Politicians are not economic managers

Aubyn Hill, Financial Gleaner Columnist

When we consider the state of many of the economics in the Eurozone and especially the recent near meltdown in Cyprus at the end of last month, many do contend that politicians are not at all economic managers.

Some would insist that politicians - in Europe, the Caribbean and parts of Africa - have been extremely harmful to their countries' economies.

In this instance, we speak of a semblance of free enterprise economic management, and although the 18th-century French philosopher would take issue with the broad generalisation — he is reported to have said all generalisations, including this one, are wrong — even he would be hard pushed to find the exception, starting with his own country.

In Jamaica, we tend to be incredibly generous to politicians who are masters at promising, and then failing to deliver the prosperity in exchange for which they accepted mainly poor people's votes.

But we would have to be blind not to see the devastation our political leaders have caused.

Our very anaemic 40-year average growth rate of 0.8 per cent, that can hardly be referred to as growth, and the devaluation of our currency from J$0.77 to US$1 in January of 1972 — J$0.91 to US$1 in January 1973, to trading at over J$102 to US$1 — intraday - on Tuesday of this week, really tell a big part of the story.

Include crime that seems to threaten everyone, inside and outside of Government, our difficult and deteriorating infrastructure and a government apparatus that is widely seen as ineffective and inefficient, then we have a state that is, at best, stagnant.

BANKERS HAVE MESSED UP TOO

From March 2008, when Bear Stearns had to be rescued by JPMorgan and September of the same year when the demise of Lehman Brothers, which was not rescued by anyone, caused the international banking crisis dubbed the 'sub-prime debacle', to the banking crisis in Cyprus less than three weeks ago - bankers have proven to be outrageous destroyers of wealth.

Along the way banks in Iceland, Ireland and Greece collapsed. Those in Spain and Portugal were really shaken as well.

Lloyds and others in London suffered the ignominy of going cap-in-hand to the British government for financial assistance.

Cyprus's two big banks took the cake, though. The bankers from the Bank of Cyprus and others used the evading-the-tax-man Russian deposits to buy Greek government paper that was clearly of inferior quality.

When the troika of the IMF, ECB and the EU, pushed by Mrs Merkel, forced a 'haircut' (default) on the government of Greece, the capital of the banks in Cyprus was eroded and the Cypriot government had to turn to the same troika for a €10-billion (US$13 billion) bailout.

This, in effect, was not a bailout but a 'bail in' of large depositors of the banks.

In this instance, the economic concept of moral hazard was moved from taxpayers — they, wrongly, have been the payers of last resort — to large depositors with over €100,000 uninsured deposits. It is fair to say that in the perception of hosts of persons in the public, many bankers have joined politicians as poor economic managers and wealth destroyers.

This is especially true because many bankers continued to buy the bonds of governments, like Greece and others, who have borrowed well beyond their sustainable limits.

Bankers just never thought, or if they thought never had the guts to tell their over-borrowed governments "no".

Successful politicians tend to have an innate ability to be popular, and those who were not born with that quality appear to be adept at developing its close cousin — that of getting people to like them enough to vote for them.

Successful in this context carries a limited definition - simply of being able to win an election. Alas, being able to win does not mean the winner can manage anything.

If we look at the Bruce Golding-led JLP government, Chris Tufton seemed to have had some solid marketing experiences which served him well in the Ministry of Agriculture.

Audley Shaw had a less than spectacular foray into business - the gas station is remembered - but he was one of if not, arguably, the best performing minister in the Bruce Golding administration. Shaw surprised many on the upside.

Daryl Vaz was a bulldozer that delivered for his prime minister.

In today's PNP administration, Peter Bunting and Mark Golding had financial-services sector entrepreneurial experiences which made them wealthy.

Richard Parchment is a chartered accountant with a Pricewater-houseCooper's pedigree. He also started, expanded and managed his own businesses. In any near-term shuffle, he should probably be considered for at least a junior minister post in a ministry of economic importance.

Managerial, can-do skills

Julian Robinson seems to have some managerial and can-do skills.

The economic, social and moral imperative of our elected government is to grow the economy. Private sector-led growth has never really been a carved-out, centre-of-focus agenda item of successive governments in this country.

Sure, there have been spurts — of the statist variety — but nothing sustained long enough to improve the lot of our citizenry over time.

The Portia Simpson Miller administration has no alternative but to push for growth.

The J$600 billion we have to shave off the debt between now and 2020 can really only be dented by a high growth rate over a sustained period of time. Prime Minister Simpson Miller needs a serious economic growth driver.

While the finance minister and prime minister need to be elected into the lower house of Parliament, a minister of knowledge economy and growth could possibly be chosen from the Senate.

The finance minister will have his hands full just getting an IMF agreement in place and implementing and monitoring policies which will help make the deal a success.

Given the dearth of economic and managerial skills among her parliamentary colleagues, who will she turn to as her growth driver?

That person needs to take charge quickly.

Aubyn Hill is the CEO of Corporate Strategies Limited and was an international banker for more than 25 years.Email: writerhill@gmail.comTwitter: @HillAubynFacebook: facebook.com/Corporate.Strategies.