Don’t be seduced by the populists
Emboldened by recent political events in Greece and Spain, the economic populists of Jamaica are likely to have gained a second wind and can be looked to for noisy rants as Peter Phillips prepares the Government's Budget for the next fiscal year.
Dr Phillips must remain unswayed. For he, even if the populists are not, ought to be aware that Jamaica is neither Greece, nor Spain, nor Portugal, nor Ireland; and unlike them, is not a member of the European Union (EU). There is no rich club that is likely to feel it is in its self-interest or deem it a moral obligation to bail out Jamaica. Any that is so compelled can't afford it.
The debate, of course, is over the fiscal discipline that Jamaica's Government has been forced to maintain under its economic support agreement with the International Monetary Fund, a major element of which is the primary surplus of 7.5 per cent of gross domestic product (GDP) it is obligated to achieve. Critics argue that the programme's targets are too tough, insisting that they will not resuscitate the stagnant economy, and belittle the fact that the administration has met the Fund's performance targets over seven consecutive quarters.
This is where they can be energised by the developments in Europe, where Greece's left-wing Syriza party won the general election 10 days ago and Spain's year-old Podemos is leading in opinion polls with elections due by year end. Both have pledged to overturn the economic austerity programmes that countries have been forced to undertake in exchange for European/IMF bailout packages. Indeed, the new Greek prime minister, Alexis Tsipras, and his finance minister, Yanis Varoufakis, want a big haircut on the country's debt of €325 billion, or 175 per cent of GDP.
Two things are worth remembering, the first relating to Jamaica: The country is where it is because of decades of poor economic management and fiscal laxity that resulted in a debt of nearly 150 per cent of GDP and 40 years of economic growth that averaged less than one per cent per annum. That debt not only stifled
private-sector investment, but had become unsustainable. No one was willing to lend to Jamaica, and at a price its Government could afford.
As to the matter of Europe, and especially Greece, the Germans, Europe's economic strongmen and major contributors to the bailout, insist that the Greeks should continue to meet their obligations. But even if Angela Merkel were to fold, the reason would, in part, be fear of contagion. Greece remains part of the Eurozone, and the collapse of its economy could reignite the crisis that previously hit members of the monetary union, with significant impact on the global economy. Moreover, the EU has the wherewithal to rescue a
member of the club.
The Caribbean Community is too poor to rescue Jamaica, which, if it goes under, would hardly cause a ripple on global markets. Indeed, it is worth remembering that ahead of the agreement with the IMF, there were some in the international community who were not unwilling to see Kingston go to the wall.
Further, despite the attempts in some quarters to belittle the gains, it is obvious that Jamaica's adjustments are having positive effects: the debt-to-GDP ratio is improving, as is the current-account deficit; growth is resuming in the economy, and business and consumer confidence are up. These gains should not be squandered.