Tue | Nov 12, 2019

Briefing | Edward Seaga - Who is a visionary?

Published:Wednesday | June 5, 2019 | 12:28 AMAndre Haughton/Contributor

While in a conversation with the late former Prime Minister Edward Seaga, he raised a pertinent question and quickly provided the answer. “Andre, do you know the difference between a visionary and a dreamer? A dreamer dreams with his eyes closed while a visionary dreams with his eyes open ... “.

Edward Seaga was definitely a visionary leader. He envisioned and established many institutions and policies that were necessary to maintain and improve an economic system of people and businesses in Jamaica. He had many interests, including improving sports, music, culture and folklore, but his passion from my interactions with him, was to develop a diversified robust economy that unearthed the natural potential of its people to produce goods and services to compete globally.

One day I received a call on my office phone.

“Good day. May I speak to Dr André Haughton?”

“This is him,” I replied.

“Dr Haughton, this is Mr Seaga, Edward Seaga. I have been reading your articles in The Gleaner. I think we need to talk.”

Mr Seaga was particularly interested in commissioning a research to analyse the sustainability of Jamaica’s foreign currency reserves over the medium to long term. He wanted a better understanding of how to maintain the value of the Jamaican currency, which he knew was a direct derivative of the total amount of foreign currency that Jamaica earns or have access to compared to the amount of foreign currency that leaves the island or is expected to leave, which was a derivative of the value of the goods and services traded or type of investment flows with the rest of the world. He was concerned that Jamaica might find itself in foreign currency liquidity problems if it continued on the same path, which reminded him of his interactions with the International Monetary Fund (IMF) when he first became prime minister in 1980.

In his first presentation in Parliament, he focused on the state of the economy and addressed Jamaica’s foreign currency deficit and budget deficit. The Extended Fund Facility was initiated in 1981 and Jamaica gained access to US$105 million; US$40 million from USAID (the United States Agency for International Development), US$40 million from four local branches of overseas banks and US$25 million from Venezuela. These were accompanied by structural adjustment loans from the World Bank.

The dollar’s value

Mr Seaga had strong views on the value of the Jamaican dollar. He believed that a stronger currency illustrates a stronger national economic position. And as long as Jamaica is paying out more foreign currency than it is earning, the economy is on a roller coaster heading over a precipice. He spent much of his time as a leader trying to properly coordinate the Jamaican economy to increase or maintain the value of its output relative to the rest of the world.

Mr Seaga negotiated and initialised the Caribbean Basin Initiative that allowed goods produced in the Caribbean to enter the United States without tariff, which improved the volume of trade between the US and the Caribbean. Cash-strapped government back in that time engaged in barter transactions with trading partners, for example, bauxite was bartered with the US for rice, as well as with the Soviet Union for Lada cars. Efforts were made to reduce the import bill of the country. Quantitative restrictions were placed on certain items that were imported and, therefore, some rationing of their distribution as a result. Structural adjustment programmes were accompanied by austere measures, a push to devalue the currency, job cuts and other factors that were often seen as counterintuitive to the economic growth objectives. Many other countries around the hemisphere faced similar challenges and encountered similar circumstances with the IMF and the World Bank during that time.

Mr Seaga was concerned about the well-being of the people of Jamaica. In an episode with the IMF, he asked them, “Name one developing country in the world which has been a success story using devaluations imposed by the IMF adjustments?” They could not find an answer. It justified his prescribed approach to maintain the dollar at a particular value. During his tenure as prime minister the exchange rate maintained a stable value relative to the US which was critical in his growth expansion strategy.

Dr Andre Haughton is a university lecturer and opposition senator