Alfred Dawes | Pot-bound economics
I recently took up gardening as a hobby. Aside from being very relaxing and fulfilling, it is also quite informative. For one, it helps to remind me of my limitations, where I may have extraordinary success in one area, yet fail miserably in a closely related endeavour, especially with orchids. The other epiphany in my garden is the reason why Jamaica cannot experience tangible growth and a viable middle class.
Before I am accused of pesticide poisoning, let me elaborate, using the simplest of analogies. When a plant grows too large for its pot and the roots circle around the inside of the pot and even grow over the edges, it is said to be pot bound. The growth of the plant is restricted by the limitations imposed by the boundaries of the pot, and it can never reach its true potential as long as it remains in that pot. The only solution is to break the pot or move it to another that allows it to grow to its full potential.
Before the Economic Growth Council was saved by a Deus Ex Machina in the form of COVID-19, we were nowhere near the promised five-in-four growth. Alas, the last quarter of growth was a mere 0.1 per cent. Jamaica just can’t grow. And while the rest of the world was growing, albeit inconsistently, our low rates of growth made us fall further and further behind each year. Not long ago, the reason we couldn’t grow was because of high interest rates stifling the economy. Once interest rates went down, banks could lend money cheaper and businesses would use this to expand, leading to more investments, jobs, and growth. Yet with Treasury bill rates close to zero and bank loans in single digits, there was still anaemic growth. We heard that the devaluation of the dollar would decrease imports and make our exports more competitive, decreasing the trade deficit and driving foreign exchange earnings. The Jamaican Dollar has moved from 5 to US$1 to 150 to US$1 in my lifetime, and that scenario never materialised.
Then it was the high debt burden that the Government had to be servicing. We moved from 145 per cent of GDP to now close to 90 per cent of GDP, but still nothing! The austerity measures imposed by the IMF were the cause of anaemic growth, but that agreement is no more. Pre-COVID-19 unemployment was at its lowest level ever. Yet the poverty rate was up. The inflation rate was below target. The exchange rate although volatile, has not seen the massive slides of years gone by, and the net international reserves were healthy. The indicators were looking good, but we never saw the promised boom.
A part of the reason why we cannot grow is that the innovators in Jamaica are pot bound by a system that rewards nascent wealth and political tribalism at the expense of those who can create value. Outside of a handful of innovators in the financial system creating mega companies, there are no Musks, Jobs, or Gates who can create our version of Silicon Valley. Novel products and services are quickly copied by the connected, and the pioneers are muscled out of the market without access to capital or political largesse. The young, bright dreamers have no outlet and remain pot bound, working in underfilled positions, or they migrate, and we then glorify their achievements growing the GDPs of other countries.
MINTED NEW MILLIONAIRES
The pandemic has minted new millionaires and created obscene profits for corporations that were innovative or nimble. Meanwhile in Jamaica, the sanitisation booths that were developed by local entrepreneurs are still in storage. Then there is the story of Christopher Christie, who saw the gaps in reporting COVID-19 cases and created a software programme that can furnish real-time updates as to test results from across the island. Not only does it tell you where the clusters of positive patients are, but identifies them as being high or low risk, data that can lead to contact tracing and effective action within hours instead of days with our archaic paper-based system.
Yet, he is clueless as to how to proceed with his game-changing app that can improve not only how we handle COVID-19, but Dengue, Chik-V, and any reportable disease. And while these ideas that can aid in reopening the economy and create value in small businesses languish, the big money is hard at work running from one hustle to another.
There are reports of container loads of ventilators bought on the cheap just waiting for enough Jamaicans to start dying in order to sell them to the Government at inflated prices. Outside of the sanitisation bill in St Ann, profiteering off the pandemic without any long-term value creation has reached epidemic proportions. With the right links you can get a contract in the private or public sector whether or not you provide the best value for money. This will only, of course, exacerbate the gap between the rich politically connected, and the poor, connected or not. But that is par for the course in Jamaica.
It is the small businesses that should be driving growth. But whether it is from being denied access to capital, not having the links to have superior bids approved, no pathway to markets for innovators, or simply the realisation that it is easier to hustle and get rich than to develop or improve on a product, small businesses are not leading the way to growth. If there is an Economic Growth Council II, they should listen more to small business owners’ talk about their daily struggles.
It would explain why we had one of the best-performing stock markets in the world for years, yet there was zero correlation with the growth rates of a large number of listed and unlisted companies. It seems that the tiny pot binding us is not our macroeconomic factors, but cultural and political barriers suffocating the development of an entrepreneurial class. But hey! What do I know? I’m just a simple surgeon-gardener.
- Dr Alfred Dawes is a general, laparoscopic, and weight-loss surgeon; Fellow of the American College of Surgeons; former senior medical officer of the Savanna-la-Mar Public General Hospital; former president of the Jamaica Medical Doctors Association. @dr_aldawes. Email feedback to firstname.lastname@example.org and email@example.com