More pain coming: get used to it
The media were in a frenzy all of last week over new unemployment figures which showed that the rate had reached a 10-year high at 16.3%, with youth unemployment well over 30%. And to deepen that alarm, bus fare increases of 25% were announced effective today.
Our media do a poor job of putting things in context and telling the larger story. But especially in this age of instant communication and information overload, there is a growing need for backgrounding and surgical analysis of issues.
The Sunday Gleaner had an article last week obsessing over the question: 'Can a jobs czar do it?', with the sub-title 'Worrying unemployment rate sparks talk on need for a minister to drive growth'. Why do we believe that reshuffling vocabulary can change our deep structural problems? Or is the problem that we don't recognise the problem?
My good friend, the affable and cosmopolitan banker Aubyn Hill, has been touting this idea of a Ministry of Knowledge Economy, geared at driving economic growth. Others are talking about having a jobs czar, language as antiquated as it is obnoxious. But that did not prevent Dr Chadwick Anderson from endorsing the idea as well as adding some other recommendations for czar, in his own article in The Gleaner on Thursday.
He hails Ireland's Ministry of Jobs, Enterprise and Innovation, just two days after the International Monetary Fund published its paper, Dismal Employment Growth in EU Countries: The Role of Corporate Balance Sheet and Dual Labour Markets. In that paper, the IMF notes that while employment increased by two per cent in Germany and Poland where there is no ministry of jobs, "employment dropped by 14% in Ireland", where there was such a ministry, between 2008 and 2011. So much for semantical economics!
It's time we get off Fantasy Island and wake up from our Cartesian dream. It's time the media start educating our people better about the choices which face them in the real world and the consequences of certain choices. We are on an austerity and fiscal consolidation programme under the tutelage of the IMF. Fiscal consolidation, fiscal compression and austerity are not compatible with stimulus and Keynesianism. A neoliberal economic approach, which is favoured by the IMF, prioritises monetary policies like inflation, interest rates, exchange rate - not employment.
If you know anything about neoliberalism - and those who write and do commentary on public affairs have an obligation to know these things - you know that employment is usually a casualty, certainly in the short term, of neoliberal policies. One of the criticisms of neoliberalism has been precisely that while there is a focus on inflation targeting, there is no such emphasis on employment targeting. The Bank of Jamaica's concerns, as Governor Brian Wynter again reminded us, is about inflation, interest rates and exchange rate. That's its determined focus.
Do you think the Ministry of Labour has as determined and targeted an approach to employment creation and employment targeting? Apart from trying to send away a few thousands of our low-skilled Jamaicans, does the Ministry of Labour do the kind of cross-functional and multi-faceted targeting of employment growth and unemployment mitigation? Well, no wonder people are calling for a jobs czar! There is no targeted focus on jobs.
And, supporters of the neoliberal model will tell you boldly that in a competitive market economy, there is no need for a Ministry of Jobs or a jobs czar, for private sector-led growth is supposed to take care of that. If government policies are business and investment friendly, prudent and hard-nosed investors will create jobs. That's the neoliberal view.
Let's cut to the chase: You had better get accustomed to the bad news in the short term. It will get worse before it gets better. Self-serving politicians will come by and tell you they have the magic wand and they can create economic miracles. That's the job of politicians. Ours in media and civil society is to educate people to understand their options and the results which will inevitably flow from certain decisions taken by the State.
Right now, we are on an IMF path. It's a demand management programme which often includes heightened unemployment and price increases. Government is following the programme strictly. That's why it passed its first IMF test and why the IMF review team has given them high praise. The IMF programme is contractionary. The cutback in government expenditure must affect business. If business is affected, workers will be affected. Demand will slow. That's what an austerity programme is supposed to do! It is not a stimulus programme.
Of course, it is supposed to eventually lead to a stimulus (so the theory goes). It is supposed to get rid of the distortions in the economy and to incentivise increased production and productivity, which should boost employment and growth. But this is not going to happen overnight, and you would expect people in media to understand and explain this. We should not be startled that unemployment and prices are increasing. That's what fiscal austerity does.
Our media people should be telling people what the effects of an IMF programme are likely to be. So did you expect that employment would be steadily increasing during this period of fiscal adjustment? Did you expect that the National Debt Exchange would have no effect on business and the economy in the short term?
Did you expect that the Jamaica Urban Transit Company (JUTC) would continue to run at a loss and to bleed the public coffers and that the Government would be absorbing the cost increases while under the watchful eyes of the IMF, and with certain targets to meet? Why don't we wake up from our dream? How do you think we reached the point where our debt has reached 140 per cent of GDP?
Why do you think our fiscal deficits have been so high? Why do you think our public enterprises have racked up billions in losses? You think it's sheer incompetence, wickedness or bad-mindedness? It is because people wanted to postpone hard decisions for as long as possible.
Why do you think the Jamaica Labour Party abandoned the last IMF agreement? Because Audley Shaw was incompetent and didn't know how to meet those stringent IMF targets? No, because he and his Government knew how much pain it would cause and how costly following the IMF programme was. They knew it meant political suicide.
KICKING THE CAN
We have been kicking the can down the road for decades. That's why we are here. The fact of the matter is as a nation - PNP, JLP, Jehovah's Witness, Rasta - we have been living beyond our means. It's cutback time. It's crunch time. Don't mek duppy fool you. I have written consistently about the pitfalls and limitations of neoliberalism, but I have also acknowledged that certain aspects are necessary, though by no means sufficient. We have to get our macroeconomic house in order.
I am not surprised that employment is a casualty of this IMF programme. I am not surprised about bus fare increases and other price rises which are to come. Politicians will seek to exploit people's hardships and their ignorance.
But I have a few questions which I want to see these politicians to address between their rabble-rousing and populist pandering: Is there a non-IMF path that the JLP would pursue if elected? Would the JLP get the IMF off our backs and free us up to keep on subsidising bus fares, keep water rates low, and get the dollar back to at least J$85 to US$1?
Would the JLP repudiate the debt so we would have money to fund education, health and security adequately while providing more concessionary loans to small business? Could we use some of that money saved from debt repudiation to provide an economic stimulus which would create jobs?
Let's be real. Or, in JLP leader Andrew Holness' favourite words, let's be clear: The IMF is not going to change its tune depending on who occupies Jamaica House. And that is one thing the challengers to Andrew Holness need to understand - or the JLP delegates. Merely having a leader who is tougher, louder, coarser, and more cantankerous than Andrew Holness might help you to get into Jamaica House, but it won't help the country escape the hard decisions we have postponed for 40 years which the IMF would insist we do. We want a licence for continued irresponsibility and profligacy. We want to eat our cake and have it.
We had better get accustomed to this new normal (at least for the short term) of high unemployment, high prices, and lowered expectations. It's going to get worse before it gets better. We in media can't be alarmed every time we see an unfolding of the austerity programme. That 7.5% primary surplus has to be achieved. We signed to it. That's not consonant with high employment expansion tomorrow.
Yes, logistics hub is coming, there is big hotel expansion, and the Chinese are rolling out their big investment plans. But as Minister of Finance Peter Phillips explained in an interview last week, it takes time from investment decision to implementation.
I worry about the proposed tax reform which is coming next month, as announced at that Ministry of Finance press conference with the IMF last week. The JLP and the private sector have been pressing the Government to be "bold" with tax reform. The IMF was clear last week Thursday that its tight fiscal programme will not be adjusted and that our tax system has to be "simplified". These are code words for unleashing GCT tax burdens on the backs of the poor.
More pain is coming. You had better get used to it.