Dawn Ritch, ContributorIN A report last year called "The old guard outgunned", about the results of the Jamaican general election, the Economist stated "...there is now little to chose in policy terms between the PNP and the centre-right Labour Party, which traditionally presented itself as the party of economic competence. This election has therefore turned on personalities, where the PNP has the edge."
The weekly newspaper out of the United Kingdom also said that the PNP "...proclaims a sort of lukewarm third-way Blairism, with ministers preaching the virtues of the Internet and the 'knowledge economy'... Neither party has offered any convincing answers to the pressing problems of the public debt, the low standard of education, and crime".
I would have thought that banishing government incompetence and corruption by voting JLP would have been answer enough to the country's economic and other problems. Income and revenue have no point if it's just thrown by the bucket-load out the window, while men in suits on the other side try to catch it by the cup-full. I would have thought it was perfectly obvious that this was no way to run a country. But it seems that the matter is more complex than that, and that what the country needs urgently is yet another committee to give us the answer. I joke of course.
I learnt my economics in a Chinese grocery at the corner of Windward and Belmont Roads. In order to buy tamarind balls, I had to climb upon the single railing so that I could reach the counter and sign the exercise book. The Chinese man wrote down six tamarind balls - 3 d., and I signed my name beside it.
I was given early introduction to credit and debt, which was paid off monthly by my parents. Naturally, I was soon put on a small, weekly allowance, but could earn an additional sixpence for every "Very Good" gained on school work, or thrupence for "Good". I grew fat on tamarind balls and chocolate Rosebuds.
That was the 1950s, however, long before everybody began to feel timid and think that it couldn't be real economics if they could make head or tail of it. Or that credit and debt were good things for governments, but not for private individuals and companies, because a country could always switch out of this debt and into another debt to get lower interest rates, and that additional overseas borrowings were always available for governments (but not private individuals and companies).
Well, it seems to me that all this modern thinking has just been turned on its head. Argentina, the former darling of international lenders of every description, put paid to that. The country was denied further overseas borrowings for a long interregnum. The Argentine middle-class had to line up outside the banks while their U.S. dollars were converted to pesos by government edict and with the complicity of the courts. There is a limit to government borrowing it seems, even on bad terms.
During the two-month long strike in Venezuela, the Government imposed controls on the overseas payables of private Venezuelan companies. So there are limits to credit too.
What Jamaica needs therefore is cash, not the borrowed or stolen kind, but the kind that is earned. This means that the PNP Government has to become more investor-friendly and encourage production in Jamaica by Jamaicans, so that we can earn money.
In the recent past the PNP Government has understood "encouraging production" to mean going into joint ventures with foreign investors in targeted sectors like telecommunications and roads. The experience has been all too often that the foreigners lose Jamaican taxpayers' money, and fail to generate the promised jobs for Jamaicans. This economic model lacks the commitment of the Jamaican entrepreneurial spirit.
Even the suggestion from JLP Opposition Leader Mr. Edward Seaga, of activist state investment policy, implies some sort of joint venture with private interests. This has its weakness as a strategy, because the public debt is already so high.
Instead of looking to tax the informal economy, which may be wishful thinking on the Finance Minister's part, Dr. Davies should lower deficits, lower interest rates, and lower taxes. Private individuals and companies need more cash, so that they can spend money to buy the stuff of life and expand their companies to earn more money and create more jobs. Instead we brace ourselves, fearing exactly the opposite.
There is talk in some quarters of floating a US dollar global bond to borrow more money to finance government spending or perhaps switch debt, which has been putting pressure on the value of the Jamaican dollar recently. This will not only increase the public debt along with higher debt servicing as interest rates rise, but could prove very disastrous as the Jamaican dollar devalues. Everybody seems to believe the dollar will continue to devalue. There is now almost a herd mentality about it.
Dr. Davies must therefore step up to the counter and put everything on the table because technically we have no money. Every single public debt, deferred or otherwise, must be written in the exercise book of the House of Parliament. This is not the time for hiding, or trying to sneak out two tamarind balls. Dr. Davies must own up and account to the Chinese man. Then the Finance Minister's figurative parents, who are the tax-paying people of Jamaica and the overseas lenders, will doubtless recommend the urgent need for generating more national revenue, as distinct from mere revenue collection.
It's also time we all stop talking nonsense about Jamaica needing a low inflation model, as though that ideal state can be achieved by wishful thinking. With an overvalued exchange rate and no confidence in the Jamaican dollar, devaluation is inevitable and will mean inflation in the short run.
Above all the public debt is the real issue. It cannot be magicked away, or caused to be made to vanish. It is real, and the sovereign obligation of the Government of Jamaica, which obligation has to be repaid by the earnings of the people and taxpayers of this country.
Only economic growth can get us out of the debt trap. This economic growth can only be produced from the increased output and production of the members of the Jamaican private sector at every level.
It is all too obvious, however, that the Patterson administration has no plan whatsoever on how to achieve buoyancy in the Jamaica private sector, instead of only closures and more joblessness islandwide. Their prescriptions are Houdini-like and ineffably complicated, even though the bankruptcy of Dr. Davies' policy has long been exposed.
These are times that separate the men from the goats. The Reagan era ushered in 19 years of economic expansion in the United States. Between 1982-1989, 20 million jobs were created, and contrary to popular mythology, most of them paid at least US$10 an hour.
What is completely lacking here is a Jamaican politician who surrounds him or herself with people who are of the conservative, pro-business ideological mould. We need to get some of these people. Only then will the right policies emerge that can create economic development and growth.
