Economic interconnections: prosperity and education

Persaud

THE INSURANCE salesman/woman in Jamaica can be easily singled out by their lifestyle. I have always wondered why a society would plunder its teaching, nursing and social work professions, as well as its agricultural extension workers, in order to sell insurance. Is the task intrinsically more worthwhile to Jamaica? Is it not true that nursing is a profession that we will all, individually, find one day indispensable? Can we all afford Miami or New York for our medical attention, or to send our children abroad for their education? Even if this were possible, is it in the long run, good for Jamaica?

Of course selling insurance is a required activity in a modern society. Someone must go about, encouraging young entrants to the workforce into providing their future children, not to mention their retirement or old age years, with some security. And the middle-aged parent sometimes must be encouraged to have a few more sleepless nights pondering University education for the children and that mortgage. S/he must be reminded that "unplanned" death creates enormous problems for those surviving! It is possible for premature death (if there ever is such a thing) to cause the surviving brood to be plunged into the underclass and poverty. In addition, saving is a good and necessary habit for both individual and society.

Hitherto our insurance industry literally guaranteed the providers with a good living. But it is apparent that for a considerable period of time too much was being spent in garnering savings. It was felt that to be effective and successful required a lifestyle of opulence. Classy cars, numerous and luxurious offices were the order of the day for our insurance industry. In addition commissions were taken large and upfront. A little while ago some of this changed. Offices were closed, the number of agents and support staff reduced. Efficiency took on a greater level of importance. But some of the unnecessary opulence still remains.

In our banking industry, even after treasury bill rates fall, loan interest rates remain high and savings rates low. A few years ago, Bankers argued that they were compelled to hold 47 cents out of every dollar with the Bank of Jamaica. This they said was the reason they had to charge such high interest rates. Was this true? Perhaps not. For some of that 47 cents did attract interest income-about 22 cents of it. Furthermore our major banks still do not pay interest on current accounts. So something here does not compute. Could it be that the banks were/are inefficient? Could it be that they spent too much on executives, did not optimise their use of technologies available to them? Could it be that they made loans without the proper screening and therefore ended up with too many loans gone sour? Is it that borrowers took advantage of friendships, inter-connected companies? If any of these possibilities were true they must be changed in the interest of the financial sector itself! For such eventualities present long run contradictions for the sector and the economy as a whole.

If the society does not create wealth through production, then the financial services industry - indeed industry in general - will not prosper. Our society must therefore make the necessary changes in behaviour to halt this tendency.

Now it is within the realm of possibility for a whole society to decay. This could happen if its population is rendered non-literate, non-numerate, unhealthy and generally lacking in the tools, skills and nurtured abilities that allow the normal, animal/human drive to survive, to be channelled into pursuits acceptable to society. I am by no means suggesting that unacceptable occupations and activities-criminal behaviour-are the preserve of those whose abilities and education levels are not highly developed. Highly educated people, with highly developed skills and abilities, sometimes turn out to be most artful criminals engaging in so-called white collar and other crimes!

We speak of negative growth, which our country has experienced for too many years. But this is a euphemism. A tree does not grow negatively, nor does an economy. For "negative growth" read "decay". Decay does not set in and affect only export levels, or provision of roads. It affects everything!

Our financial sector is on a path to recovery after interventions of government and some investments by both local and CARICOM companies. Economic growth must be financed! For this path to be continuous and even remotely upward, however, a range of skills will have to be nurtured and developed. It is only through proper arrangements for education and perhaps more importantly, remuneration after accomplishment of such education, that the required skills will be created and retained.

It is time that salaries paid to scarce skills reflect their importance to the society. Politicians have indicated that differential salaries cannot be entertained in the teaching profession. They fear the power of the teachers union and its influence in vote-getting. I began by pointing out how insurance services gained the skills it needed. Everyone now supports the "market" - perhaps too much so and uncritically. Setting aside those issues for the moment, why not use it to increase our capacity to grow by developing the social infrastructure?

Mr. Persaud teaches Economics at the UWI and is a board member of FINSAC. Views expressed do not necessarily reflect those of either institution.

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