Fri | Aug 28, 2015

Peter's pie in the sky

Published:Sunday | January 13, 2013
No, it's not the bitter medicine! Lola Hamilton grimaces as nurse Shantel Yap pricks her finger during a blood sugar and cholesterol test. Columnist Gordon Robinson says the watchword of our labour force should be productivity. - Gladstone Taylor/Photographer

Gordon Robinson, Contributor

Peter Phillips' recent statement on IMF "negotiations" is a masterpiece of obfuscation and an education on how to say nothing at length.

He said nothing new. So, apart from trying to paper over the embarrassment of his losing prediction of December success, why bother to speak? Was it out of concern for transparency, or his party's political fortunes?

He began:

"On assuming office, one of the most urgent priorities ... was to reopen the line of communication with the IMF and negotiate a new agreement that would satisfy the interest of Jamaica's economic recovery, as well as the board of the IMF ... ."

Why the pompous rhetoric, Peter? What "would satisfy the interest of Jamaica's economic recovery"? What, fundamentally, caused Jamaica's economic decline? Wasn't it the huge unsustainable "external" debt (which we can't pay)? What other reason was there to go to the IMF? This seemed the main thrust of your Budget speech.

IMF funds will bolster our net international reserves, allowing us to defend the dollar without repeating the 1990s financial ruin. This keeps our external debt down in Jamaican-dollar terms. That's important because we don't earn enough net foreign exchange to pay the debt, and because much of our "external" debt is locally held. Right, Peter? The IMF seal of approval will allow us to borrow from multilaterals to help pay the same debt. Right, Peter?

So, it's OUR debt that's the problem. Right, Peter?

So, why the mealy-mouthed nonsense about IMF board satisfaction? Have you forgotten that we approached the IMF, not the other way around? The IMF doesn't require satisfaction. It doesn't need to lend us a dollar, and it won't unless we take steps we should've taken decades ago towards fiscal responsibility. Government isn't seeking IMF satisfaction but, like an undisciplined child, is checking the boundaries of what the IMF will put up with from a nation proven too irresponsible to be entrusted with its own fiscal policy.

So, your prior hand-wringing about "sovereignty" because the IMF insisted on eliminating tax waivers is exposed as populist politics, having more to do with a reluctance to give up political fiefdoms than "the interest of Jamaica's economic recovery".

HOLLOW SOVEREIGNTY ARGUMENT

This just in, Peter: We can't afford tax waivers. We haven't been able to afford them for decades. But the ability to apply ministerial whim and fancy to the largesse that are waivers is too shiny a political toy to surrender. Had we long ago concluded an IMF agreement including a 'no waivers' clause, could we have imported 16 SUVs for ministers almost tax free? Is "sovereignty" to grant waivers connected to the level of political parties' campaign contributions? As long as campaign contributions continue in secrecy, we'll never know.

Why isn't there agreement on simple fiscal issues after 12 months? What exactly are theĀ  "complex and weighty
issues"
Peter insists are "at
stake
"?

Who's fooling who? Peter
says:

"Over the past two months, discussions
intensified with the visit of senior officials to Washington, and while
many of us enjoyed the holidays, the negotiating team worked throughout
the Christmas period ... . Government is working to bring the
negotiations to a conclusion that's mutually satisfactory to Jamaica and
the board of the IMF. This agreement must be in
[Jamaica's] best interest and provide protection for
the most vulnerable
."

Let's get one thing
clear, Peter. Very few of us enjoyed the holidays. The overwhelming
majority of us weren't assigned a new Audi to drive for Christmas. We
endured weekly gas-price increases. We suffered with frozen salaries or
decreased earnings further eroded by inflation rates ignored by STATIN.
We endured buying less for more. Many would've enjoyed working through
the Christmas period, but some got just two weeks on the JEEP, others no
work at all. So please don't patronise us. Tell us the
truth.

The truth is, the IMF has no axe to grind. It
has no "satisfaction" index. It's Jamaica whose past follies drive its
Government's expressed need for IMF approval. It's Jamaica's Government
which placed all its eggs in the IMF basket with no apparent alternative
plan and then tried to talk tough to the IMF. What's your Plan B,
Peter, if the IMF insists on no tax waivers and you insist on
"sovereignty"? What's next when the "sticking point" sticks in our
throats?

But, the IMF
says:

"Jamaican authorities and the
International Monetary Fund have been engaged intensely over the past
few months, working on the technical elements of a possible
Fund-supported programme.
"

Let's break this
down for those hostile to the English language. Has Peter noticed that
the IMF doesn't seem to think it's involved in any "negotiations"? The
teams are "engaged intensely" on "the technical elements" of our fiscal
programme. The sticking points (including tax-waiver elimination) are
"technical" and unrelated, except indirectly, to policy or
"sovereignty". How do you exercise "sovereignty" over illusions like the
feasibility of tax waivers? If it doesn't exist, no amount of "policy"
will create it. Fiscal policy includes deciding you need to cut spending
and upon what to spend 'what lef''. What to cut are technical matters
upon which technocrats usually advise governments, whose veto ought to
be used sparingly when overall fiscal policy
demands.

Further, IMF support is only "possible".
Translation: "Look, enough time-wasting. Do whatever you want. We'll
drink your milkshake and, when YOU decide what's fiscally responsible,
we'll say if we approve."

Breathing
space

I believe Audley understood this message and
swiftly presented an approvable programme he possibly knew he couldn't
keep. Jamaica needed breathing space. So he implemented JDX and agreed
to several fiscally responsible but politically impossible future
actions to that end. Now it appears Peter is being fried in Audley's fat
and asked to implement "elements" of Audley's future actions as "prior
actions" before any further agreement is finalised. Instead of accepting
the inevitable to avoid economic disaster, we're treated to spectacles
of tearful concern for the poor and belligerent defences of
"sovereignty".

How will the poor fare without an IMF
agreement, Peter? How many of them benefit from the sovereign exercise
of Government's power to waive taxes?

Peter says:
"The discussions with the Fund technical staff are virtually at
an end.
" But the IMF says: "The IMF remains fully
committed to helping Jamaica achieve these fundamental objectives and
prepare the path for a more prosperous future, and discussions in this
direction are continuing.
"

Whose crystal
ball is correct? Unless the path is "for a more prosperous
future", the IMF won't support it. Discussions are "in this
direction
" only, which doesn't sound like "at an
end
".

What does the IMF consider Jamaica's
"fundamental objectives"? A rare IMF public retort
identified them: "Create the conditions for sustained higher
growth, achieve fiscal and debt sustainability, improve competitiveness,
preserve financial sector stability, and foster social cohesion,
including through an effective social safety
net.
"

Create
conditions for sustained higher growth:

The
important word is "create". It follows that those conditions don't
currently exist. Countries like Jamaica with high debt-to-GDP ratios and
small economies can only "create" these conditions by radical
structural reform. This means deep public-sector cuts which, twinned
with real incentives for small businesses, can replace unproductive
public-sector workers with productive private-sector entrepreneurs.
Closing Petrojam, investing in alternative energy, and embracing
expansion of new horizons like gaming could also
help.

We can't afford to discard productive citizens.
Raised retirement ages; productive graduates from education systems;
relaxed service-sector regulations (regulators become facilitators); and
fewer monopolies are national imperatives. The watchword should be
productivity. Environmentalists need to appreciate that Earth is no
longer pristine. Man de yah. For example, environmentally speaking,
roads are inherently invasive but
pro-production.

Achieve
fiscal and debt sustainability:

This isn't
rocket science. Austerity is necessary, but insufficient. Spending cuts
are essential (no SUVs). Tax collection must increase. However, our
insane tax rates (especially customs) must be reduced. Productivity the
watchword; growth the key. Realistic constitutional debt caps,
inviolable without a referendum, must be deeply
entrenched.

Preserve
financial-sector stability:

Keep interest
rates and inflation down. Financial-sector regulation, unlike in other
services, must be strict.

Foster social cohesion,
including through an effective social safety net.

This
is different from Peter's pronouncement that the agreement must
"provide protection for the most vulnerable". The IMF
won't approve without "social cohesion", which simply means the fiscal
programme MUST have bipartisan and civil-society support. The "effective
social safety net" is but a permissible route to achieving "social
cohesion", not a requirement of itself. An "effective safety net" may or
may not protect "the most vulnerable". It depends on how one measures
"effectiveness". The effectiveness of the safety net is sufficient when
"social cohesion" is achieved.

LOST IN
TRANSLATION

While the IMF speaks easily understandable
language, Peter appears not to grasp the essentials of fiscal
responsibility, and still clings to "sovereignty". He's "actively
focused" on: "1) the approach and timetable for a comprehensive
policy on tax waivers and 2) safeguards against fiscal slippage in this
fiscal year and the examination of even higher primary surpluses in the
medium term to underpin targets for debt
reduction.
"

While he's insisting on a
"policy" on tax waivers, the IMF has reduced the tax waiver issue to a
"technical" level. Does that sound like discussions are "virtually at an
end"? A juxtaposition of the IMF's simple statement of requirements
(action) and Peter's "active focus" ("approach"/"examination") will
expose the crapstorm we're facing.

The IMF insists on a
higher primary surplus (read: public-sector cuts and tax-collection
enhancements); while Peter waffles about investing "great
effort in advancing pension reform, wage negotiations, reducing the
effective size of the public-sector Establishment, tax administration,
introduction of a centralised Treasury management system, and various
pieces of enabling legislation ...
". What effort? What's been
done? What's an "effective size"? Has the public-sector wage bill been
reduced? How does "enabling legislation" translate into implementation?
Debt can only be reduced from primary surpluses. If your plan is to
forever borrow to pay debt, resign and let somebody else
try.

NOTHING has been done towards real fiscal
responsibility. Once again, we're hoping to trick the IMF into accepting
a "mouth cut" to close the deal. But, it's obvious to all but the most
politically sycophantic that the IMF is saying, "Fool me once; shame on
you. Fool me twice; shame on me!"

Peace and
love.

Gordon Robinson is an attorney-at-law. Email
feedback to columns@gleanerjm.com.