Don Robotham | Jamaica in the low-tech trap

The Jamaican economy is stuck in a low technology trap. This is also a low growth trap and a low wage trap. The official Bank of Jamaica projections for 2023/24 is 1.6 per cent; for 2024/25 it’s 1.1 per cent; for 2025-26 it falls to one per cent and for 26/27 it’s also one per cent.

So, forget ‘five-in-four’. According to the Government’s own data we face a dismal future of persistently low incomes, a weak tax base and more social unrest. The fundamental task facing the country is how to reverse this descent into low wage hell--what economists call ‘premature deindustrialisation’ and ‘the middle income trap’ – and to begin to lift the economy and people’s lives unto an entirely new level.

RISE OF INDUSTRIAL POLICY

The policies being pursued by our current Government cannot achieve that. They are rooted in the old Washington Free Market consensus which Washington itself has abandoned. In this model, countries are economically borderless and nations are left to produce only what they have a competitive advantage in, even if these means they are confined to low-value added, extractive raw materials and ‘raw services’ activities.

In contrast, the Biden administration has embarked on an unprecedented industrial policy with the Infrastructure Investment and Jobs Act, the Inflation Reduction Act and the Chips and Science Act. This amounts to a massive US$1 trillion state subsidy to the private sector and an aggressive picking of winners, especially in the EV/AI sectors, as a means of outcompeting China. All the talk is about ‘near-shoring’ and ‘friend-shoring’ and ‘decoupling’ – in other words segmenting the previously ‘free’ global market into parts tied to the US exclusively. The European Union is doing the same, as is China. The WTO has been sidelined. Neoliberal globalisation is stiff stone dead. Yet this is the stale paradigm which our Government thoughtlessly regurgitates and imprisons us in.

PREMATURE DEINDUSTRIALISATION

Global value-chains have shifted massively to Asia and contributed to wholesale deindustrialisation of the US/UK. But the countries of the Global South, such as Jamaica, have had a similar experience – what Harvard economist Dani Rodrik calls ‘premature deindustrialisation’. This is the phenomenon whereby the manufacturing sector of these economies, under pressure from highly efficient global production ecosystems anchored in Asia, have drastically been curtailed and even collapsed, even before they have had time to develop. Jamaica is a classic example: between 1987 and 2003 the Jamaican garment sector collapsed by a whopping 65 per cent, withering under the pressure of Asian competition. In 2000, manufacturing contributed about 18-20 per cent to our GDP. Today it is a mere 10 per cent. We currently have 495,600 persons in the informal sector, but only about 76,000 in manufacturing. We have become a poster child for premature deindustrialisation and the low technology trap.

As manufacturing has collapsed so has the level of technology in Jamaican factory processes. Labour productivity is low and there is no technical innovation taking place at any firm or sector or national level. No surprise then, that, in addition to becoming a low-tech economy bedevilled by premature deindustrialisation we have also become a low-income society with a ‘bang-belly’ financial sector, picking over our economic carcass, vulture-style. Frustrated expectations for the grassroots Jamaican and financial crimes by the elite and scamming are the inevitable consequences.

TOKENISM AND EL SALVADOR

Presently, only token measures are in place to correct this 50-year slide. The proposed five new STEAM Academies represent three per cent of all high schools and the Innovation Fund gets only 0.1 per cent of the Budget. Agricultural research is to get 0.09 per cent. The Scientific Research Council is to get 0.07 per cent while the Agro Investment Corporation gets 0.06 per cent. A paltry J$159 million is to be spent on educational transformation.

The real policies in Jamaica are not about development at all. They are about wage repression and the states of emergency (SOE): low wages in the BPO sector; low wages in the tourism sector, low wages in the public sector and low incomes in the informal sector. This wage repression policy is guaranteed to result in higher crime rates accompanied by more and more attempts at militaristic repression by a desperate minority government dreaming of El Salvador. We shall need more than a chess grandmaster to fix this.

REVERSING THE LOW-TECH LOW WAGE TRAP

Professor Antonio Andreoni, a leader in this field, places Jamaica in Quadrant III with the worst cases – which include the Dominican Republic, Costa Rica, Peru, South Africa and many others. These are economies whose manufacturing sector is way below what it should be, given their GDP level and who are stuck with low technology, low value-added and thus low incomes.

The solution requires a comprehensive package of industrial policies adapted to the needs of the Global South: i) the private sector is central to this strategy so the government must help them (including the largest ones) in product and process development, helping them to ‘link up’ to global value chains and to ‘link back’ to other parts of the local economy as well as to develop advanced producer services, not just manufacturing. JAMPRO should be repositioned to emphasise technology transfer and linkages to global value-chains.

There should be a radical overhaul of our entire human resources system (not just formal education and HEART/NSTA Trust); particular attention should be paid to technical on-the-job training for those already working in the labour market whose impact on technology and productivity is immediate. We should modernize the curriculum in the primary/high schools not just in five academies. The Scientific Research Council should be revamped to focus on product/process development. University of Technology (UTech) must return to its original mandate as a technical university on the Northern European model; we must bring our engineers to the forefront of economic development policy. Key innovators who work on the internet of things and the young researchers in the computer science, should be brought to the centre of development policy and their work properly funded and linked to local firms and their international counterparts. We should establish a properly resourced innovation fund and make it central to our economic policies.

SERIOUS PROGRAMME

We need a serious programme to technically upgrade small farming, paying particular attention to irrigation and facilitating access to modern high productivity small farming technology. More focus is needed on net value-added processing and packaging of agricultural products. The entertainment sector should be taken to a new level with technical upgrading. There should be a strong programme of on-the-job training to upgrade the technical level of our informal sector and to encourage them into small-scale value-added production for export.

Escaping from the low tech/low wage trap is not about the current tokenism. What we are proposing is not so much about additional expenditure as a wholesale overhaul and refocusing of ALL institutions and the private sector towards industrial and tech upgrading policies. In any event, tax revenues are currently running J$80 billion ahead of target and are likely to be at about J$90 billion by March 2024.

In 1958, Norman Manley’s regime embarked on a programme of technological upgrading: Kingston Technical was converted to a high school, Holmwood, Vere and Dinthill upgraded and St Andrew and St Elizabeth Technical constructed. In 1959, he established the College of Arts, Science and Technology — the forerunner of UTech. But this technological thrust was never built on. Now is the time to resume such policies. It won’t be easy, given all our many constraints and weaknesses. But it’s the only way. The sooner we set out on this road the better. Time is running out. The danger of social anarchy is real.

- Don Robotham is professor of anthropology and founding director of the advanced research collaborative of the graduate centre, City University of New York. He was pro vice chancellor for graduate studies and research at UWI. A follow-up article will be published in the coming weeks. Send feedback to drobotham@gmail.com