Tue | Oct 23, 2018

Letter of the day: Sugar is not too big fail

Published:Monday | May 4, 2015 | 12:00 AM


The proposed imposition of a cess on imported sugar in the manufacturing sector goes against the spirit of free-market capitalism.

If we accept that in a free market, companies and industries in an economy go through a life cycle, part of which includes slowdown or eventual death, it is not treason to conceive that the sugar industry in Jamaica has reached such a stage.

The arguments being put forward by those in support of the cess have a glaring resemblance to the 'too-big-to-fail' arguments that dominated the debate about banks in America and Europe in the aftermath of the 2008 financial crisis.

The mechanisms of a free market are such that industries and firms which become uncompetitive fail in order to free up capacity and resources in the economy to allow for new industries and companies to emerge.

The cess being proposed seems to confer a divine right on the sugar industry to continue to survive when all the indications point to imminent failure. If the industry should fail, let it fail so that resources can be freed up to allow entrepreneurial innovation to take its place.

To tax the barely stable manufacturing industry to prop up the ailing sugar industry defies free market logic - it amounts to sticking up a broke man, an analogy put forward by Horace Dalley.




To add insult to injury, we have now learnt that the cess is to be used to fund Jamaica Cane Products Sales (JCPS), an entity in which the Government has no stake. Free-market logic seems to have been flipped on its head. Why tax one capitalist entity to fund another? Is JCPS providing a public good that no other entity can provide?

If the owners of JCPS are short on cash, the local and international financial markets exist for them to raise the funds they need. For the capitalist class of the sugar industry to be hiding behind the frock tail of Government is cowardly and disingenuous.

If you cannot face up to the vagaries of the free market, you should not be in business. Business and industries fail; it is just a fact of life - and no amount of tax can change that.

The sugar industry cannot tax its way to competitiveness; it must, like other industries, use the mechanism of the market to improve efficiency, innovation and productivity.

Andre N. Poyser