Cabinet retreat, no IMF advance

Published: Sunday | January 13, 2013 Comments 0
All eyes on Peter Phillips and Portia Simpson Miller over the protracted IMF talks. - Photo by Janet Silvera
All eyes on Peter Phillips and Portia Simpson Miller over the protracted IMF talks. - Photo by Janet Silvera

Ian Boyne, Contributor

It was the worst case of bad timing: The need to present a report card for her administration's first year in office - demanded by an
Observer editorial, among others - and the Jamaican people's unquenchable thirst for information on her Government's negotiations with the International Monetary Fund (IMF). The people had absolutely no appetite for achievements, or any looking back. What scares them is what is ahead.

And so Prime Minister Portia Simpson Miller was severely attacked not so much for the speech which she gave, but for the one she did not give: one telling us where exactly we are with the IMF, how near we are to concluding an agreement after the finance minister's missed deadlines, and what will be done, concretely, to halt the slide to our dollar and our net international reserves (NIR); what will stop spiralling prices. When the people did not get that, they were furious, and now with additional tools of protest at their disposal (Facebook, Twitter), they vented and fumed.

The Government has to understand the people's rage. There are business people who want to make projections but who don't know what the hell to do because they don't know how close we are to an IMF deal, what the deal will involve, how that deal will affect economic activity or the social and political climate. They can't price their imports or products because they don't know where the dollar will be without an IMF agreement. They don't know how much they will be able to borrow and at what interest rate, or how their customers and clients overseas will be affected by our continuing economic uncertainties.

Workers see their wages being depleted every day with increases in the supermarket and all over the place. Their wages are not going up, whether in the public or private sector. Indeed, they fear they will lose their jobs in this IMF-less economy. Uncertainty and instability are the two principal words - with their attendant emotions - on people's lips. They want to know what 2013 really holds for them. That is what they were hoping to hear when the prime minister spoke last Sunday night.

STRIDENT CALLS

The Government has to understand people's expectations and anxieties. After all, it has been one year since the People's National Party (PNP) administration has been in power, and it is not unreasonable for people to expect that an IMF agreement should have been concluded by now. The strident calls for IMF - information - now from the powerful Private Sector Organisation of Jamaica (PSOJ) and the Jamaica Manufacturers' Association last week would, no doubt, have provided some urgency to Government to disclose more.

Sounds were coming from the Cabinet retreat that the Government was seized with the urgency of giving in to the demand for more concrete information. But let's face some issues squarely. It is common sense that you can't disclose specifics or details of negotiations while they are being pursued. I understand the call for information on the negotiations and I believe the pressure to conclude an agreement as soon as possible is appropriate. Government must do everything in its power, use all its technical resources possible, to get an agreement signed.

Patrick Bailey, who is certainly no PNP supporter, made a lot of sense on 'All Angles' last Wednesday night. He pointed out that the demand for specific information in the midst of negotiations is not rational. It was his view that if the prime minister had nothing concrete which she could have revealed last weekend - if the negotiations were still inconclusive - rather than speak in generalities, it had best been left alone.

We chastise our politicians for double-speak and deceptive communication and then chastise them when they keep quite when they have nothing to say. If the Government cannot give me a reliable commitment and tell me as it really is, I don't want reassurances just to comfort me and make me feel good. I don't think it appropriate to conduct negotiations in public. I never thought so when the Jamaica Labour Party was under pressure from the PNP over its stalled IMF negotiations, and I don't think so now.

SENSITIVE TALKS

I know the view that IMF negotiations should not be secret for, after all, we the people are sovereign, and if our representatives are negotiating on our behalf, we have a right to demand that we know what they are signing on our behalf. For we are the ones who have to face the music. But in the real world of representative democracy, not original Greek-style direct democracy, that is unworkable and idealistic. Sensitive negotiations cannot be conducted that way.

We already know the broad framework of an IMF agreement. We know some of the standard things the IMF demands. And I don't hold the view that any deal is better than no deal. No, I don't believe that delay is necessarily good, for look at what the delay is already doing to our dollar, NIR and prices - not to mention public confidence. Delay is danger, I concede. But I don't believe that we should sign an agreement which is impracticable and which we cannot fulfil. We did that already. We had better learn our lesson.

Some of the people screaming for an IMF deal right now seem oblivious to the fact that it's not just a matter of signing something to get some money and to have multilateral funding flowing in. This is an agreement with tests which we must pass. And if we start failing them, we are back to square one. So if the IMF is demanding a more rapid rate of adjustment, whether higher primary surpluses or a 'more realistic' exchange rate, it would be irresponsible of the Government to simply agree because the pressure is mounting to sign. No deal is better than a bad deal.

Let's take the issue of waivers and incentives. It is a fact that our system of waivers and incentives is grossly inefficient, unproductive, and unwieldy. The discretionary powers of ministers of finance have been abused. I was stunned when I read an Inter-American Development Bank study on our incentive programmes and realised how many we have.

So an urgent revamping and restructuring is needed. But not a wholesale abandonment of all incentives and waivers. Incentives and waivers played a major role in the economic development of the Far East and, indeed, in the economic development of the West, beginning with Britain. This neoliberal view of getting rid of all incentives is totally ahistorical and misguided, and has been empirically demonstrated to be so by such distinguished economists as Ha-Joon Chang, Dani Rodrik, Erik Reikert, Joseph Stiglitz, and now former chief economist at the World Bank, Justin Yifu Lin, in his 2012 book, The Quest for Prosperity: How Developing Countries Can Take Off.

Says Lin in his empirically rich book: "A close look at the history of capitalism reveals that even Britain and the United States, conventionally believed to have succeeded by adopting laissez-faire policies ... actually promoted their national industries through various forms of active government intervention that included tariffs, subsidies and other measures. Many of today's rich countries also used extensive government intervention to jump-start their process of modern economic growth. In the 19th century, Germany and Japan kick-started their industrialisation with state-owned enterprises in textiles, steel, shipbuilding."

And then after World War Two, Austria, Finland, France, Korea, Norway and Singapore used state-owned enterprises and various incentives to modernise their economies. The ideologues at the IMF who are pushing certain policies on countries like Jamaica - unquestioningly followed by some uninformed pundits here - are scorning economic history and even contemporary economic affairs. So I believe that if the issue of waivers and tax incentives are a "sticking point", it is a sticking point that our technocrats must fight over before another lever of investment attraction is pulled from us.

Performance criteria

Yes, get rid of waivers to political cronies, party contributors and others who can afford them like athletes, and be like the East Asians and tie waivers and incentives to specific and measurable performance criteria. But don't, in theological fashion, just wipe out all waivers or emasculate our minister of finance who will need to grant concessions to some investors.

Not every IMF deal is worth having. I don't know that it is due to scrupulousness why we don't have an IMF deal already. That pressure is mounting on the Government to conclude a deal is good, because it also adds pressure to the IMF, which is not totally insensitive to public sentiments. Let the IMF know that the State is under pressure from powerful business interests, civil society, including media, and the masses themselves for an agreement.

But don't let politicians give us empty assurances, capitulate to our insistent demand for specific information and mislead us on details and specifics when they themselves are not sure. When Government has something concrete to tell us, tell us right away. Do a national broadcast for that. (All the PNP's trumpeting about its one-year achievements is lost on the people who could not care less about that. They want to know about the way forward; not what has gone in 2012.)

There is one good thing about all this hyperventilation and intense interest over the IMF and the economy. It provides the Government, the Opposition and civil society, particularly the media, with an excellent opportunity to discuss the sacrifices necessary to take this country out of the hole it is in, with or without the IMF. There are some tough decisions which we, as a people, have to make, with or without Washington. Our people's ears are opened now. Let them hear.

PSOJ President Zacca says the private sector is willing to bear its share of the burden. Good. Let all sectors talk frankly about what they have to do to make this work. Don't waste this crisis with partisanship and one-upmanship. Let a genuine, robust dialogue begin on the way forward.

Ian Boyne is a veteran journalist. Email feedback to columns@gleanerjm.com and ianboyne1@yahoo.com.

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