Clarke: IMF still here, but we’re better off economically
Mismanagement was the term used by some to characterise Michael Manley’s handling of the economy during his tenure as prime minister leading up to the 1980 general election. Capital flight had bankrupted Jamaica, which had no foreign exchange reserves by 1980 and zero dollars to pay its import bill. On the other hand, Edward Seaga, who succeeded Manley in 1980, was lauded for his acute business acumen.
Seaga’s economic austerity programme, including a painful public sector reform – terms dictated by the International Monetary Fund – made his government very unpopular and they were soon booted from office.
Jamaica would go into worsening indebtedness, which cast its long shadow over the economy, especially throughout the late ‘70s, ‘80s and ‘90s.
Dr Nigel Clarke, the current custodian of the country’s economic apparatus, said, “The economic preoccupation of the 1980s was centred around recovery from the destabilising effects of the flight of capital and skills of the previous five years. There were no foreign currency reserves in the central bank in 1980 and our reputation with international creditors was in tatters. We are in an entirely different time now, and that’s a good thing.”
TRANSITION TO A MARKET ECONOMY
He said the economy of the 1980s would seem strange by today’s standards, as the state controlled major pillars of the economy. Citing the government’s involvement in the financial services sector, he said market interest rates were essentially set by the government.
“You needed a licence to import basic foods and there were price controls on these foods where margins and prices were set by the government. There was price regulation in the petroleum and other sectors as well. In addition, the government owned and controlled significant swathes of the economy – banking, cement, steel, energy, agriculture, ports, airports etc ... ,” he argued.
These arrangements, he believed, proved to be inefficient and wasteful, and led to institutional disincentives to innovation. Government was also unable to finance the capital investments required to maintain the service level of the state enterprises in its portfolio.
While the slate is not yet clean, substantial progress has been made in building a market economy.
“This transition began in the 1980s and continued over the decades that followed, and that work continues today,” he said.
Bipartisan efforts in the last decade, he said, has provided macroeconomic stability today even in the face of a major crisis. That stability has provided the flexibility and policy space to respond to the crisis. Without it, the crisis would be much worse, Dr Clarke said.
Conditions for the expansion of economic opportunity have been reached but remain insufficient, he said, stating that “much more needs to be done to raise the productivity of labour and capital, reduce structural bottlenecks to investment, improve the level of human capital, enhance efficiency of the public bureaucracy and improve governance”.
Jamaica has for years attempted to reform its public sector. The state’s ownership of institutions – each justifiable at the time – he believes, is unsustainable, as is seen over subsequent decades.
“As we grow and develop and as the world changes, the Government of Jamaica will always need to perform and deliver different services. However, it is not sustainable to continually add new state institutions without reforming others. We must also engage in a continuous process of assessing existing state institutions and merging, reintegrating, divesting and even closing as we create space for new ones,” argued Clarke.
He said this had been the focus of current and past administrations, and in the last four years 20 public bodies had been merged or reintegrated into their parent ministries and 13 public bodies closed.
“Jamaica is stronger, more dynamic, and more resilient than we were 40 years ago and Jamaicans enjoy substantially more economic freedoms. However, there is much more work to be done,” said Clarke.