Leroy Fearon | Economic security: The China way

In my recent article, ‘Jamaica Has a Salary Problem, but We Keep Calling It a Cost-of-Living Problem’, I argued that the central economic question is not simply how much money Jamaicans earn, but how much that money can actually buy.

That conversation, however, cannot end with wages. If we want Jamaicans to earn more and enjoy greater purchasing power, we must confront a more difficult question: What kind of economy can sustainably generate higher incomes?

The answer cannot simply be to increase salaries every few years and hope that prices do not respond. Nor can we continue building an economy heavily dependent on importing what we consume while expecting wages to rise substantially. Jamaica needs to produce more, produce better, produce competitively and sell more of what it produces to the world.

This is where China offers an important case study.

China did not become an economic powerhouse simply because Chinese workers worked hard. Hard work matters, but millions of hardworking people exist in countries that have not achieved China's scale of economic transformation. China's experience was also about productivity, industrialisation, infrastructure, technology, investment, exports, skills development and deliberate economic organisation.

The lesson for Jamaica is not to copy China. Jamaica is a small island economy with different geography, demographics, institutions and resources. However, there are elements of the Chinese experience that deserve serious examination.

DEVELOP THE CAPACITY TO PRODUCE

One of the most important lessons is deceptively simple: an economy becomes stronger when it develops the capacity to produce. For years, Jamaica has struggled with a structural imbalance between what we buy from the world and what we sell to it.

That should force us to ask uncomfortable questions: Why are we importing products that we could potentially produce competitively? Why are we importing so much of our food? Why are we not processing more of our agricultural output before exporting it? Why are we not transforming our raw materials into higher-value products? Why should Jamaican farmers produce coffee, cocoa, fruits, spices and other commodities while greater value is often captured elsewhere through processing, branding and distribution?

Economic security begins when a country develops productive capacity. We should therefore move from a mentality of asking, “How can we get cheaper imports?” to the more strategic question, “How can we produce competitively enough that we need fewer imports and can sell more abroad?”

This does not mean abandoning trade. Jamaica needs trade. It means becoming a stronger participant in it.

China's development also offers an important lesson in the use of industrial clusters and special economic zones. Rather than spreading economic activity thinly across the country, China deliberately concentrated infrastructure, businesses, workers, investment and supporting services around productive activities. These clusters helped to create ecosystems in which companies could benefit from proximity to suppliers, skilled workers, transportation networks, technology and markets.

Jamaica can adapt this principle to our own circumstances. Rather than establishing economic zones simply because land is available, we should ask what industries Jamaica can realistically become globally competitive in.

Imagine an agro-industrial cluster in central Jamaica connecting farmers, irrigation systems, food processors, packaging companies, laboratories, cold-storage facilities, financial institutions and exporters.

Imagine a technology and business-services cluster in Kingston that moves beyond traditional call-centre operations into software development, cybersecurity, accounting, legal-process outsourcing, artificial intelligence services and financial technology.

Imagine a logistics and light-manufacturing cluster strategically connected to our ports.

The objective should not simply be to create buildings or designate geographic areas. The objective should be to create industries.

Jamaica must also become much more aggressive about value addition. If we export a raw agricultural commodity and another country processes, packages, brands and sells it at several times the original value, we have effectively exported the opportunity to create higher-paying Jamaican jobs.

Consider agriculture. The opportunity is not simply to produce more tomatoes, peppers, coffee, ginger, cocoa, yam or fruit. The opportunity is to create the processing ecosystem around those products.

Instead of merely exporting coffee beans, why not expand our capacity to produce Jamaican-branded roasted coffee, capsules, beverages and premium products? Instead of exporting raw agricultural commodities, why not produce sauces, juices, preserves, dried foods, nutraceutical ingredients and other processed products? Instead of thinking about farmers simply as producers of commodities, we should increasingly think about them as participants in global value chains. That distinction could transform rural Jamaica.

INCREASE VALUE PRODUCED BY EACH WORKER

This brings us directly back to wages. The most sustainable way to increase wages is not simply to decree that employers must pay more. The deeper objective must be to increase the value produced by each worker. If a worker produces significantly more value for a company, there is considerably more room for that worker to receive a higher salary than if the worker produces much less value. Therefore, Jamaica's wage strategy must also be a productivity strategy.

That means modern machinery, digital technology, artificial intelligence, better management, technical and vocational education aligned with industry, research and development, and businesses investing in workers rather than viewing labour primarily as a cost.

It also means creating industries in which Jamaican workers can perform higher-value functions. If we want Jamaican workers to earn first-world wages, we must create more opportunities for them to perform first-world work.

This is one of the important lessons from China's economic transformation. The objective was not merely to employ millions of people. It was to progressively move workers and enterprises into more productive activities. As productivity increased, businesses became more competitive, investment increased, exports expanded and wages could rise. Jamaica must think about development in the same interconnected way.

NATIONAL PRODUCTION REVOLUTION

We therefore need a national production revolution. Agriculture and agro-processing should be central to it. Tourism should move further into local supply chains so that more of the food, furniture, entertainment, technology and professional services consumed by the tourism industry are supplied by Jamaican businesses. Manufacturing should be upgraded rather than treated as an old-fashioned sector. Our creative industries should be treated as export industries, not simply entertainment. Technology and professional services should become major foreign-exchange earners. Logistics should exploit Jamaica's geographical position. Our mineral resources should increasingly be connected to domestic processing and higher-value activities wherever economically and environmentally viable.

The objective should be straightforward: export more Jamaican value, not merely more Jamaican resources.

Energy must also become part of Jamaica's industrial policy. No production strategy will succeed if the cost of producing in Jamaica makes Jamaican products uncompetitive. Energy is therefore not merely a utility issue. It is an economic-development issue. A manufacturer facing high electricity costs has fewer resources available for wages, machinery, research and expansion. A farmer facing expensive irrigation has higher production costs. A hotel facing high energy expenses becomes less competitive. A small business facing high electricity bills has less capacity to hire.

Jamaica must therefore accelerate the development of reliable, affordable and increasingly renewable energy while improving energy efficiency. This is not only about environmental responsibility. It is about production economics. Lower the cost of production and Jamaican businesses become more competitive. Increase competitiveness and businesses can expand. Expansion creates employment. Higher productivity creates room for better wages. This is the economic chain we need to understand.

There is also room for a more sophisticated version of “Buy Jamaican”. Patriotism alone cannot sustain an industry. Jamaican products must be competitive in price, quality, reliability, packaging and availability. Government can help by becoming a smarter purchaser. Where Jamaican companies can competitively supply schools, hospitals, public institutions, hotels and other large buyers, procurement policies should create opportunities for domestic producers without sacrificing value for money.

But there should be an expectation attached to support. If we protect or support an industry, that industry must become more productive. Protection without productivity creates dependency. Support linked to measurable improvements in productivity, employment, exports, technology adoption and quality creates a different incentive. Government assistance should therefore not simply keep inefficient businesses alive. It should help viable businesses become more competitive.

Jamaica should also become much more intentional about export targets. Every major productive sector should be able to answer several basic questions: How much are we producing? How much are we exporting? How many Jamaican workers are employed? How much foreign exchange are we earning? How much value is being added locally? How much has productivity improved? And what are we doing differently this year compared with last year?

Economic policy cannot simply be about announcing programmes. We need measurable outcomes. China’s experience demonstrates the importance of setting clear goals, monitoring performance and continuously upgrading productive capacity. Jamaica needs the same discipline, adapted to our own circumstances.

WHAT REAL PURCHASING POWER MEANS

This brings us back to the Jamaican worker. Jamaicans deserve better wages. But the sustainable route to better wages is an economy capable of generating greater value. If productivity rises, businesses become more competitive. If businesses become more competitive, they can expand. If they expand, they can employ more people. If workers acquire scarce and valuable skills, their bargaining power can increase. If industries move into higher-value activities, the economic value of labour can rise.

And when that happens, wages can rise without simply pushing the entire economy into another round of higher prices. This is the distinction between increasing nominal wages and increasing real incomes. A worker earning $200,000 who can afford less than a worker previously earning $150,000 has not necessarily experienced economic security. The objective should be different. We should want the worker earning $200,000 to be able to afford more because Jamaica is producing more food, generating cheaper energy, improving transportation, increasing housing supply, producing more competitive goods and services and creating better-paying employment.

That is what purchasing power means in practice. Economic security should therefore become a national development objective. It means a Jamaican can work and reasonably expect that work to provide a pathway toward a better life. It means a farmer can produce knowing that markets, irrigation, storage and logistics will not undermine the effort. It means a manufacturer can invest knowing that energy, transportation and bureaucracy will not make production unnecessarily expensive. It means a young person can acquire a skill and find an industry willing to pay for it. It means a business can grow from five employees to 50 without becoming trapped by financing, infrastructure or regulatory barriers. And it means the country itself earns enough foreign exchange through productive activity to reduce its vulnerability to external shocks.

China's experience is not a prescription for Jamaica. We cannot simply transplant China's policies, institutions or development model onto a small Caribbean island. However, there is a principle worth borrowing: economic security is built through productive capacity.

Jamaica cannot sustainably consume its way into prosperity. We cannot import our way into stronger wages. We cannot negotiate our way around low productivity forever. And we cannot simply increase salaries without increasing the value generated by the economy.

We must produce. We must process. We must innovate. We must export. We must compete. And, most importantly, we must ensure that the wealth created by greater productivity increasingly reaches the people whose labour creates it.

My previous article asked what happened to the value of the Jamaican salary. Perhaps the next question should be even more fundamental: What must Jamaica produce so that the Jamaican salary can become more valuable?

That is where the conversation about purchasing power must now go. Because economic security will not come simply from giving Jamaicans more money. It will come from building an economy in which more money can buy more life.

- Leroy Fearon Jr, J.P, M.Sc., is a lecturer, multi-disciplinary researcher, author, geography specialist, columnist, Governor General's Achievement Awardee '24 and Governor General I Believe Initiative (IBI) Ambassador '24. Email feedback to columns@gleanerjm.com and leroyfearon85@gmail.com. ONLINE ONLY COMMENTARY.