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Course fi change!
No jobs - unless we change course
published: Sunday | October 5, 2008
Claude Clarke, Contributor
The promise of jobs was the centrepiece of the Jamaica Labour Party's (JLP) election manifesto last year. It was no doubt sincere and well intentioned, just as the promises of free high- school tuition and hospital services.
The fact that it was accompanied by a commitment to change course could have led one to believe that it might well have been fulfilled, as it would have been clear that the creation of new jobs would indeed have required a radical change of economic course.
Free tuition and health care were politically appealing, but it is my view that it will be the ability to deliver on its 'jobs, jobs, jobs' promise that will determine the success or failure of this government.
However, the creation of jobs will not be as easy as the removal of hospital and high school tuition fees.
Globalisation has created a new world economic environment in which the dominant feature is global economic competitiveness. This has been reinforced by the ending of the Cold War, which changed the nature of geo-politics and reduced, if not eliminated, the ability of uncompetitive economies to get by on the patronage of the superpowers.
Economic success can now only be achieved through economic com-petitiveness. And any country which is unable to compete will be condemned to poverty and to the social instability which characterises Jamaica today.
Pricing competitively
Unfortunately, for more than 16 years, our economy has been managed with no apparent consciousness of these implications of globalisation and we have consequently pursued policies which have tended to strengthen globalisation's threats and weaken its opportunities.
The effort to create new jobs in this new competitiveness-driven environment must begin with the recognition of the simple fact that a sustainable job can only exist if its contribution to the creation of real economic value can be priced competitively.
The price of that contribution is the cost of labour. However, the price of labour (including executive labour) will always tend to reflect the cost of the needs and expectations of people within the economy. And what determines the cost of those needs and expectations is the cost of living. In other words, the price of labour is high where the cost of living is high, and low, where the cost of living is low.
However, in the more developed economies, a high price for labour is offset by the productivity-enhancing assets of high technology, efficient economic infra-structure and healthy social capital, which effectively reduce the cost of labour. While in less-developed economies, like Jamaica, where these assets are limited, a high price for labour guarantees uncompetitiveness and leads to economic strangulation.
Unfortunately, the economic policies of the last 16 years have led to the cost of living in Jamaica increasing more than three times faster than in the economies of our trading partners, Trinidad and Tobago, Barbados and the United States, when measured in the currency with which we conduct trade, the US dollar.
The cost of satisfying the needs and expectations of our workers has increased correspondingly, as has the price of labour.
The Government must, therefore, face the harsh reality that before it will be able to create the new jobs it promised, it must develop policies which will reverse the growth of our cost of living and so bring the cost of satisfying the needs and expectations of our people in line with the value of their output.
In short, the Government must convert Jamaica from the high-cost economy it has become, to a low-cost economy, for us to be competitive again.
Examples in Caribbean
The task is not beyond us. In the 1980s, as the paradigm of globalisation was taking shape, the three major Caribbean economies, Trinidad, Barbados and Jamaica, responded with marked success.
The success of the Trinidadian and Barbadian effort is now legendary. But a very heavy political price was paid by the prime ministers who led those efforts.
Trinidad and Tobago's George Chambers and A.N.R. Robinson and Barbados' Erskine Sandiford employed varying combinations of unpopular monetary and incomes policies, which resulted in a dramatic reduction in inflation to the point where the rates achieved were similar to those of the US and in some instances, better.
These countries' competitiveness improved, their economies grew and their people are now enjoying a level of prosperity Jamaica can now only dream about.
However, it is a little-recognised fact that in Jamaica, we carried out an equally successful effort to achieve competitiveness.
In the 1980s, the structural adjustment programme, which included monetary and incomes policies, led to a re-pricing of Jamaican production, resulting in a level of competitiveness to match our trading partners.
Of course, the same political price paid by Chambers, Robinson and Sandiford was also paid by the Jamaican leader, Edward Seaga.
Building on the base
One is naturally led to ask: Why are the Trinidadian and Barbadian economies now enjoying relative prosperity while Jamaica is engulfed in economic miasma?
The answer is really quite simple: the administrations which succeeded Chambers and Robinson in Trinidad and Sandiford in Barbados built on the competitiveness they had inherited and used it as a platform for economic growth and expansion.
However, in Jamaica, the very opposite took place. We embarked on a course which effectively undermined our economic competitiveness.
The result has been the reversal of growth, the reduction of economic opportunity and the emergence of 'alternative schemes' as a substitute for real economic activities. So uncompetitive are we that our exports can now only pay for one third of our imports.
The challenge we face now is: how to undo this damage to our competitiveness and embark on a path of economic growth and social rehabilitation.
The one thing we can be sure of is that if we continue doing what we have been doing for the last 16 years, any change which occurs will be for the worse.
Overpriced services
The new government promised a change in course and one had expected that they recognised that as far as the economy and the creation of jobs were concerned, significant change was necessary. So far, I have seen no evidence of change of any significance. But change is urgently needed.
The Index of Global Competitiveness for 2007 placed Jamaica's macroeconomy at 118th among the 131 countries measured.
This put us behind all the countries in Central America and the Caribbean, except Haiti and Guyana. An uncompetitive macro-economy renders everything produced within our borders uncompetitive. This is why our sugar, bananas and manufactured goods, or anything else you can think of, cannot stand up to international competition today.
This situation must be urgently corrected if we are to have any chance of turning our economy around. Government must act decisively to rid the economy of all overpriced domestic services which inflate the cost of the goods and exported services produced within the country.
Top of the list is the cost of government. The cost of capital, financial services and the provision of energy are not very far behind. All economies absorb these services in their production and it is largely the difference in their costs which separates the countries that succeed from those that fail.
Contrasting productivity
The disproportionately high cost of these services in Jamaica is substantially responsible for the fact that, according to International Labour organisation data, the average Barbadian worker produces twice the value produced by the average Jamaican worker, and the Trinidadian worker produces over three times more.
In spite of this, Jamaican top-end incomes are at least 25 per cent higher than they are in those countries. As long as this contradiction exists, Jamaica will not be able to compete or attract productive capital to create jobs.
The capital we attract will always tend to be directed toward the exploitation of raw materials, including sun, sea and sand, not to the productive output of our people - and will create relatively few jobs
The productivity of our people is the only basis on which we will be able to attract the kind of capital which creates sustainable jobs and leads to economic spinoffs which can provide the dynamism that the economy must have to achieve the high level of growth needed to catch up with our neighbours.
Before 1992, when our economy was more competitive and we attracted investments largely on the basis of the productivity of our workers, our economy grew impressively and thousands of productive jobs were created.
Even more important, our tradespersons, involved in small businesses, generated an economic vibrancy which laid the base for the creation of thousands of small-business jobs.
But these seem to have all but disappeared. Small tailors and dressmakers, shoemakers and other artisans seemed to have simply faded away. We need a new approach to economic management to bring them back.
Test of leadership
But changing our economic management strategy to make it more production-focused will present an extraordinary test of leadership. Success will not only require wise, strong and committed leadership from government; it will need the willingness of our people to generate the national drive and passion we so easily generate when our athletes excel.
We spontaneously unite and rally in celebration of sporting successes, but seem less able to join in hard work and sacrifice to achieve other national goals.
Today, our most important and urgent national goal is achieving economic competitiveness.
It will not be easy and will involve major sacrifices to wean us from the high consumption-low production -'alternative scheme'-dominated environment in which we have existed for so long.
Can government provide the leadership, and can we commit the discipline and sacrifice that our successful athletes did to succeed so spectacularly in Beijing?
I believe we can. For, like Usain and his teammates, we are Jamaicans and we too are capable of greatness.
Claude Clarke is a former PNP trade minister and manufacturer.
No jobs - unless we change course
published: Sunday | October 5, 2008
Claude Clarke, Contributor
The promise of jobs was the centrepiece of the Jamaica Labour Party's (JLP) election manifesto last year. It was no doubt sincere and well intentioned, just as the promises of free high- school tuition and hospital services.
The fact that it was accompanied by a commitment to change course could have led one to believe that it might well have been fulfilled, as it would have been clear that the creation of new jobs would indeed have required a radical change of economic course.
Free tuition and health care were politically appealing, but it is my view that it will be the ability to deliver on its 'jobs, jobs, jobs' promise that will determine the success or failure of this government.
However, the creation of jobs will not be as easy as the removal of hospital and high school tuition fees.
Globalisation has created a new world economic environment in which the dominant feature is global economic competitiveness. This has been reinforced by the ending of the Cold War, which changed the nature of geo-politics and reduced, if not eliminated, the ability of uncompetitive economies to get by on the patronage of the superpowers.
Economic success can now only be achieved through economic com-petitiveness. And any country which is unable to compete will be condemned to poverty and to the social instability which characterises Jamaica today.
Pricing competitively
Unfortunately, for more than 16 years, our economy has been managed with no apparent consciousness of these implications of globalisation and we have consequently pursued policies which have tended to strengthen globalisation's threats and weaken its opportunities.
The effort to create new jobs in this new competitiveness-driven environment must begin with the recognition of the simple fact that a sustainable job can only exist if its contribution to the creation of real economic value can be priced competitively.
The price of that contribution is the cost of labour. However, the price of labour (including executive labour) will always tend to reflect the cost of the needs and expectations of people within the economy. And what determines the cost of those needs and expectations is the cost of living. In other words, the price of labour is high where the cost of living is high, and low, where the cost of living is low.
However, in the more developed economies, a high price for labour is offset by the productivity-enhancing assets of high technology, efficient economic infra-structure and healthy social capital, which effectively reduce the cost of labour. While in less-developed economies, like Jamaica, where these assets are limited, a high price for labour guarantees uncompetitiveness and leads to economic strangulation.
Unfortunately, the economic policies of the last 16 years have led to the cost of living in Jamaica increasing more than three times faster than in the economies of our trading partners, Trinidad and Tobago, Barbados and the United States, when measured in the currency with which we conduct trade, the US dollar.
The cost of satisfying the needs and expectations of our workers has increased correspondingly, as has the price of labour.
The Government must, therefore, face the harsh reality that before it will be able to create the new jobs it promised, it must develop policies which will reverse the growth of our cost of living and so bring the cost of satisfying the needs and expectations of our people in line with the value of their output.
In short, the Government must convert Jamaica from the high-cost economy it has become, to a low-cost economy, for us to be competitive again.
Examples in Caribbean
The task is not beyond us. In the 1980s, as the paradigm of globalisation was taking shape, the three major Caribbean economies, Trinidad, Barbados and Jamaica, responded with marked success.
The success of the Trinidadian and Barbadian effort is now legendary. But a very heavy political price was paid by the prime ministers who led those efforts.
Trinidad and Tobago's George Chambers and A.N.R. Robinson and Barbados' Erskine Sandiford employed varying combinations of unpopular monetary and incomes policies, which resulted in a dramatic reduction in inflation to the point where the rates achieved were similar to those of the US and in some instances, better.
These countries' competitiveness improved, their economies grew and their people are now enjoying a level of prosperity Jamaica can now only dream about.
However, it is a little-recognised fact that in Jamaica, we carried out an equally successful effort to achieve competitiveness.
In the 1980s, the structural adjustment programme, which included monetary and incomes policies, led to a re-pricing of Jamaican production, resulting in a level of competitiveness to match our trading partners.
Of course, the same political price paid by Chambers, Robinson and Sandiford was also paid by the Jamaican leader, Edward Seaga.
Building on the base
One is naturally led to ask: Why are the Trinidadian and Barbadian economies now enjoying relative prosperity while Jamaica is engulfed in economic miasma?
The answer is really quite simple: the administrations which succeeded Chambers and Robinson in Trinidad and Sandiford in Barbados built on the competitiveness they had inherited and used it as a platform for economic growth and expansion.
However, in Jamaica, the very opposite took place. We embarked on a course which effectively undermined our economic competitiveness.
The result has been the reversal of growth, the reduction of economic opportunity and the emergence of 'alternative schemes' as a substitute for real economic activities. So uncompetitive are we that our exports can now only pay for one third of our imports.
The challenge we face now is: how to undo this damage to our competitiveness and embark on a path of economic growth and social rehabilitation.
The one thing we can be sure of is that if we continue doing what we have been doing for the last 16 years, any change which occurs will be for the worse.
Overpriced services
The new government promised a change in course and one had expected that they recognised that as far as the economy and the creation of jobs were concerned, significant change was necessary. So far, I have seen no evidence of change of any significance. But change is urgently needed.
The Index of Global Competitiveness for 2007 placed Jamaica's macroeconomy at 118th among the 131 countries measured.
This put us behind all the countries in Central America and the Caribbean, except Haiti and Guyana. An uncompetitive macro-economy renders everything produced within our borders uncompetitive. This is why our sugar, bananas and manufactured goods, or anything else you can think of, cannot stand up to international competition today.
This situation must be urgently corrected if we are to have any chance of turning our economy around. Government must act decisively to rid the economy of all overpriced domestic services which inflate the cost of the goods and exported services produced within the country.
Top of the list is the cost of government. The cost of capital, financial services and the provision of energy are not very far behind. All economies absorb these services in their production and it is largely the difference in their costs which separates the countries that succeed from those that fail.
Contrasting productivity
The disproportionately high cost of these services in Jamaica is substantially responsible for the fact that, according to International Labour organisation data, the average Barbadian worker produces twice the value produced by the average Jamaican worker, and the Trinidadian worker produces over three times more.
In spite of this, Jamaican top-end incomes are at least 25 per cent higher than they are in those countries. As long as this contradiction exists, Jamaica will not be able to compete or attract productive capital to create jobs.
The capital we attract will always tend to be directed toward the exploitation of raw materials, including sun, sea and sand, not to the productive output of our people - and will create relatively few jobs
The productivity of our people is the only basis on which we will be able to attract the kind of capital which creates sustainable jobs and leads to economic spinoffs which can provide the dynamism that the economy must have to achieve the high level of growth needed to catch up with our neighbours.
Before 1992, when our economy was more competitive and we attracted investments largely on the basis of the productivity of our workers, our economy grew impressively and thousands of productive jobs were created.
Even more important, our tradespersons, involved in small businesses, generated an economic vibrancy which laid the base for the creation of thousands of small-business jobs.
But these seem to have all but disappeared. Small tailors and dressmakers, shoemakers and other artisans seemed to have simply faded away. We need a new approach to economic management to bring them back.
Test of leadership
But changing our economic management strategy to make it more production-focused will present an extraordinary test of leadership. Success will not only require wise, strong and committed leadership from government; it will need the willingness of our people to generate the national drive and passion we so easily generate when our athletes excel.
We spontaneously unite and rally in celebration of sporting successes, but seem less able to join in hard work and sacrifice to achieve other national goals.
Today, our most important and urgent national goal is achieving economic competitiveness.
It will not be easy and will involve major sacrifices to wean us from the high consumption-low production -'alternative scheme'-dominated environment in which we have existed for so long.
Can government provide the leadership, and can we commit the discipline and sacrifice that our successful athletes did to succeed so spectacularly in Beijing?
I believe we can. For, like Usain and his teammates, we are Jamaicans and we too are capable of greatness.
Claude Clarke is a former PNP trade minister and manufacturer.
...no good ever coming from the PNP side? 
nothing good ever from the JLP side?
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