THE EDITOR, Madam:
KINDLY ALLOW me the opportunity to compliment Professor Errol Miller for his article contained in The Gleaner of Friday, November 10.
As we continue to grapple with the harsh prevailing economic conditions we deliberately and conveniently avoid a proper analysis of the events of the early 1990s that have placed our country on the path of economic decline. The Private Sector which lead the change is no less guilty for our demise than the international agencies namely the IMF, World Bank and the IDB. At work at the time, and perhaps now, was local greed and self-interest and Jamaica was not thought of. These external agencies under the guise of structural adjustment gave our ailing economy the final blow.
Much has been said in Professor Miller's article which I endorse, but I would like to expand on the question of devaluation which was one of the planks of the agencies recommendations. Incidentally it still remains a hotly debated remedy for our economic ills. It failed us then and it will continue to fail because it is not a suitable remedy for our economy.
Devaluation of a country's currency will not improve its export where it triggers production cost which nullifies the benefits derived from the devalued currency. In our case the reasons are:
Our raw materials and capital goods are mainly imported thus production suffers from the higher cost of these inputs.
Effective devaluation assumes spare capacity in the short-run and technological change in the long run. Without these elements there will be export stagnation.
Our manufacturing sector for example was able to survive and even made profits behind the walls of protection. Once the walls were removed, competition from foreign import ensured their demise.
Given this scenario and knowing our penchant for imported goods, devaluation can only make our condition worse.
I am, etc.,
32 Begovia Dr.