Restructuring debt requires equity for development
Wilberne Persaud, Financial Gleaner Columnist
Because last week's column was penned before the finance ministry's debt restructuring was made public, I attempted, too late for the paper, to add this postscript:
"Heartening indeed it is to note Jamaica Money Market Brokers' Keith Duncan and other financial services firms agreeing to the restructuring of Government of Jamaica debt. Apparently, self-interest is indeed stronger than 'rate of interest'. Jamaica cannot survive without burden-sharing for the greater good that this column has often advocated. The time is more than ripe for true developmental change."
Predictably, the same agencies that did that Alice in Wonderland job 'rating' Wall Street's Triple A subprime mortgages that nuked Iceland, scared China - the biggest US government debt holder - and halted world financial markets' fluidity for days, downgraded Jamaica's credit score.
One of the agencies referred to the JDX, Jamaica's $700-billion debt-exchange programme recalling 350 domestic bonds, as 'coercive'.
It placed Jamaica in "restricted default".
Another described the bonds recall and reissue as "selective default". Moody's saw it as "an event of default", further noting that its ratings will change depending on the size of expected losses to bondholders.
Basically, this is Wall Street gobbledygook, gibberish or mumbo jumbo. But we have to learn it. If we can talk sensibly about it, an apparent contradiction easily achieved, we become fluent in a most powerful language - a language that efficiently but surreptitiously extracts tithes from the world's poor.
So we can't escape the ultimate tax axe.
Let's be clear and understand what's happening here.
Banks and institutional investors have signed on for restructuring Jamaican-dollar debt. Whose savings do these institutions bundle and invest? They invest other people's money, pension funds of the professional, middle and working classes, prudential savings of sensible, striving and hard-working ordinary Jamaicans for the most part.
Institutional investors then 'take a turn' of the wheel in commissions.
Will the percentage commission be reduced in line with interest cost/payment reduction? I think not. So my hastily penned, attempted postscript is not quite faithful to the idea of burden-sharing.
Jamaicans who have access to US-dollar-denominated debt are not affected. For the most part one may imagine that this group is signifi-cantly wealthier than those affected by the local bond recall and reissue.
Viewed differently, more closely, groups that receive the highest reward from the workings of the Jamaican economy will not participate in the mandatory haircut! So we're not all going to become, at the stroke of the minister's pen, crazy baldheads.
None of this restructuring or 'fixing' of the Jamaican economy is easy. Should we have attempted to restructure all the debt fallout would have been worse.
IMF approval would have been denied. So the minister of finance had one hand tied behind his back, most likely his writing hand.
To truly restructure our fiscal condition with realistic prospects for development with equity, the shares of income generated and expen-ditures on lifestyle choices have to be altered. This can't be achieved by government decree. Nor can it be done sustainably, by welfare payments and income redistribution of the legal and opposed kind, or illegal but tolerated 'gully' and corrupted National Housing Trust contract and protection rackets.
The only potentially successful way this might be achieved is through the process of economic growth - not the growth remini-scent of the 1960s.
Rather, it will have to be soundly based, harnessing the existing skills of Jamaicans, equipping the unemployed with skills and wise, prudential and innovative use of natural, cultural and other proven resources we have demonstrated and, therefore, know we possess.
This is a long-term endeavour. It has so far been impossible to achieve because Jamaican capitalists enjoy a kind of almost-monopoly or oligopoly situation, require in excess of 'normal' returns on capital and often are protected from rival market entry and some forms of competition by their relationship to our governments.
As such, they do not normally operate with long horizons - there are, of course, exceptions. Political parties in government apparently, cannot do so either, as the five-year term pushes them to operate the winner-take-all strategy of our peculiar brand of Westminster governance and politics.
If the Opposition and its supporters are banished to 'nyam grass' upon losing an election, if thoughtful analysts, experienced professionals and the technically skilled among our population are excluded for no reason other than a view of their political affiliation, we have all the ingredients for continuous economic decay, albeit with pockets of production growth and opulence.
Mobilisation of the electorate, the masses, is done to provide social and economic system legitimacy. This requires money. Political parties garner funds from those who can afford it. There is no free lunch. Shylock always requires his pound of flesh.
Just as President Obama finds it difficult to create required, real reform on Wall Street after close to a trillion dollars of taxpayer bailout, because of Wall Street's political contributions and lobbyists - to and for both parties - so too do our political leaders find it almost impossible to effect real reform that would alter comparative control over Jamaica's economic resources.
These 'resources' include jobs, advisory positions, indeed any situation of influence, over which political contributors and supporters actively contend.
To the extent, as Robert Budhan excellently demonstrates with reference to our Constitution and money bills in The Sunday Gleaner of January 17, 2010, that Parliament is excluded from deliberations on fundamental policy shifts and impacts on present and future money bills, to that very extent, the population grasps these develop-ments as 'big-man', 'Anancy' or secret 'samfie' government.
This is not good. If we are to build lasting developmental vehicles and institutional capability, these approaches to governance must surely cease.
Without this, the inevitable result, among a large swath of the Jamaican population, is an entirely cynical view and attitude: 'If de top o' de stream dutty, den wha yuh expect down a de bottom?'
Corruption is tolerated, praedial larceny justified, and Port Royal-style plunder viewed as genius.
Analogy to the super tanker is good. To change course takes skill, discipline, commitment to equity and, most of all, time. But it surely is running out.
The Economist magazine asked if Jamaica was fixable or a failed state. We need to ask: If we don't fix it now, do we guarantee a future failed state?
Finance Minister Audley Shaw points to his financial secretary, Dr Wesley Hughes, while making a point during the launch of the Jamaica Debt Exchange programme at the Bank of Jamaica, Nethersole Place, Kingston, on January 14. - Ricardo Makyn/Staff Photographer