Thank you, Mr President
Earlier this month, Jamaicans everywhere beamed with pride at The Coming of Obama to Jamaica. America's first black president, obviously infected by the genius of Bob Marley, and touched by the gushing admiration of our prime minister and the near-perfect arrangements made for his visit, fell head over heels in love with our country. It was an incomparable public-relations success for Jamaica.
But he didn't come bearing gifts, as some might have expected. Yes, we were included in Caribbean and Latin American-wide initiatives for energy and young leaders. But there were no debt write-offs, no CBI repeat and no Rockefeller Committee equivalent.
What he brought us was potentially far more valuable. He came with sound economic advice: advice which, if followed, would put Jamaica on the road to development and give our people a chance for economic prosperity. He told the Government that the way to reduce debt is to grow the economy and increase the country's income. He effectively said that neither seeking debt relief nor "just putting the squeeze on folks" is the correct way to reduce our debt.
President Obama's disclosure that he had given the prime minister this advice is significant. His further advice that to grow the economy, the Government needs to "address, in a more systematic fashion, how we can spur growth" was even more pointed, as was his admonition that "it requires development plans and approaches that are productive".
The US president's assertion that investments in the social and economic infrastructure are precisely where Government's expenditure should be focused directly contradicts our Government's recent practice of cutting capital spending in order to meet the quantitative targets set by the IMF.
For more than two years I have been delivering the very same message through this column. I have argued that, though the fiscal discipline for which the president appropriately commended the Government is important, it is only when that is combined with strategies to generate economic growth that the country will benefit and be able to successfully deal with our debt.
My assumption was that reasonable minds would accept this logic. But some, blinkered by a need to cheer Government's actions, no matter how misguided, saw only "gloom and doom" in constructive commentary.
The Government's growth-free, contractionary economic policy agreed with the IMF can only lead to economic hardship and take the country into an economic dead end, as the president seemed to imply in his presentation to the town hall meeting at UWI. This is best exemplified by the fact that after two years of faithful observance of every letter of the agreement with the Fund, our prime minister felt constrained to use her once-in-a-lifetime, face-to-face meeting with the world's most powerful man to 'beg a bly' on our debt rather than seek support for a realistic plan to move the economy from poverty to prosperity.
The debt write-off request, though an obvious non-starter in today's geo-economic environment, would have been charmingly and politely put aside by the president and the prime minister directed instead to the same recommendations that other Jamaicans whose only interest is pointing the Government in the right direction have been making all along: "grow the economy" with "systematic measures".
Such measures would obviously begin with policies to keep the price of our currency consistent with the economic value of our productive output. This, more than anything else, will make our economy competitive and Jamaican production attractive to capital. What is remarkable is that although Jamaicans have already made much of the sacrifice the president admitted would be necessary, Government has been far less decisive than is necessary in taking the actions required to make the economy competitive. Instead of improving, our merchandise trade deficit, at 60 per cent of total trade, is now at a historic high.
Nothing but the competitiveness of our economic output will make the Jamaican economy attractive to capital. No one, including Jamaicans, will be prepared to invest in Jamaican factories, Jamaican farms or Jamaican export services, if an overvalued currency makes them uncompetitive.
However, because we are so far behind our peers and so desperately in need of capital to catch up, we must go beyond just making production competitive. In addition, we must employ strategies to specifically incentivise capital to invest in productive and exporting activities. That is why the tax code must be revised to provide tax credits for profits invested in new and expanding productive capacity. It is why we must change the Omnibus Incentive Scheme to weight incentives in favour of production and export activities that will grow the economy.
And we must not be afraid to press the IMF to allow us to use a portion of the present 7.5 per cent primary surplus to pay for these initiatives. It is far better for us to use this sacrifice to grow the economy than to apply all of it to paying down debt.
We must commit never again to sacrifice our investments in human development or the infrastructure required to enhance our productivity. There are less economically destructive ways to honour our obligations.
WIDEN THE SCOPE
We must work intelligently to build favourable market access for Jamaican goods and services to widen the scope of international business available to Jamaican enterprises.
President Obama's visit was a tremendous marketing bonanza for Jamaica. But it will be of little value if we do not accept his advice to put in place policies to spur economic growth at the same time that we hold a tight fiscal line. The president's statement that the international financial institutions "should have to accommodate the interest of countries who have a sound plan for growth so that they cannot just stay in this static state but can, over time, thrive and succeed" should be enough to convince our Government that it should not be afraid to take the tough fiscal, monetary and administrative decisions needed to boost production for growth.
The head of the IMF, the head of the IDB; and now the president of the United States have all trod a path to our door within the last year. It is time to make this high recognition we have received for compliance with the IMF programme count.
While we bask in the glory of successfully hosting the United States president, we must not forget to convert the positive afterglow into practical measures for Jamaica's growth. We need the kind of systematic strategy President Obama talked about, aspects of which I have outlined here and in earlier articles. And we need them now.
Hopefully, he convinced the purveyors of the idea that what Jamaica's economy requires for its recovery is simply for Government to spend less and collect more taxes that although frugal spending and efficient tax collecting are important, it is even more important to increase production and generate growth. For this, Mr President, we thank you.
- Claude Clarke is a businessman and former minister of industry.
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