Tue | Aug 22, 2017

The power of the people

Published:Sunday | September 27, 2015 | 9:00 AM
Minister of Finance Dr Peter Phillips

Had the economic turnaround the prime minister proclaimed in her address to the 77th annual conference of the People's National Party (PNP) been real, there would not be an election before the end of 2016. After the economic austerity the country has endured under the present International Monetary Fund (IMF) programme, an administration expecting even the faintest signs of an economic upturn would wait for them to be seen before asking an electorate to judge its performance. The relief that the beginning of such a turnaround would bring would all but guarantee the administration electoral success.

The idea that the Government has signalled an intention to go to the polls in the midst of arguably the most extreme economic austerity experienced since the 1970s while it sees economic recovery on the horizon defies logic.

It is clear that the Government is less than confident that there will be economic improvement in the near future. It may even fear there is greater pain ahead. This is the dilemma which confronted the Jamaica Labour Party (JLP) administration in 2011 as it stared down the barrel of the IMF gun. In describing it as 'bitter medicine', the then Prime Minister Andrew Holness signed his electoral death warrant.

Faced with the same dilemma today, Prime Minister Portia Simpson Miller is promising jobs, jobs, jobs; and in so doing has taught Holness a lesson. A political party, particularly if its intentions are noble, has a first duty to secure state power. The harsh reality of the challenges it faces can be taken care of later.

The present administration, notwithstanding the extraordinarily enticing inducement offered by the unending internecine conflicts within the opposition party, knows that its chances of electoral success would be far greater if it were to wait for the public see the fruits of their long, hard sacrifice under the IMF agreement. But it is guided by the first principle of politics the imperative of securing state power. To do this, it must do what Holness failed to do in 2011.

The Government promises jobs and a better economic future. It is doing so in an environment in which the business sector and much of the media is prepared to subscribe to the belief that by satisfying the IMF's conditions the economy are recovering. Some have even been prepared to declare recovery a fact. What economic recovery?

 

non-oil trade deficit up

 

In the first two years of the IMF programme ending with the first quarter of 2015, output was 0.4 per cent less than it was in the preceding two years. Jamaica's non-oil trade deficit has risen seven per cent in 2015 over 2014. Unemployment remains stubbornly around 14 per cent.

The money spinners in the financial and related sectors are all in celebratory mood. But most operators in the real economy complain of having never seen as depressed a commercial environment as this one, in years.

The enamouring of the finance minister, Peter Phillips, by many highly placed Jamaicans is unmistakable. This fascination has morphed into a generally favourable rating of the administration's economic performance and a Pollyanna-like view of the prime minister, whose image of caring for the poor dampens the mood for public protests, which could throw the severe austerity measures off track. Without it, the overly harsh IMF programme, far harsher than that which sent Greece into an economic and political tailspin, could not have lasted longer than a snowball in the Sahara.

The Economic Programme Oversight Committee (EPOC) has served as an even stronger imprimatur than the IMF, lending credibility to government data within the business community. EPOC will prove to be a political masterstroke unmatched in Jamaica's history.

But there is far more to managing an economy back to growth and prosperity than the confluence of political fortune and the goodwill of the upper class. It requires bringing internal economic costs to internationally competitive levels. It needs fiscal and trade policies to attract capital to productive effort and an intelligent and aggressive strategy to create the market space needed locally and globally for the output of Jamaica's productive engine.

Phillips, driven by a dogged determination to succeed as finance minister, has been doing an extraordinary job of imposing discipline on the fiscal affairs of the country. With the help of the IMF, he has been able to render stability to the Government's finances. Were this all that was needed, Jamaica's economy would not be sputtering as it is today; it would be revving.

In today's capitalist world, the economy is far more than is contained in Government's books. While maintaining good order in Government's fiscal affairs is important, it is the economic policy environment that affects the price competitiveness of private businesses which will determine the country's economic health. The finance portfolio, though critically important, is but one element in the management matrix needed to drive an economy.

 

goal: people's well-being

 

The completion of an IMF programme is not an adequate goal of a serious political administration. The real goal must be the people's well-being; and it is into that goal which the IMF programme must fit.

What of the targets that relate to the people's lives? How will their standard of living be raised? How will their need for gainful employment be satisfied?

The prime minister promised 28,000 new jobs in the next five years. This will barely match the increase in the working age population in that time.

The PNP has abandoned its socialist moorings and has drifted into the unfamiliar waters of capitalism without the experience to navigate them.

The party's embrace of a flat income tax system when it needs to directly incentivise capital to invest in production to create sustainable jobs is inconsistent with both its socialist ideology and capitalist pragmatism. Squandering a half billion dollars raised through gas taxes to bet that oil prices will rise more than 40 per cent above their 30-year, inflation-adjusted average could have been avoided, if Government was focused on real job creation as its goal.

By abandoning its philosophical roots, this socialist/liberal party is no longer able to mount a campaign platform on meaningful gains by the people. Instead it has to rely on the endorsements of its philosophical opposites: the voices of big capital, local and foreign.

Having abandoned the obligation of its socialist ideology to centre its policies around the interests of the ordinary people, and fully embraced the most extreme form of capitalist economics, success is now determined by tax revenue, praise from big business, and the endorsement of the international financial community.

Jamaica does best when its people are productively engaged. World Bank data shows that at the end of the 1980s, the last time the economy did well, 74 per cent of our labour force participated in the economy. Today, only 63 per cent do. For the PNP, its ideological antecedents and economic common sense should have dictated that the most logical centrepiece for its economic programme would be restoring the 74 per cent labour force participation rate achieved in 1990. And it would have sensibly and practically designed a step-by-step strategy to get there within a fairly short time frame. Had it done so, it would by now have been well on the way to adding 150,000 net new permanent jobs at liveable wages for the people it is ideologically committed to represent.

In the end, only the people matter. And it is the people who will judge.

- Claude Clarke is a businessman and former minister of industry.

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