Fri | Sep 22, 2017

Voting for the IMF

Published:Sunday | November 29, 2015 | 11:00 AMIan Boyne, Contributor

Irrespective of which political party wins the next election - whenever it is called - it is the International Monetary Fund (IMF) that will assume power. Despite all the prancing and tracing on the campaign trail, and the promises of Utopia being dispensed, it is the bitter medicine of the IMF that will be served up after the euphoria of victory has subsided.

I am not making out the IMF to be any bogeyman. A number of the policies that it recommends make economic sense and are inevitable if we are to have economic growth. And one of the things people have to understand and which no Opposition would have any interest in teaching at this time is that certain painful decisions we want to avoid and would make us turn to the Jamaica Labour Party (JLP) are really inescapable. That's no apology for this "wicked" PNP Government. It is just a fact.

Some of my work colleagues laughed me out of the room with my ridiculous suggestion that what is needed is for Andrew Holness and Peter Phillips to go around the island and hold joint town hall meetings to educate the people about basic economic literacy. I said neither party would benefit from having a country of misguided people who are expecting paradise without first encountering some pain. They ask me which country I was living in! And they were right. What interest would the JLP have in making people believe that it could not deliver a painless path and make their lives better next year than this year? Why would people vote out the People's National Party (PNP) if they did not feel the JLP could do substantially better economically?

But what is going to happen is that if the JLP wins, it won't take long before people's rising expectations are met with equally rising frustration, as the tough economic realities over which we have no control in the short term continue. Hear this: No matter which party wins the next election, that 9% wage-to-GDP decree of the IMF will have to be met, come hell or high water.

Pension reform will come and can't be delayed for much longer. There will be other tough-on-the-pocket measures which will be applied. No incoming JLP Government is going to wave ta-ta to the IMF, as P.J. Patterson did some years ago. It is not going to happen.

 

COMMITTED TO PATH

Let's just accept that our two political parties are committed to the IMF path. The private sector last week made a strong call for both parties to commit to certain macroeconomic policies, no matter what happens in the election. They don't have to worry. Andrew Holness and Audley Shaw would not be dilly-dallying with the IMF as the last JLP administration did. So here's the thing: Seeing that we are stuck with the IMF for the time being, and seeing that our economic conditions demand fiscal prudence and some degree of austerity, those of us who have a voice had better strategise as to how we can use that voice to influence the outcomes of that premier Washington Consensus institution.

The facts indicate that the IMF is not impervious to criticism and pressure. The IMF is very sensitive to public opinion because of its unfavourable history in the developing world, as well as some spectacular failures in Asia and the developed world (it got trounced during the global economic meltdown). Some IMF purists have been pointing out that its recent relaxing of the primary-surplus target is largely because of the Jamaican Government's recent PetroCaribe deal and general fiscal prudence which has pushed down our debt rate faster.

The Gleaner was very quick to shoot off an editorial on Monday, November 16, after the previous Friday's announcement of the relaxation, warning, 'Don't let go of fiscal discipline'. The editorial did not waste any time in scolding: "We expect there will be much crowing of vindication among the deficit deniers and advocates of unaffordable Keynesian-type spending and fiscal indiscipline. They misapprehend."

The Gleaner has continued to make the unassailable point that there is need for fiscal discipline, some austerity and for responsible spending. But it has not been as acutely sensitive to the growth-constraining effects of austerity and has not given enough attention to the very reasonable point that there comes a point when austerity and fiscal consolidation are counterproductive - literally. The loud calls from the Opposition, some private-sector voices, Claude Clarke and other pubic commentators for growth and not just austerity have had an impact on the IMF.

 

ADVOCATES GONE SILENT

Unfortunately, the voices that used to speak up for workers and marginalised groups have gone silent and, in some cases, have joined the neo-liberal choir. Danny Roberts of the trade union movement has done a fine job of advocacy, but many of his colleagues in the union movement have become too complicit with neo-liberalism and have resigned themselves to powerlessness. The interesting thing is that neo-liberal friends like Dr Damien King and The Gleaner are now saying matter-of-factly that, oh well, it's just a matter of doing the maths to see that this concession from the IMF is just commonsensical. As The Gleaner says in another editorial (November 20), 'Wanted: serious economic debate': "The sniping of the surplus target could take place only because the discounted buy-back of US$3 billion in PetroCaribe obligations put debt on a faster trajectory than anticipated." This is the narrative being pushed.

But it's funny, for before the IMF decided, in its wisdom, to make this slight adjustment freeing up $12 billion, none of these neo-liberal voices was making that "do the maths" point. They were saying don't change a thing; don't make any adjustments. Don't listen to these populist naysayers calling for adjustments to the fiscal programme. They are just irresponsible Keynesians and political opportunists like Audley Shaw - some of the same people who brought us to the brink with a 150% debt-to-GDP ratio!

When some of us were recommending that the fiscal surplus needed to be lowered, we were told that that would be irresponsible. Before the IMF came up with it, there was no Gleaner editorial or any speech by Damien King saying now that the PetroCaribe deal has been made we can ease the primary surplus just a little bit. No, it has only been since the IMF has seen it fit to do so that we are being told how logical and deductive that move really is! It would have been more credible if our home-grown neo-liberals had suggested that, rather than merely now echo the IMF.

Audley Shaw might overdo the playing to the gallery bit, but to his credit, it must be said that he has shown a boldness and intellectual nerve in standing up to IMF dogma. That is commendable. He has deftly criticised specific IMF policies and has shown how wrong-headed some of them are. I think that while we are stuck with the IMF, we have to ensure that we don't blindly follow their prescriptions but have the intellectual confidence to critique their ideas. The IMF is not infallible.

 

NO SPACE FOR BLIND FAITH

If you think it is, I recommend that you read the International Labour Organization's lengthy paper, The Decade of Adjustment: A Review of Austerity Trends2010-2020 in 187 Countries. I also recommend another ILO paper, Fiscal Space for Social Protection: Options to Expand Social Investments in 187 Countries. We can't just passively and docilely gulp down IMF medicine in blind faith. The IMF has given very bad advice in a number of countries, and those countries have paid dearly.

The Government has boasted that it has protected "the most vulnerable" in crafting its austerity policies. But it is not enough to protect "the most vulnerable". There are working and lower middle-class persons who need protection, too. As the ILO paper The Decade of Adjustment points out, "Given the large number of vulnerable households above the poverty line, universal policies may better serve developmental needs."

Neo-liberals here are pushing for more consumption taxes and the removal of exemptions. They are in favour of "targeted subsidies". Be wary of this. As the ILO paper warns: "While subsidies can be removed overnight, developing social protection programmes takes a long time, particularly in countries where institutional capacity is weak" - like Jamaica.

Election - whenever it is called - is the easy part. The struggle for development under an IMF path is the real challenge.

- Ian Boyne is a veteran journalist working with the Jamaica Information Service. Email feedback to columns@gleanerjm.com and ianboyne1@yahoo.com.