Mon | Feb 24, 2020

Jamaica must first believe to become developed, progressive

Published:Sunday | July 3, 2011 | 12:00 AM

Ralph Thomas, guest columnist

A small boy sits on the edge of the 50-metre stadium pool as he contemplates the challenge of covering the distance in his first race at that venue. He wants to be a champion. He is my son, five years old at the time.

One of us looks very worried; it is me. The water looks deep, the distance endless. It is my job to motivate and encourage him to be the best he can be. That is what fathers do. Unsure about the outcome, I do my best. I need not have worried though, as he looks me in the eye with supreme confidence unbecoming a small child facing a great challenge and says the simple words that floored me: "Dad, you have to believe to become!"

As I ponder the hefty document published by the World Bank titled Country Economic Memorandum - Unlocking Growth, I recognise that there is a treasure trove of information, analyses, observations and conjecture in this 322-page document concerning the outlook for our country and our people at a critical juncture in our history - the approach of our 50th year as an independent nation. Already, some pundits are expressing doubts about our viability as a nation and suggesting that we may have been better off had we remained part of the British colonial empire.

no confidence

I am puzzled by this lack of confidence in nationhood and sovereignty and the yearning and aspirations of a people for freedom from the tyranny and control of persons far away who exploit resources and suppress dissent. Given a choice again, would we so freely turn our backs on the sacrifices of our forefathers to achieve self-determination? Have we not come a long way, achieving many enviable goals on our path to development? Have we not, over many years, overcome many political, economic and environmental challenges and advanced the interests and well-being of our society despite missteps and miscues along the way as we learn and grow as a fledgling nation? We have set what appears to be increasingly challenging goals for national development in our Vision 2030 plan, which aspires to achieving developed-country status by the year 2030.

Against the backdrop of a sustained period of national recession accompanied by the decimation of the middle class, re-emergence of accelerating poverty, price increases and national debt soaring to stratospheric levels, it is indeed not unexpected that as a people we may begin to lose hope as self-doubt creeps into our consciousness. This is also reflected in the widening perceptions of social and economic inequity, a divide between rich and poor that threatens the social cohesion of our nation and the achievement of our Vision 2030 goal.

As we confront this wavering national confidence, it is a matter of national interest that the four lectures delivered and to be delivered by former and present prime ministers in the series of presentations labelled 50-50 reflections, sponsored by the Sir Arthur Lewis Institute of Social and Economic Studies (SALISES), be taken seriously to gain the benefit of insights. The lectures reflect on the past 50 years and the vision of the future. Prime Ministers Seaga, Patterson and Portia Simpson Miller have already presented their lectures, and each has reflected intellectual acuity and unique perspectives on our development. Prime Minister Golding is expected to present his lecture in the near future.

As we reflect on these developments and study the findings of the World Bank report, we can be inspired by the voice of a small child facing a challenge and his admonition that we must "believe to become". He meant that he should believe that he could swim the distance and ultimately become the champion he dreamed of. In our case, it means that we must recommit to our national vision of self-determination, freedom, justice and economic viability; that would make us a developed nation in the shortest possible time. We must "believe to become".

But we must actualise the confidence derived from this belief by better strategic thinking, tactical planning and focused programme implementation. This should be accompanied by deeper ethical standards, honesty and truthfulness of our public-sector workers, politicians, business persons and wider society.

challenges

What are the challenges identified by the World Bank report? The diagnosis is that we have failed to achieve our potential as measured by growth in gross domestic product (GDP) and ranked in the lowest quartile of developing countries. Our numbers look a little better when differences in inflation rates are taken into account. Inexplicably, we received one of the highest levels of foreign direct investment flows of any nation when compared to most Latin American and Caribbean (LAC) countries and even the fastest-growing states of Asia, which should have correlated to high growth rates.

These investment rates were as high as 28 per cent of GDP. Clearly, the key parameter for accelerated and sustained growth, which is investments, had been achieved, and in any other country would have taken us where we aspire to be as a nation: developed-country status. This dichotomy is largely unexplained by the report.

Four key areas were explored as a way of explaining this unexpected result. These were: high public debt overhang, low total factor productivity (TFP) of workers and differences in education quality and investments. However, the latter area had outperformed and only provided an explanation when the nature of the investments, principally in tourism and mining, was explored. These two sectors were largely culpable for our failure to grow gross domestic prod(GDP), because of what the World Bank defines as "enclave development" - where the benefits of these investments did not flow through the economy in a manner that it would benefit other sectors and act as an income multiplier that increases GDP growth. This "enclave development" model must be addressed by public policy if we are to reshape the outcome and achieve our objective of developed-country status.

The overhang of public debt, at its worst, was more than 200 per cent and declined under the strictures of previous International Monetary Fund (IMF) programmes to as low as 80 per cent. Again it has grown to 140 per cent of GDP, and is likely to grow further if we do not arrest our insatiable appetite for borrowing and structurally adjust our economy. The IMF programme and its pro-cyclical policies discipline our expenditures, but hamstring growth. If the economy were to grow significantly, then this debt-to-GDP ratio would fall.

However, the interdependency of macroeconomic variables makes this like chasing a phantom, as you can't grow an economy by austerity measures and cutting necessary expenditure required to fuel growth. Reckless and poorly directed spending remains the greatest risk to achieving the dual outcome of economic growth and debt reduction.

In examining education relative to other countries as an explanation for low economic growth, the statistics were unconvincing, as we fared reasonably well against a sample of 67 countries, but, expectedly, fared poorly when compared to the US - a necessary but unfair comparison. Educational disparity played a role, but was not the most significant cause of our underdevelopment. Linked to the productivity of workers, there was significant evidence that improvements in this area would help. But is it education, in the classical sense of examinations and more academic certifications, or more skills training and critical thinking skills in select fields of human endeavour supportive of productivity that we need? Is it both, and in what combination? How should we reshape our educational policies to address these issues?

lagging behind

According to the World Bank, Jamaica's TFP per worker lags behind most other countries' in Latin America and the Caribbean. For example, our productivity was 85 per cent of the Latin America and Caribbean average, a serious cause for concern. As much as 40 per cent of the disparity in GDP was said to be explained by this weakness in productivity. Does this mean that we have the laziest and most good-for-nothing workers in the region? It does not. Twenty five per cent of this low productivity was blamed on human capital, with 10 per cent related to labour force intensity. Other factors not in the control of workers affect productivity. These factors include the unwillingness of the owners of some Jamaican businesses to invest their capital in modernising plants, utilising technology and achieving efficiencies of scale in both production and distribution. Such efficiencies may, ironically, cause reduction in the labour force and increased unemployment. About 30 per cent was explained as a physical capital gap. Investments by GraceKennedy in a distribution centre and planned investments by Lasco are, therefore, significant and more businesses should follow suit.

Deficiencies in the business environment, government bureaucracy and red tape, high crime rates and taxes were also important factors. Surely, high-energy costs are a critical factor that would explain disparities. Also, tax waivers cut government revenues by 20 per cent and add to fiscal deficits, influencing growth in debt to finance gaps. The high proportion of the informal economy and skilled migration were also factors, with 85 per cent of all college graduates living abroad.

To reshape our economy and achieve our destiny, we must act confidently and make the necessary structural changes that can result in sustainable development and the achievement of a safe and just society. The right mix of policies for integrated and socially equitable development is necessary. It is also a matter of "believing to become". We must believe that we can!

Ralph S. Thomas is a senior teaching fellow and joint appointee of the Mona School of Business and the Department of Management Studies, UWI. He is a financial consultant and was a vice-president of the Bank of New York-Mellon. Email feedback to columns@ gleanerjm.com and ralphthomas003@yahoo.com.