'Driva Bruce' and his passengers
The Bruce Golding government last week unveiled one of the boldest, most hopeful and far-reaching attempts to deal with Jamaica's seemingly intractable debt albatross.
In a speech which has been widely hailed as being inspiring, thoughtful and confidence-building, and which led pre-eminent newsman Cliff Hughes to hail him as "a politician with 19 lives", the prime minister signalled that the reports of his political death were greatly exaggerated. The 'Driva' is back at the controls! And many of his formerly anxious and jittery passengers are casting off doubts about the authenticity of his licence.
What the Golding address to the nation demonstrated was that his administration was seriously and systematically tackling some of Jamaica's gravest economic challenges. It demonstrated that the Government could summon the boldness, fresh thinking and decisive actions needed to pull the economy from the earthquake-like mountain of debris under which the economy has been trapped.
can't keep borrowing
We cannot go on borrowing and borrowing. Nor can we tax our way out of our problems. Besides, Government needs to lose its loss-making entities. It must radically overhaul the public sector, as The Gleaner has been demanding, making government leaner, more efficient, more development-oriented, business-friendly and far more cost-effective. Low interest rates, low inflation, a stable exchange rate and a generally fiscally responsible state were all emphasised by the prime minister on Wednesday night.
We must not take away anything from the prime minister or his Government, but we must make one significant observation in the context of the international political economy. It was, by the Government's own admission, the International Monetary Fund (IMF) which not only facilitated the debt-exchange programme but insisted on it as a condition of any agreement with Jamaica. This is noteworthy and is particularly telling to me as someone who has always written about the primacy of international political economy and the global environment in influencing developments, in developing countries particularly.
Prime Minister Bruce Golding emerges from his motor car before entering Parliament to deliver his Budget speech last year. - File
I have never subscribed to the insular, parochial and woefully ignorant view that countries needed to simply put their own house in order, free up the market and ipso facto growth would follow. If the IMF were not in agreement with this debt-exchange programme, you would not have one - despite all the will in the world by the Golding government.
Too many of our commentators speak and write in blissful ignorance of the weight of international factors on local economic decision-making outcomes, with some parading their ignorance by saying that when calls are made for reforms of international institutions like the IMF, the World Bank and the World Trade Organisation; or when calls are made for global debt-rescheduling deals or for stabilisation funds to deal with exogenous shocks; this merely represents a cop-out by developing countries and is reflective of "the mendicancy of the Third World".
All we need to do, they say, is to set our own house in order, free up the market, give incentives to the private sector, attract foreign investments and "push production". Be it known that this Government and Jamaica would not have an additional $40 billion available to do critical things and would not have this ease in its debt burden if the IMF did not decree it or give its approval. It's that plain and simple. It would have to remain a
good idea in Bruce Golding's mind. You could free up the market until they are able to sell your mother, you would continue under the debt burden unless the big, powerful and almost almighty IMF said otherwise.
Notice something else very significant. There is a split between the representatives of international capital and the brokers for the international capitalist class. The IMF and the other multilateral agencies are lined up against the credit-rating agencies on this debt-exchange issue. The IMF has for some time been in favour of it, but the credit-rating agencies downgraded Jamaica merely because discussions were going on earlier, even before we made the move.
In the Golding speech on Wednesday, he acknowledged that the credit-rating agencies might yet again downgrade Jamaica's bonds, despite the fact that the debt exchange does not involve our overseas bonds. But Golding knows that with the imprimatur of the IMF, he can afford to tell the rating agencies to back off because he has "backative". Again, the power of the external. In his national address, he bragged that the IMF, the World Bank and the Inter-American Development Bank had pledged US$2.4 billion to Jamaica over the next 27 months. So what if the credit agencies want to downgrade after such massive support from the Washington Consensus institutions and their regional associate?
Golding even went as far as to say that Turkey, Uruguay and Argentina "have pursued not dissimilar strategies and before long they not only recovered but surpassed their previous best ratings". Bold talk - when you have backative! Golding would not have made that boast had he known he did not have powerful external support.
Remember, too, that the credit-rating agencies have lost much credibility and clout since the US sub-prime crisis and the subsequent global financial meltdown. Not only did they fail to see the collapse of certain key financial institutions coming, but they were complicit in misleading people and consorting with those who had much to gain from their casino-capitalist schemes.
We celebrate the debt-exchange programme but, as a globalist, I use it to point out the primacy of global factors in influencing indigenous political and economic development (while not eschewing the absolute importance of taking appropriate local action.)
Had the credit-rating agencies not lost their authority so ingloriously because of the global financial crisis; had there not been such a backlash over the financialisation of the global economy; greater pressure on the IMF to support states, not just finance capital narrowly, and a more state-centric IMF, you would not have had this debt-exchange programme. It represents a triumph of a number of factors.
Not all of them are external. The People's National Party actually helped the Government on this one, unwittingly. Because it has led a campaign to tax bank profits or interest income; because it has whipped up people's emotions and incited a "righteous indignation" over the issue of burdening the poor while letting off the rich; and because it has so effectively mounted a campaign about equity in taxation, the banks realised that to resist the Government's offer would not be in their best public relations interest. It was a deal which, for all practical purposes, they could not refuse.
The financial institutions knew they had much to gain by accepting the debt-exchange programme and much to lose by rejecting it. Business people are as pragmatic as much as they are patriotic. The public pressure that the PNP generated over the issue of taxing the banks, with many ordinary people saying, "Why them don't tax the big man and look how much profit the banks dem making," strengthened the hand of the Government in negotiating with the bankers. The fact that the Government is making substantial provisions for those banks, which might have some problems with their balance sheets, makes it a win-win situation for everyone.
Golding made an impressive case that his debt exchange programme is even better than the PNP proposal merely to tax interest income. It would have a much lower yield than his over $40 billion and would not structurally address the debt problem. The Government is clearly on to something with its debt-management strategy, and that it has strong multilateral support for it makes it unassailable.
Some will say there will be long-term consequences of what they consider a technical default. They will perhaps say Golding's optimism that Jamaica will fare as well as Argentina and Turkey might be wishful thinking. Golding might be flayed for dithering on this issue and for having lost opportunities to pull off this deal earlier. There are a number of issues which can be debated.
What is not debatable is that our enormous appetite for debt was killing us and had to stop. We needed some breathing space. But Golding's most telling point was his illustration, which he said came from one constituent who compared our situation to pushing a broken-down bus up a steep hill.
"There are times when it threatens to roll back on us. There are times when we feel we can't push any more. But if all passengers lend a hand, we will push that bus up that hill and when we get to the brow of the hill, we will find that pushing the bus becomes easier, and it will gather enough speed that it will be able to start the engine. After that, we will have to run fast to catch it."
So it's really not just about the Driva, after all. The Driva of this debt-ridden bus called Jamaica needs all hands on board. The Driva must inspire and motivate all the passengers to get the bus up the hill. And so this week Golding called in the banks, the trade unions, the Opposition (which did not issue any release decrying another national broadcast rather than a Parliamentary address); media owners and senior journalists and commentators who represent the public.
It comes back to another issue which I have always emphasised. The importance of social capital - co-operation, cohesiveness, trust, positive values and attitudes. If, as the prime minister says, "slackness, skylarking and failure are no longer options," we have to build partnerships, not partisanship; consensus, not confrontation. Perhaps we could take last week's activities, beginning with the deep consultations on Monday, to that Bank of Jamaica conclave on Thursday as a fresh start for Jamaica.
Driva, the passengers are ready to hit the road.