passion for the people would have led her to use her years in opposition to develop an economic strategy that would productively engage the people in turning the economy around. The PNP's Progressive Agenda, on which so much time and intellectual capital were spent, did no such thing. Today, it is worthless as a guide for tackling the economic challenges facing the country or promoting the economic uplift of the people.

In its negotiations with the International Monetary Fund (IMF), her Government again had the opportunity to prepare a plan to get the country out of its economic quagmire. But its agreement with the Fund bears no resemblance to a people-oriented growth strategy. There is no evidence that the cause of the ordinary people has been advanced by an administration purportedly committed to their well-being.

There seems to have been no recognition that only a sustainable economic growth programme could bring economic opportunity to the poor and raise their prospects for a better life. Welfare programmes like PATH and the make-work JEEP can provide only minimal temporary economic relief and are not substitutes for the real and sustainable economic opportunities gained from increased production.

So far, the approach taken by Government has been to fix the fiscal problem by any draconian means necessary and hope that economic rebirth will follow. This is hardly different from the trickle-down economics the ruling party professes to abhor and diametrically different from its platform of bottom-up development, "putting people first" and the party leader's mantra of "balancing people's lives while balancing the books".

GROWTHLESS PROGRAMME

Instead of adhering to these foundation principles, the Government, in collaboration with the IMF, developed a growthless austerity programme founded on the contrary precept that a fiscal fix must precede the people's economic uplift, which can only result from increased production.

This is as illogical as starving the horse while growing the grass and is completely antithetical to the PNP's ethos of putting people at the centre of development.

The two-party democratic system works best when the contenders for power shape their strategies for governance around their core philosophical beliefs, particularly in their approach to economic solutions. And the leaders of the respective movements, whether in Government or Opposition, must be the vessels through which these beliefs are instilled.

The PNP's approach to economic management would be expected to reflect its philosophical orientation towards social democracy. And while it may be the job of a finance minister to pursue the objectives of his portfolio by any means necessary, it is a prime minister's responsibility to ensure that these means are consistent with the broad philosophy to which the political movement is committed.

But contrary to its stated core beliefs, the economic programme to which the Government has committed the country has put the viability of the ordinary people on hold while it contracts the economy in order to pay down our debt. It has so faithfully enforced the extremely painful measures of the IMF programme to the point of attracting effusive praise from the Fund's managing director. Not surprisingly, the people have not been as impressed.

What the Government perhaps did not realise is that the consequences of its IMF strategy would not only be economic, but political as well. The political effect is borne out by its dramatic fall in the recent polls.

The extended fund facility agreed with the IMF was devoid of any means by which the economy could increase its output or giving ordinary people adequate opportunity to participate in it. All the people had was their faith that the prime minister would protect their interest.

BEST POSSIBLE ADVOCATE

The 'compliment' given to the prime minister by the IMF head as the "best possible advocate" that the most vulnerable Jamaicans could have contains a suggestion that the commitment of the country's chief executive officer to the poor is more talk than action. The recent polls now make it clear that the people are looking for action, not advocacy.

The PM's dramatic fall in these polls bodes very negatively for the Government's ability to continue its austerity programme. With the sedative effect of her popularity diminished, the people's tolerance for the painful measures will likewise decrease. The Government's success in passing the quarterly IMF tests so far has been largely dependent on the people's voluntary compliance in the face of severe economic hardships. The upheavals witnessed in Greece might well have been replicated in Jamaica had it not been for the Simpson Miller effect.

Popular cooperation cannot be counted on if the calming effect of the prime minister's popularity is absent, and the fiscal austerity on which the quarterly tests are judged will not be possible. The cheerleading IMF itself is expecting nothing better than the same anaemic performance of the Jamaican economy over the last two decades continuing into 2015. At the same time, it is projecting vigorous growth from our hitherto lowly regarded CARICOM neighbours Haiti and Guyana.

As I said at the time of its announcement, the IMF's EFF would inevitably lead to the situation we are now beginning to face: commercial activity in the country contracting; tax revenues declining; and the capacity to meet the debt-payment obligations progressively slipping out of reach.

The IMF's economic programme with Jamaica now faces a political challenge. If it expects the Jamaican economy to recover, it must now get together with the Government and rework the programme to prioritise growth and sustainable economic opportunity for the people. Only in this way can the public's continued restraint in absorbing the pain of the programme be assured.

Claude Clarke is a businessman and former minister of industry. Email feedback to columns@gleanerjm.com.