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Editorial: Why can’t PNP tell story of the economy?

Published:Monday | May 11, 2015 | 12:00 AM

When it sucked at managing the economy, which was the case in the 1970s, the People's National Party (PNP) was, at least, good at one thing. It knew how to mobilise people around ideas.

So, Michael Manley and people like D.K. Duncan, Arnold Bertram and Hugh Small, as impractical as their ideas might have been, convinced many Jamaicans that the fundamentals of economics didn't matter; that social programmes could be delivered without paying for them; and that there would be no accounting for fiscal deficits. When, finally, the Government was forced to concede the logic of economics and couldn't avoid an agreement with the International Monetary Fund (IMF), it attempted to extricate itself from that reality with alternative strategies and emergency production plans so called. Many people fell for it.

Economically, what Manley's socialists achieved was the diminution of national wealth and the distribution of poverty. Decades later, Jamaica is still attempting to recover.

We are reminded of the economic folly of those times, and what can happen when idealists, ideologues and populists combine to defeat common sense, by some of the responses to information of the Government's narrow J$4-billion, or three per cent, miss of the nominal J$121-billion primary surplus it should have recorded at the end of the fiscal year under its economic reform agreement with the IMF. The alarmists bellow for a lowering of the primary balance target of 7.5 per cent of gross domestic product (GDP). This, the argument goes, would allow the Government more investable cash to drive consumption and growth.

Except that the argument misses important elements, including that the main benchmark for the primary balance isn't an arbitrary number. At the time of the IMF agreement, Jamaica's debt was heading towards 150 per cent of GDP. The Government was unable to borrow unless it acquiesced to interest rates it knew, increasingly, it couldn't afford to pay. Credit default was a real possibility. Rebuilding market credibility required that Jamaica had to put its fiscal house in order and its debt on a downward trajectory; the 7.5 per cent of GDP merely starts that process.

 

Growth agenda

 

It would help, too, if the economy grows, which is not happening fast enough. But the answer to insufficient growth is not, as Greece - even with the cushion of its membership of a rich members' club - is discovering, the overthrow of fiscal prudence or an increase in deficit spending. In the event, while we appreciate that government spending on social and other infrastructure can be good for an economy, it is misplaced that the State ought, somehow, to become the big engine of economic activity. Or, for that matter, that the IMF programme is deficient of a 'growth agenda'.

The programme, maintained with discipline, is of itself growth-inducing, insofar as it creates the macroeconomic environment in which people have confidence and, therefore, willingness to invest. That is beginning to happen. Jamaica is now 58th among 189 countries in the World Economic Forum's Ease of Doing Business survey. It was previously 86th of 144. Domestically, business confidence is the highest in eight years. The Statistical Institute of Jamaica has just revealed that jobs are being created in the manufacturing sector - more than 6,000 in the past year.

There are things to mobilise people around. The reformed socialists in the PNP seem to have forgotten how to do it.