Mon | Sep 24, 2018

Daniel Thwaites | Yep, five-in-four is officially dead

Published:Sunday | August 26, 2018 | 2:21 AMDaniel Thwaites

We regret to announce the passing of five-in-four. Five-in-four, late of Jamaica House, St Andrew, died under tragicomic circumstances, leaving behind parents, Andrew and Audley, 2.7 million children, grandchildren, other relatives and friends. Funeral service will be held in St Mary, presided over by Bobby’s obeah uncle. The graveside will be covered in Mombasa grass. Donations in aid of bushing, used cars, Cornwall Regional Hospital, and Wakanda-themed parties.

Five-in-four arose in the aftermath of the admin's '1.5' coup. You will recall that Andrew and Audley had said it was ALL paid for, but then Audley went on to hammer the public with increased taxes, and to “phaaase it eeeen”. Well, supposedly there’s this little thing called karma – honestly, I don’t know – but it hasn’t escaped anyone’s notice regarding Audley that after him “phaaase it eeeen”, Andrew just “phaaase him ooouuut”.

Anyhow, I was cautioned to recall that five-in-four was more of an aspirational target set by the EGC rather than a direct Government plan. But you coulda fooled the public! Or was that the intention? 

Whether that “target” belonged to Michael Lee-Chin alone, or to the whole regime, I remember the photo ops and the gangster-like finger signs when it was announced. It was a big deal, the ostensible goal of the whole Government. It’s therefore worth pausing to note that it has been pronounced dead. All the same, don’t look for an announcement in The Gleaner’s obituaries.

The death rattle was confirmed by the correspondence I read between Finance Minister Dr Nigel Clarke and the Bank of Jamaica. And it’s that exchange that I ultimately want to get to, in particular the current consternation that the country is moving, as planned, to a flexible exchange rate. But the vast gulf between campaign commitments and governing reality is always a satisfying theme, and it is only matched by the gulf between what people do in Government and de way dem gwaan in Opposition.

So one more reminder before I get to the meat and potatoes.

Recall the sweetest piece of campaign rhetoric, again from Man-A-Yaad when the dollar was depreciating under the former administration. Audley had an impressive stock routine worthy of any vaudeville of Broadway production: "The dollar slide, then the dollar wine, now 120 is dollar grind," Shaw said to loud cheers from party faithful.

This is the problem with writing down quotes. It doesn’t at all capture Audley’s dramatic pauses, the sliding when he said “slide”, the winin’ when he said “wine”, or the jookin’ and uproarious hilarity when he said “dollar grind”.

Now with all of Audley’s dramatics, he actually was laying out a position regarding the exchange rate according to which stability was at a premium. The promise was to manage the dollar and end its promiscuity and whorishness.

The trouble is that Audley never spoke about the costs of maintaining the dollar in supposed respectability and keeping it off of Back Road. That cost of that shaky 'stability' is what we Jamaicans are unaccustomed to thinking about. In truth, we are allergic to even inquiring into it too deeply, partly because of the Audley-esque demagoguery of so many of our politicians, but also because we have to confront some of our cherished myths.  

Of course, the reality after the election was a lot more prosaic. After all the campaigning, Audley signed back on to a flexible exchange rate, just as his predecessor had done. And it is those signed agreements that continue to govern the actions of the Jamaican Government today, but everybody is acting surprised.

The trouble for Dr Clarke is that Audley has so seasoned the ground with his rhetoric that at the first sign of depreciation, even if the evidence suggests that inflation continues to be low, and people go into full-fledged panic.

Now that Dr Clarke holds the reins, one argument is that “de dollah fraid a Nigel”, so that’s why it’s running away. Though humorous, it’s just not true. As strange as it might appear, things are proceeding as planned.

The difficulty for Clarkey is that he must contend with his own faithful who just a few months ago would have heard, absorbed, and accepted Andrew’s and Audley’s ranting and raving about dollar whoredom. That’s one side. On the other side, despite having done the same while in power, the Opposition will affirm that it wants a flexible exchange rate, providing it’s not too flexible. 

Here’s the reality. Jamaicans have to make up their minds. We want free capital convertibility, because we don’t want to have to go to any Government board when we want USD to buy. However, we also seem to want a “managed” exchange rate, because if it goes up or down as it should in a flexible system, we panic. But to have a managed rate, we would need tons of reserves we don’t have. So it’s back to the same-old problem that we’re in love with the free lunch.

Anyway, since the IMF was reinvited back, the plan has always been to gradually move away from a managed float and towards a flexible exchange rate that more accurately reflects the ups and downs of the market. As part of that change, we have to expect more volatility than we’ve been accustomed to.

I can’t quite recall where, just recently, I heard a clip of Mr Holness talking with great sense about the madness of using up the country’s reserves on “defending the dollar”. That was a different guy than the one we had heard rattling the cage about devaluation when he was in Opposition himself. But maybe better sense is dawning since he’s phased out Audley.

Daniel Thwaites is an attorney-at-law. Email feedback to columns@gleanerjm.com.