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Free market or 'fraid market'
Lloyd B. Smith
Tuesday, January 22, 2008
According to Wikipedia, "A free market is a market in which prices of goods and services are arranged completely by mutual consent of sellers and buyers. By definition, in a free-market environment buyers and sellers do not coerce or mislead each other nor are they coerced by a third party. Free markets contrast sharply with controlled markets, in which governments directly or indirectly regulate prices or supplies, distorting market signals. In other words, a free-market economy is "an economic system in which individuals, rather than government, make the majority of decisions regarding economic activities and transactions."
Having absorbed all of the above, one may well ask, "Does Jamaica have a free-market system?" I am no economist, but as a layman in the field I cannot recall at any given moment in time when I have become sufficiently convinced that we do. Well, almost. When the Bruce Golding-led Jamaica Labour Party came to power last year, dyed-in-the-wool capitalists in our midst nearly had an orgasm as they contemplated an environment in which the free-market philosophy would hold sway. Indeed, Industry and Commerce Minister Karl Samuda vigorously defended the government's position saying no to subsidies and state intervention.
Then the rising oil prices gave the government a serious jolt. Even when Opposition People's National Party Portia Simpson Miller was demanding some subsidies to counter the increase in basic food prices, there was resistance. Needless to say that the government soon relented, so we now have basic food subsidies, and banana farmers were bailed out in the aftermath of the devastation of Hurricane Dean. "Free market mi back foot," as my granny would say. What we have is a "fraid market".
The ongoing "cass-cass" or kerfuffle surrounding investment schemes and clubs which are unregulated brings into sharp focus the extent to which a country can allow for a free-market scenario without shooting itself in the foot. The harsh reality is that Jamaica has never fully embraced the free-market ethos. To begin with, when Edward Seaga came to power in 1980 and promised that money would jingle in people's pockets by virtue of the fact that the country had moved away from the socialist path encouraged by the late Michael Manley, he soon realised that the role of the state could not be ignored if survival was the name of the game. And so Seaga took us fully into state capitalism.
Well, "Seaga-onomics" soon fell by the wayside, thanks to crawling-peg devaluations and other such pseudo-capitalist experimentations which did not put any money in the pockets of the poor, so by 1989 Michael Manley, now a reformed capitalist, was back in power. What was to ensue was an unbridled attempt at free market enterprise which ultimately led to FINSAC - that horrendous financial meltdown of the 1990s, all because of what some people and institutions did with other people's money. Of course, much of the debacle had to do with the high interest-rate regime and the bureaucratic red tape surrounding doing business in this country.
Against this backdrop, in today's Jamaica, anybody with a sizeable amount of cash is very unlikely to start a business, set up a factory or get involved in any economic activity that is going to involve bureaucracy and officialdom. It is better to invest one's money in an instrument, whether government or private, go relax on the beach and to hell with production! Who wants to get entangled with labour, security and other worries that come with doing business in Jamaica?
On the other hand, banks and other financial institutions have been most stingy and draconian with respect to how they deal with depositors based on returns on savings and investments. So the average Jamaican citizen out there, as is expected, has been using his ingenuity and sometimes "jinnalship" to get by. Hustling, gambling, throwing partner hands and now joining an investment club have become the preferred ways to get rich quick. Who wants to die poor after working hard all their lives?
In my view, while the leading commercial banks have formed some kind of informal cartel to protect their interests, these investment clubs which some pundits dub ponzis and pyramid schemes will ultimately do likewise. And what will be the government's role in all of this? After all, too much regulation is not good for a free-market system, so where do we go from here?
According to Wikipedia, "Free-market economics is closely associated with laissez-faire economic philosophy, which expands this environment by confining government intervention to market failures." With the previous government having to bail out so many depositors which parliamentarian and talk-show host Ronnie Thwaites has described as the greatest transfer of wealth from the poor to the rich since slavery, this Bruce Golding administration must be very edgy about any such recurrence, hence the present trepidation.
My own stance on the matter is that government's major role should be educating the populace, not introducing legislation simply to stifle free-market aspirations and activities. In any event, a recent study by CAPRI has revealed that the majority of people who enter into such schemes are people who can afford to do so. It has been further stated that any fallout in the sector would not necessarily have a long-term negative effect on the overall economy of the country, so why the panic? Why not let the chips fall where they may?
The bottom line is that freedom and fear are the two ingredients that are now contrapuntal. One key element in free-market enterprises is risk-taking. The greater the risk the greater the gain or loss. Well, it has been said that the fool and his money will soon part. Let the state educate, not relegate the free-market spirit. The glaring truth is that until successive governments in this country are able to make going into productive economic activities more attractive, safe and profitable and until the formal banking and financial sectors can operate in an environment where returns on savings and investments are worthwhile to depositors, then alternative schemes will continue to flourish, whether legally or illegally.
In the meantime, there is no such thing as a free-market system in Jamaica. Let us not fool ourselves. What we have is more akin to a mixed economy which in essence is the preferred basis of socio-economic policy for most countries and political parties. Enough said! And please bear in mind I am not an economist and would never want to be one!
lloydbsmith@hotmail.com
Lloyd B. Smith
Tuesday, January 22, 2008
According to Wikipedia, "A free market is a market in which prices of goods and services are arranged completely by mutual consent of sellers and buyers. By definition, in a free-market environment buyers and sellers do not coerce or mislead each other nor are they coerced by a third party. Free markets contrast sharply with controlled markets, in which governments directly or indirectly regulate prices or supplies, distorting market signals. In other words, a free-market economy is "an economic system in which individuals, rather than government, make the majority of decisions regarding economic activities and transactions."
Having absorbed all of the above, one may well ask, "Does Jamaica have a free-market system?" I am no economist, but as a layman in the field I cannot recall at any given moment in time when I have become sufficiently convinced that we do. Well, almost. When the Bruce Golding-led Jamaica Labour Party came to power last year, dyed-in-the-wool capitalists in our midst nearly had an orgasm as they contemplated an environment in which the free-market philosophy would hold sway. Indeed, Industry and Commerce Minister Karl Samuda vigorously defended the government's position saying no to subsidies and state intervention.
Then the rising oil prices gave the government a serious jolt. Even when Opposition People's National Party Portia Simpson Miller was demanding some subsidies to counter the increase in basic food prices, there was resistance. Needless to say that the government soon relented, so we now have basic food subsidies, and banana farmers were bailed out in the aftermath of the devastation of Hurricane Dean. "Free market mi back foot," as my granny would say. What we have is a "fraid market".
The ongoing "cass-cass" or kerfuffle surrounding investment schemes and clubs which are unregulated brings into sharp focus the extent to which a country can allow for a free-market scenario without shooting itself in the foot. The harsh reality is that Jamaica has never fully embraced the free-market ethos. To begin with, when Edward Seaga came to power in 1980 and promised that money would jingle in people's pockets by virtue of the fact that the country had moved away from the socialist path encouraged by the late Michael Manley, he soon realised that the role of the state could not be ignored if survival was the name of the game. And so Seaga took us fully into state capitalism.
Well, "Seaga-onomics" soon fell by the wayside, thanks to crawling-peg devaluations and other such pseudo-capitalist experimentations which did not put any money in the pockets of the poor, so by 1989 Michael Manley, now a reformed capitalist, was back in power. What was to ensue was an unbridled attempt at free market enterprise which ultimately led to FINSAC - that horrendous financial meltdown of the 1990s, all because of what some people and institutions did with other people's money. Of course, much of the debacle had to do with the high interest-rate regime and the bureaucratic red tape surrounding doing business in this country.
Against this backdrop, in today's Jamaica, anybody with a sizeable amount of cash is very unlikely to start a business, set up a factory or get involved in any economic activity that is going to involve bureaucracy and officialdom. It is better to invest one's money in an instrument, whether government or private, go relax on the beach and to hell with production! Who wants to get entangled with labour, security and other worries that come with doing business in Jamaica?
On the other hand, banks and other financial institutions have been most stingy and draconian with respect to how they deal with depositors based on returns on savings and investments. So the average Jamaican citizen out there, as is expected, has been using his ingenuity and sometimes "jinnalship" to get by. Hustling, gambling, throwing partner hands and now joining an investment club have become the preferred ways to get rich quick. Who wants to die poor after working hard all their lives?
In my view, while the leading commercial banks have formed some kind of informal cartel to protect their interests, these investment clubs which some pundits dub ponzis and pyramid schemes will ultimately do likewise. And what will be the government's role in all of this? After all, too much regulation is not good for a free-market system, so where do we go from here?
According to Wikipedia, "Free-market economics is closely associated with laissez-faire economic philosophy, which expands this environment by confining government intervention to market failures." With the previous government having to bail out so many depositors which parliamentarian and talk-show host Ronnie Thwaites has described as the greatest transfer of wealth from the poor to the rich since slavery, this Bruce Golding administration must be very edgy about any such recurrence, hence the present trepidation.
My own stance on the matter is that government's major role should be educating the populace, not introducing legislation simply to stifle free-market aspirations and activities. In any event, a recent study by CAPRI has revealed that the majority of people who enter into such schemes are people who can afford to do so. It has been further stated that any fallout in the sector would not necessarily have a long-term negative effect on the overall economy of the country, so why the panic? Why not let the chips fall where they may?
The bottom line is that freedom and fear are the two ingredients that are now contrapuntal. One key element in free-market enterprises is risk-taking. The greater the risk the greater the gain or loss. Well, it has been said that the fool and his money will soon part. Let the state educate, not relegate the free-market spirit. The glaring truth is that until successive governments in this country are able to make going into productive economic activities more attractive, safe and profitable and until the formal banking and financial sectors can operate in an environment where returns on savings and investments are worthwhile to depositors, then alternative schemes will continue to flourish, whether legally or illegally.
In the meantime, there is no such thing as a free-market system in Jamaica. Let us not fool ourselves. What we have is more akin to a mixed economy which in essence is the preferred basis of socio-economic policy for most countries and political parties. Enough said! And please bear in mind I am not an economist and would never want to be one!
lloydbsmith@hotmail.com