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The Election and the economy - Life after the 'bitter medicine'

Published:Sunday | December 11, 2011 | 12:00 AM

Ian Boyne, Contributor

The Gleaner has been continuing its relentless campaign to get the political parties to focus on issues and ideas, but it seems to be waging a losing battle, what with the almost daily eruptions of excitement over scandals, political outbursts and intrigue.

Why should the parties, especially the People's National Party (PNP), bore the country talking about its economic alternatives when it can play masterfully to the gallery by talking about the prime minister's bleeps and blunders, his battle with the media, Jamaica Development Infrastructure Programme and now this latest spy-plane mystery? Asking questions about whether we can trust anything said by any member of this Government is bound to generate more passion than any cerebral examination of economic issues.

So rumours of impending extraditions, the whereabouts of 'Treasure' Campbell, and who is into what are better bets at engaging public attention than debating economic strategies. For Heaven's sake, even for columnists it's hard to resist the temptation to be consumed by the immediate and latest sensation over the really substantial.

But in just a couple of weeks when we dispense with the political games and when the scandals, mysteries, outrage, charges and countercharges will not mean as much, we have to settle down to take our eucalyptus oil! We will have to face our debt albatross, our fiscal crisis, our balance of payments woes, our intense struggle to eke out an existence, and our unemployment and underemployment crises.

Our prime minister has been making it abundantly clear that he is a fiscal conservative who believes in the magic of the market. Just this past week, he took his free-market gospel to the proverbial Vatican, the Private Sector Organisation of Jamaica (PSOJ), and according to a Gleaner report last Thursday, he promised that the Government would "step aside to allow the sector to expand", after evangelising them to "unleash" themselves to "allow the economy to grow".

PNP policies unclear

The PNP has not been as clear and decisive as Andrew Holness has been on its economic philosophy, leading The Gleaner, in an editorial last Thursday, to jab party spokesman on the economy, Peter Phillips, about his reticence. But the PNP has no incentive to spend much time in a serious intellectual engagement on the economy, as it suspects it can ride to power on a wave of allegations of scandals, corruption, lying, "the wickedness of this Government" and "hard time for poor people". Those of us in media who are unrestrained by party-political timetables and agendas must freely engage in the necessary discourse on this country's economic options.

The PNP should do what Barack Obama did last Tuesday when he went to an area with historic significance to the Republicans and pulled on Republican stalwart Teddy Roosevelt to challenge the neoliberal ideology of his political opponents. He delivered what pundits have called his most important economic speech of his presidency. Brilliantly drawing on Teddy Roosevelt to confound his latter-day successors, Obama said, "Just as there was in Teddy Roosevelt's time, there's been a certain crowd in Washington for the last few decades who respond to this economic challenge with the same old tune. 'The market will take care of everything,' they tell us." Obama ridiculed those whom he said suffer from "a kind of collective amnesia". It's the same here, just that some of our debaters never had the knowledge in the first place.

To listen to our financial analysts, media commentators and even some University of the West Indies academics, you would believe that it's only 'dundo heads' who believe that the state can play any productive role in a modern economy. People who believe in an activist state must either be wild-eyed socialists living in a time warp, or foolish idealists who have not grown up.

Let's start with some facts: The countries which are growing the fastest today are not those which only provide security and collect garbage. China, India and Brazil all have strong state sectors. And a country which has been heavily praised by neoliberals, Chile, is also one where the state has a very active role. Chile actually has the most impressive performance in Latin America, not Brazil.

Chile is number one in the region in terms of competitiveness, according to the Global Competitiveness Report. And according to the latest Human Development Report, Chile has the highest level of human development in Latin America, and ranks 44th out of approximately 200 countries. During the first half of the year, GDP increased by 8.4 per cent (way above Brazil's). Chile has reduced poverty from 40 per cent of its population in 1990 to 15 per cent in 2010. There has also been significant progress in the provision of educational opportunities, health care, income support to poor families, as well as access to housing and social infrastructure. Chile, since it rejected the pure neoliberalism of the 'Chicago Boys' (named after Milton Friedman and other economists from the academic epicentre of neoliberalism, the University of Chicago) has been growing handsomely.

Sound principles

Sure, Chile is a capitalist society which uses the market and practices sound macroeconomic principles. Remember, my point has always been that macroeconomic stability and fiscal discipline are necessary, but not sufficient means of development. I agree with all the things The Gleaner has been campaigning for. I am simply saying that The Gleaner does not go far enough. In other words, even if we were to do what the Gleaner editorials are recommending, we would still not be assured of economic growth, let alone employment growth and the reduction of inequality, two very important indices of development.

The mantra of social democracy has always been: 'As much market as possible, as much state as necessary.' I am not advocating a command or Marxist economy. What I strongly oppose is laissez-faire capitalism. In the latest issue of the Harvard International Review (fall, 2011), Chile's former president, Ricardo Lagos, praises his country's model of social democracy. Says Lagos: "A contrast is drawn between social democracy - in which public policies are designed in accordance with citizens' aspirations to both complement and temper market forces - and neoliberal democracy - in which the market is prioritised above all and citizens are viewed primarily as consumers."

maintaining stability

Lagos goes on to say in that article (The Chilean Way: A Look at Social Democracy in the 21st Century), "The modern world is characterised by tensions between the market and the state. In neoliberal democracies, society is structured by market values. Public policies are viewed as unnecessary or treated as of secondary importance because it is believed that the spontaneous, unregulated behaviour of the market should determine the type of society that will emerge."

This view that once you free up the market, create a stable macroeconomic environment, growth, jobs and social progress will emerge must be challenged. And we must debunk this notion that any questioning of the primacy of the market is 'old-style socialism'. Nonsense and absolute ignorance. Modern, sophisticated economies are being run on the mixed-economy model.

I told neoliberal Colin Steele, in an interview on 'Nationwide at Five' last week, that 20 per cent of Singapore's output comes from state-owned enterprises, while the international average is 10 per cent. And, remember, Singapore is the darling of many neoliberals. The Economist special report on 'Business in India' (October 22 issue) reveals that 40 per cent of the profits of India's biggest listed firms come from the state. "In finance, energy and natural resources, they control at least two-thirds of production."

The Economist goes on to say (I hope these financial analysts are reading this): "In aggregate, the 24 state outfits in the top 100 generated a 17 per cent return on equity, on par with the private sector, and profits almost doubled in the past five years." Of course, privatisation has been increasing in India since it launched its liberalisation programme in 1991. But the state still remains strong.

All the major economies have grown with strong state guidance and intervention. That's how Britain and the other early industrialisers grew. Economic scholar Ha-Joon Chang, in his book Bad Samaritans, says, "From the 1880s, most European countries raised protective barriers, again partly to protect their farmers from cheap imported food from the New World and partly to promote newly emerging industries such as steel, chemicals and machinery."

Economic miracle

Japan used the state heavily to promote its economic miracle. Japan rejected neoliberal advice from its American advisers and used industrial-policy planning to guide its development. South Korea, Taiwan and Singapore used state policy to guide their development. The World Bank, in 1993, published its East Asian Economic Miracle: Economic Growth and Policy Planning showing what lay behind East Asia's phenomenal rise. A later World Development Report glorified the developmental state.

Says famed progressive intellectual Noam Chomsky in his book Profit Over People: Neoliberalism and Global Order: "How did Europe ... succeed in developing? Part of the answer seems clear: by radically violating approved free-market doctrine. That conclusion holds from England to the East Asian growth area today, surely including the United States, the leader in protectionism from its origins."

The Scandinavian countries have an activist state which has not left people's welfare to the market. Even the International Monetary Fund knows that the state can't kick back and leave social development to the market. In the December issue of its main journal, Finance and Development, there is an article, 'Are the Critics Right?', addressing common criticisms of the Fund.

It acknowledges: "Improving education and health is a priority for emerging and low-income economies ... . Empirical studies suggest that higher government spending in these areas can improve educational and health outcomes." The article notes that International Monetary Fund (IMF) programmes have become "more flexible in recent years about accommodating high budget deficits and inflation". What? Don't tell the neoliberals here about such heresy! This is why it is important to pressure the IMF to make concessions to social welfare, and to consider not just inflation targeting but employment targeting.

The PM, in his sermon to the PSOJ last Tuesday, pledged: "We will reduce the crime risks ... . Bring the capital and we will guarantee you stability." No, Prime Minister, you can do no such thing unless you have a state willing to invest in people and their welfare.

Ian Boyne, a veteran journalist, is the 2010-11 winner of the Morris Cargill Award for opinion journalism. Email feedback to columns@gleanerjm.com.