Editorial | Pushing Jamaica’s growth strategy through science and technology

Despite the tremendous effort to achieve growth and macroeconomic stability, Jamaica's GDP growth rate has stagnated for the last two decades.

The last time the country approached anything close to three per cent growth was in 2007. After a significant drop in output during the global crisis, a decade later, the country has still not regained the pre-crisis level of real output.

Between 2003 and 2017, the average annual growth rate was a mere 0.6 per cent. At this rate, it will take Jamaica over 115 years to double the current level of output; clearly untenable.

Prime Minister Andrew Holness is therefore correct to identify the need to accelerate growth as a national priority. Jamaica can only hope to attain national prosperity with a sustained period of annual growth averaging above four per cent for a generation. While the country has invested in major reforms to get faster growth, clearly more needs to be done.

Since the 1980s, Jamaica has undergone significant structural reforms under the administration of both political parties to deregulate, liberalise, remove price and import controls, eliminate foreign exchange controls, and to significantly reduce government ownership of the economy via privatisation and divestment. These reforms have changed the Jamaican political economy fundamentally from a state-dominated and heavily regulated economy, to a market-driven one.

This long-drawn-out but successful shift was reinforced later by additional fiscal and monetary reforms, culminating in greater independence for the Bank of Jamaica and the enactment of Fiscal Responsibility legislation to limit the extent to which policymakers can act recklessly.

These are of great importance in building confidence and credibility. They have contributed to the country's reduced debt stock and greater macroeconomic stability. These are significant accomplishments for Jamaica and should be protected.

Review of growth strategy needed

However, despite these policy successes, danger lurks. The reforms have not raised living standards on the scale needed. Long-term public support for the model will depend on the improvements in real wages over time.

Fundamentally, an economy grows via the infusion of science and technology through innovation to raise productivity over a sustained period. If policies and reforms are not directly or indirectly aimed at raising total factor productivity, then growth will at best be spasmodic and anaemic. This has been Jamaica's experience since the end of the 1960s.

Science, technology and innovation have been given very little attention on the reform agenda, or indeed the overall development strategy. This is not surprising. Most scientists and technologists, while having a general understanding of the importance of their work to growth and development, are not well placed to champion the reforms needed to ensure that productivity incentives are at the core of public policy.

Most scientists engaged in public policy debates seem to focus more on the needs of specific projects or industry; debate around the cannabis industry being a good example.

The first element of a review of strategy should involve ensuring that the country consolidates the gains from the macroeconomic and structural reforms implemented so far. Second, the government should ensure future reforms are linked directly to long-term productivity growth.

Achieving this second element calls for action in four areas: Investment in science and technology capability to boost industry - this is the core of productivity growth; policies and incentives to encourage private fixed capital investment - both hardware and software; development of skilled labour capable of utilising modern techniques - modernising the national training and apprenticeship capacity; expansion of public-private infrastructure to adopt and adapt modern technology systems.

The payback for investments in these four areas tends to be long, while both the political leaders and the private sector have mostly short time horizons. As a result, these types of investments are not prioritised.

In the long run, we cannot raise real wages for workers without productivity growth, and if real wages do not grow, prosperity will only be a dream. A larger and deeper debate is therefore needed about spurring growth through modern science, technology and innovation policies.

The future of Jamaica's competitiveness will be largely determined by the quality of its institutions, policies, and factors that determine the level of productivity of the economy.