Boyne
Ian Boyne, Contributor
LEADER OF the Opposition, Edward Seaga, introduced a resolution in Parliament last Wednesday challenging the Government's economic policy direction and calling for a change to halt the economy's decline. He suggests that he has a better way than Finance Minister, Dr. Omar Davies.
The country now needs to concentrate its attention on studying and coming to a consensus on the broad strategies which need to be employed if we are to achieve economic development, which is much more than economic growth. The same way we were galvanised by the crisis in law and order and were jolted to do something about it, the same way we now need to be gripped with the sense of urgency in tackling our enormous economic challenges.
For make no mistake about it, there is an intimate connection between security and the economy. If we continue to throw people on the unemployment heap without creating adequate numbers of new jobs; if businesses go under, even in the Schumpeterian style of "creative destruction" without new businesses being created; if the dollar continues to decline, pushing up costs in this high import-dependent economy; and if healthy economic growth continues to elude us, then we will not avoid the "fire next time".
SIMPLIFY ECONOMIC SITUATION
It is important that ordinary Jamaicans understand complex economic issues. And there is a way to effectively and plainly communicate complex, involved economics issues. Not many economists possess the skill of clear speaking or writing indeed some equate scholarship with turgid prose and recondite speech but the journalists and talk-show hosts must draw out the facts and paraphrase simply so that the people in Trench Town, Majestic Gardens can understand. And, yes, the people in Cherry Gardens and Norbrook need to understand, too, for many uptown people are abysmally ignorant on economic issues.
If we do not understand these issues for ourselves as people without economics degrees, we are easy prey to manipulation by those with vested interests. There are any number of propagandists and spin-meisters out there armed and dangerous in propaganda warfare. Only our own base of information will protect us from their deadly weaponry. I recommend one book for those who don't have much to spend and who would like a book simply written, reader-friendly but extremely sophisticated in its scholarship and breadth. It is the recently revised book by the University of the West Indies' political scientist and Gleaner columnist, John Rapley, Understanding Development: Theory and Practice in the Third World. If you want a first-rate, hard-to-be-bettered primer on the global economy, economic issues, political economy all the critical issues in economics today, your safest bet is to get Rapley's book.
CONNECTIONS
Rapley is a second-generation Oxford-trained intellectual who is one of the most rigorous and intellectually stimulating persons I have read in political economy though he himself is not an economist but a political scientist. He is a master communicator and demonstrates convincingly that brilliance and incomprehensible communication is not synonymous. Because Rapley has a keen interest in philosophy, he is able to make connections and pull strands together in a way that most of those narrowly trained in economics cannot.
"Understanding Development" traces economic development from the immediate post-war period right up to the Asian financial crisis of 1997 and gives an analysis of it all. No one should be without this book. Another author I recommend in this necessary quest to understand the economic issues which face us while the propagandists are preparing their artillery is Robert Gilpin. His two recent books, Global Political Economy: Understanding the International Economic Order and The Challenge of Global Capitalism are two of finest I know of which deal with the critical economic and ideological issues being debated. We need to arm ourselves with the facts as we contemplate the possible alternatives to Omar Davies' economic policies.
IS THERE ANOTHER WAY?
Are there viable alternatives to Omar's strategies? Is he really as smart as he believes or would the Jamaica Labour Party's policies be better and create more jobs and bring greater levels of investments?
There is a great deal of economic naivete and plain stupidity being expressed. Some of the so-called "experts" themselves are not widely read and have a very limited understanding of economics. Many know finance, which is a subset of economics. They have very little understanding of political economics or international economics and don't have the philosophical grounding which would help them to make rigorous economic analyses. The intellectual acuity of a John Rapley shines through because of this philosophical orientation.
In the age of the Internet there is no excuse for ignorance. Ordinary Jamaicans, many of them in the working class, now have Internet connection for we Jamaicans love to profile with the latest gadgets. The IMF's Web site, for example, is a goldmine of information. All the papers by its economists are online. And it's updated almost every day. All the issues which we are debating here exchange rate policy, devaluation, fiscal crisis, independent central bank, dollarisation, financial liberalisation, the production crisis, foreign investment strategies all these issues are discussed with serious empirical backing. You can get that free. The World Bank also has its papers online and so does the Organisation of EconomicCo-operation and Development (OECD) and the United Nations Development Pogramme (UNDP).
There is no excuse for ignorance today. We must give the propagandists a harder time. Let them have to work hard and don't let them take us for granted. If we don't like books commonly thought as a safe place to hide things from black people let us use the computer to get the information. The JLP is challenging the Government's economic strategies. Ordinary people should intelligently join the debate. Don't depend on either Omar's defenders or on Mr. Seaga and his supporters to skew the debate and blindside you. Have a base of information. Don't depend totally on the Jamaican media either for they are not as unbiased, "objective" or impartial as they make out themselves to be. Read me with skepticism but a willingness to reason.
One of the things you need to study early are the constraints which the global economy impose on developing countries like Jamaica. We are used to thinking that it is Omar's decisions or P.J.'s that are really crucial to Jamaican economic development. But the more we study we will see that any Jamaican Government including any headed by Edward Seaga or Bruce Golding is seriously constrained by the decisions of the United States, the IMF and World Bank as well as the World Trade Organisation. This is not to excuse the PNP Government, for in an environment where there is little room to manoeuver, there must be serious attempts to make sure we are doing everything right to maximise our small window of opportunity.
I believe, for example, that the JLP's Manifesto has some excellent ideas. Even if you are skeptical about the super-projects which it proposes and scorn "statist development", there are a number of practical, workable ideas which it contains which the present Government would do well to adopt. Now that the election is over the Finance Minister should revisit the JLP Manifesto to see which ideas are usable. What is wrong if we "actively support and provide additional incentives for the establishment of venture capital firms to provide equity to businesses with growth potential" as the Manifesto recommends? We need more direct incentives to producers who must then be held accountable for performance. What is wrong if we "allow capital expenditure incurred on approved value-added activities to be immediately and fully expensed in lieu of annual depreciation"? (JLP Manifesto)
We have to draw the best ideas from all quarters to confront our economic challenges, and we can't afford the luxury of partisan thinking and egotism to get in the way. The JLP, however, must stop giving the false impression that there is some easy way out of the economic wilderness and that it is simply Omar's incompetence which is preventing economic growth. This view will have traction if our people are uninformed and careless about educating themselves. And we in the media must press the JLP spokespersons to tell us in concrete terms what differently they would do given our circumstances and the constraints in the real, WTO-governed, unipolar world. It's no time for myth-making and politicising serious issues.
The entire November/Decem-ber issue of the economics journal Challenge is devoted to 'Market Failures'. In it is a fascinating article, Why There's Chronic Excess Capacity. It traces the developments from the Golden Age of modern capitalism the quarter century after World War II, to the economic downturn today. The article points out that neo-liberal, free market policies have resulted in a global depression:
"Global income growth has slowed substantially from the Golden Age pace as has the rate of capital accumulation. Productivity growth has deteriorated; real wage growth has declined and inequality has risen in most countries; real interest rates are higher; financial crises erupt with increasing regularity, especially in developing economies; average unemployment has risen; the less developed nations outside of East Asia have fallen even further behind the advanced nations; and post-1997-growth in east Asia has slowed. There is the continued reproduction of substantial excess capacity in most important globally contested industries."
GLOBAL CAPACITY
The author, Economics Professor, James Crotty, of the University of Massachusetts, quotes business publications which speak of this excess of global capacity. Then he goes to the empirical data: "The most widely accepted work on long-term economic growth has been done by Angus Maddison for the OECD. It shows that the annual rate of growth of real global GDP fell from 4.9 per cent in the Golden Age of 1950-73 to 3 per cent in 1973-a drop of 39 per cent calculated on a per capita basis.The decline in the growth rate was 55 per cent. In Latin America GDP growth dropped by 43 per cent between the periods while Africa showed a 38 per cent decline. The only major area where GDP growth increased was Asia (excluding Japan) an area in decline since 1997 Asian crisis. Using a different measurement procedure from Maddison's, the United Nations estimates that world GDP grew at an annual rate of 5.4 per cent in the 1960s, to 4.1 per cent in the 1970s to 3 per cent in the 1980s to 2.3 per cent in the 1990s."
When we discuss the performance of the Jamaican economy since the 1970s it is important to put it in global context for we are told so often that it is only in Jamaica that we have experienced these economic problems, that we might come to believe it.
It is good that the JLP is encouraging debate on these critical economic issues and that the minds of so many are focused on the economy. But it is even better that we do so in an informed way.
