Don’t try to fool the people, Opposition
Finance Minister Peter Phillips stamped his class last Wednesday as he closed the 2015-2016 Budget Debate in style, debunking myths and dispelling fairy tales.
Pulling a devastating quote from Opposition Finance Spokesman Audley Shaw that the Jamaica Labour Party's (JLP) International Monetary Fund (IMF) agreement was on "the most bearable terms possible", Phillips said the JLP Government simply "took the money and ran", making it harder for Jamaica to get any lenience from the IMF afterwards. It was not simply the old point-scoring Phillips was engaging in: It was relevant and demanded serious debate.
If, as Shaw described in April 2011, that the terms he had secured with the IMF were "the most bearable terms possible", why did he abandon the programme? Shaw agreed to a primary surplus of 7.7% for 2011-2012. By his third review, he had the IMF relax those terms to 6.8%. The JLP had received significant upfront money from the IMF on the condition that critical reforms would be carried out. The JLP reneged on critical reforms - for whatever reasons - causing a suspension of the programme.
We all know that a primary reason why Andrew Holness had to call the election early was because economic conditions were worsening as a result of the suspension of the IMF agreement. Funds had dried up from the Inter-American Development Bank, the European Union, and the World Bank. The following statement by Phillips is not political but simply factual : "The failure of the then administration to pass the tests to which they had agreed and which they described as 'bearable' made the task of adjustment far more difficult and the burdens that the country has had to endure since 2012 far more onerous." It took this administration almost 18 months to get the multilaterals to give Jamaica another chance at economic reform.
You can always snicker and say Portia had promised an agreement in weeks, but if we are having a serious debate, we should not lose sight of the fact that the IMF's toughness and rigidity this time and its insistence on some onerous "prior actions" came as a result of their experience with Jamaica under the JLP administration.
I don't make the argument, which the People's National Party (PNP) would go on to make, that the suspension was not justified. It could well have been under the circumstances, but that doesn't change the fact that it made the IMF more stringent. My own view as a globalist and progressive is that we operate in an unjust global economic environment in which institutions like the IMF are not operating in the best interests of developing countries, and in which consideration is not given to negative exogenous factors.
The IMF should have extended some flexibility to the Golding administration considering the effects of the global recession. (The PNP has been crudely partisan in not factoring in the global recession in its assessment of the debt build-up during the Golding years.)
passing the growth test
Phillips effectively countered the argument that passing IMF tests is unrelated to passing the growth test. This view ignores the connection between fiscal prudence, macroeconomic stability and economic growth. It is a fallacious argument. "The major impulse of growth will come from the macroeconomic adjustments which are being made. A competitive exchange rate, for example, opens up possibilities for production of new products to replace imports and for the production of export lines that would not have existed before." Also, fiscal consolidation makes possible low interest rates which make production more competitive. Building societies' lending rates are at an all-time low.
You can't have economic growth in our structurally imbalanced economy if your macroeconomic variables are in shambles. (Be careful of comparisons with other countries that have greater fiscal space and, quite frankly, room for fiscal irresponsibility. Economic novices talk about Europe and America's having stimulus packages, ignoring our high debt-to-GDP ratio and other structural deficiencies.)
As Phillips lectured on Wednesday, fiscal prudence and passing IMF tests are part "of our growth strategy, which includes improving the business environment, maintaining a competitive exchange rate and increasing exports". I am glad he dismissed that nonsensical statement put out by the Jamaica Exporters' Association after his opening presentation, that opined that he had not addressed a "growth strategy". He not only dealt with that explicitly in his opening presentation but laid an entire paper on the issue in the House that day, but in our reading-averse culture, of course, that would be hidden from the JEA.
If you are talking out a serious intellectual engagement of the issues, you have to reckon with Bruce Golding's highly reasoned and nuanced piece in last Sunday's editorial page of The Gleaner. That's the calibre of debate we must have. Golding says, "The much called-for growth strategy ought not, therefore, to be seen as the next phase of the programme. It ought to be what defines the programme in the first place." But Peter showed that, indeed, that is factored in.
Bruce is absolutely right: "Our situation severely narrows the policies that are open to us. We genuinely need an informed, non-partisan discussion on what those choices are and how we should approach them." Peter Philips also made an impassioned plea for a serious dialogue on our options, rather than the ray-ray, bar-room kind of hysterical dialogue that passes for commentary in the press and among the chattering classes. "Electioneering is never far from the mind of any representative inside this House," Phillips conceded freely. "Yet what history and circumstances demand of us ... is that amidst this concern for the electoral contest we nevertheless find the way to identify and debate with truthfulness, honesty, sincerity, those issues that are fundamental to the existence and progress of our country. Truth should not be a casualty in our search for political advantage."
Pandering to economic ignorance and populism is short-sighted. It comes back to haunt those who ride to power through this means. Both PNP and JLP play these games. Andrew Holness, who knows better, played to the gallery by saying: "We have been to the markets and corner shops; we have been to the hospitals and we have been all over the island; and the universal cry of the people is this is not working." A part of your responsibility, Andrew, is to tell the people why there will be no hope of any betterment for them if we don't take the hard decisions now. The bitter medicine. Don't try to fool up the people and exploit their suffering by promising that you can end their suffering now. That's snake-oil salesmanship. Yes, the PNP has sold that, too.
Phillips pulled two appropriate quotes from former Prime Minister Golding and former Finance Minister Audley Shaw showing why austerity measures were necessary. You need to get the speech and read those choice quotes.
But, incidentally, Peter was unfair to Andrew in charging that he was "making a mockery of the passing of IMF tests". That is untrue, Peter. Andrew did no such thing. In fact, he said explicitly: "It is a good thing to pass the IMF test. However, the Government must pass the growth test. If the minister of finance doesn't pass the growth test, then he puts in danger the passing of future IMF tests." That is absolutely fair comment and spot on. Andrew is more nuanced than Audley on this.
But I support Audley stoutly in his call for specific incentives to the productive sector. I am uneasy about Peter's seeming unquestioned loyalty to IMF orthodoxy. Audley is more sceptical, challenging IMF theology. I think on this matter of picking winners and providing sector-specific incentives, I side with Audley over Peter. The weight of historical evidence for economic development is unmistakably on Audley's side on this. If you want robust growth, you have to move beyond IMF neo-liberal prescriptions. Now I know we have used incentives disastrously in Jamaica and that, as a practical matter, the IMF is hostile to them. But I warn that the growth agenda could, indeed, be imperilled if Peter does not adopt a little of Audley's scepticism about IMF dogma.