Wed | Dec 8, 2021

Look beneath Lagarde's sugary tongue

Published:Sunday | July 13, 2014 | 12:00 AM

Glenn Tucker, Guest Columnist

"If you let me write $200 billion worth of hot cheques every year, I could give you an illusion of prosperity, too."
- Lloyd Bentsen, on Reagan administration's economic policies, televised campaign debate, October 5, 1988.

Prime Minister (PM) Portia Simpson Miller is as pleased as punch. The managing director of the International Monetary Fund (IMF) jetted to Jamaica to congratulate her as she felt our economic performance under the IMF programme was "just amazing". During the dining and pleasantries which followed, PM Simpson Miller thanked Ms Lagarde profusely for what she and the IMF were doing to Jamaica. Sorry! That should be what she and the IMF were doing for Jamaica.

The rest of the country watched in mild surprise, wondering if Ms Lagarde's plane had landed in the wrong country. That's because, at the time of this visit, Auditor General Pamela Monroe-Ellis was telling us that 41 per cent of our fire service was ineffective. As if to prove that she was understating the problem, a fire started in a church in Mandeville - the capital of the parish of Manchester. There were no units available. So they tried Santa Cruz, the largest town in the parish of St Elizabeth. They were unable to help. Christiana and other nearby towns couldn't help either. A few days later, fires burnt unchecked in St Elizabeth until 600 acres of farmland had been destroyed.

Onerous debt

We learned that the Government owed more than $50 billion in debts to local suppliers. One business leader declared that many businesses were very close to going out of business. The head of the Jamaica Public Service Company appeared on public television declaring that the Government is one of its most delinquent customers. More recently, nurses at our largest maternity hospital had to take to the streets to seek public support as there was not one drop of water at that institution.

Of course, these matters are of little concern to the IMF head. Her happiness stems from the fact that we demonstrated clearly that we are prepared to put our people in such a precarious position to make sure creditors in the rich countries are paid on time and in full.

Surprisingly, Ms Lagarde has a small-but-influential fan club here. It consists of our best-known and respected analysts, who insist that devaluation and the other bitter pills are for our own good. The one among them that I regard most highly quotes John Maynard Keynes at the drop of a hat. And well he may. Keynes is the most influential economist of the modern age and the best student of Alfred Marshall, one of the founders of economics. He was a member of the team that worked on the Treaty of Versailles after WWI but left the conference in frustration when others proposed policies that would weaken the German currency and impoverish the German people.

Marshall went home to Cambridge and, over the next two months, wrote his best book, The Economic Consequences of the Peace. He pointed out that the punitive measures in the treaty would impoverish the German people to a point beyond endurance. One afternoon, when news from Versailles suggested that reparations of an unsustainable amount, which would require borrowing, would be demanded of Germany, an exasperated Keynes went straight to his desk and added these thoughts to the book: "There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."

In this brilliantly reasoned argument, Keynes predicted the fate of Germany and WWII. The first payment of reparations, demanded in hard currency, was made in June 1921. Rapid devaluation of the mark followed and by November of that year, the value of the mark fell to less than one-third of one cent. This set the events in motion that ushered a sociopath called Adolph Hitler on to the world stage and with him, the Holocaust, WWII, along with the 40 million deaths and the impoverishment of eastern and central Europe. We ignore history to our peril.

So what is the alternative? The statement that comes from everybody's lips is "we have to grow the economy". So when will this growth take place? Next week? When the anaemic growth projection of 2 per cent was mentioned to Ms Lagarde, she responded cheerfully that "2 per cent is 100 per cent of 1 per cent". Maybe if she had more time it would be pointed out to her that it is still less than 50 per cent of Haiti, which is at 4.3 per cent, or Guyana at 5.2 per cent.

Economic growth

Economic growth is an increase in the capacity of an economy to produce goods and services. But it is also an increase in the quality of life of the people of that country. And how will this growth take place with poor infrastructure, an untrained workforce, punitive bank rates and energy costs at US$0.44 per kWh when it is US$0.04 per kWh in Trinidad and US$0.09 per kWh in the United States?

It is time we stop listening to the Lagardes of this world and take an honest look at ourselves. There is absolutely no need for us to be poor. But the overwhelming majority of us are struggling. And whether it is out of embarrassment or blind loyalty, we seem to choose to keep quiet. This arrangement is not working. No nation, no government - People's National Party or Jamaica Labour Party - can do much when so much of what it earns goes to pay debt.

And when the institution that claims to be rescuing us prescribes a remedy that diminishes the people and their resources, that institution must be told - not just by the Government but by the entire nation, including the political Opposition - with one voice.

In her rousing panegyric of the Government, Ms Lagarde mentioned that the US administration approached her asking her to help Jamaica. Well, with all this goodwill coming from high places, there must be a listening ear to workable solutions.

In October 1996, the World Bank and IMF reached an agreement on the first-ever comprehensive debt-reduction plan to enable the debtor country to pay back its loans without compromising economic growth and without building up arrears again in the future. The IMF is far from financial frailty. Their own gold reserves are estimated by them to be US$9 billion. But any other source will tell you its worth closer to US$45 billion. May I suggest that the IMF purchase our debt and give us a 10-year moratorium to repay this loan? During the 10 years, we would still be monitored by it, but all of our available resources would be dedicated to education and training, research and development, infrastructure, and the implementation of renewable sources of energy.

This 'defensive' lending arrangement in which some new money lent by the World Bank is sent straight back to Washington as debt-service payment on old debt is the height of Anancyism. It's not just we who need to change our ways. These agencies must acknowledge past failures and change the way aid is delivered.

There is no doubt in my mind that the transformation of this country would not be limited to the economy. We would see dramatic reductions in crime and other antisocial activities, including the disappearance of dons and the restoration of family life.

Glenn Tucker is an educator and sociologist. Email feedback to columns@gleanerjm.com and glenntucker2011@gmail.com.