Tweet
Jamaica must become united as US faces prospect of modern-day depression
Keith Collister
Wednesday, November 26, 2008
The US economy faces the prospect of a major recession at best, or a modern-day depression at worst, as the ongoing financial crisis now appears to be morphing into a worldwide economic crisis.
The US Government's current economic team, particularly Treasury Secretary Paulson and Federal Reserve Governor Bernanke, have made a number of very serious mistakes over the past year and a half, not the least of which is their failure to recognise the severity of the crisis they were facing.
However, the seeds of the current financial crisis were laid much earlier, with both Former Federal Reserve chairman Alan Greenspan and the US Congress having played starring roles. President-Elect Barack Obama appears to be constructing a strong economic team, including appointing current New York Federal Reserve chairman Timothy Geithner as his future Treasury Secretary and famous economist (and former Clinton Treasury secretary) Larry Summers to head his National Economic Council.
However, the new team will face almost unprecedented economic challenges.
To begin with, the financial crisis is far from fixed as the best measure of global financial stress, the London interbank offered rate or Libor (the interest rate banks charge each other for three-month loans in dollars), is starting to rise again.
This benchmark of global borrowing costs, derived from the British Bankers' Association's survey of 16 banks, climbed for a third day yesterday to 2.2 per cent. This is despite the Federal Reserve and Treasury having pumped more than US$3-trillion into the US financial system so far, and Citibank having just had to be bailed out by the US government.
Beyond the financial crisis, and the US's big three automakers are now seeking a bailout, and the world's biggest economies continue to officially fall into a recession. Following housing's collapse, the US is now facing the scary prospect of the first consumer-led recession in decades.
All of this suggests that Jamaica requires a unified approach in addressing its problems. A week ago on Wednesday, local independent think-tank the Caribbean Policy Research Institute (CAPRI), in conjunction with the Caribbean Council, hosted a seminar entitled "Social Partnership in Jamaica - Elements of Success".
The seminar included speeches from Opposition Spokesperson on foreign affairs and trade Anthony Hylton, Minister Dwight Nelson, minister without Portfolio, Ministry of Finance & Public Service, Chris Zacca, President of the Private Sector Organisation of Jamaica and Vincent Morrison, representing the Jamaica Confederation of Trade Unions.
The key presentation of the seminar, entitled "Ireland's Transformation - An Insight" was made by Irishman Paul Haran. Haran, who had retired as the secretary general of Ireland's Department of Enterprise, Trade and Employment in 2004, held one-on-one meetings with representative stakeholders in Jamaican society including government, opposition, unions and private sector at which Haran both shared the Irish experience, and answered questions from the stakeholders he was meeting.
In a post-conference draft paper entitled "Jamaica United", Capri argued:
"This exercise was instructive and useful. The most important thing that can be said was that there was a broad, shared commitment to the principle of social partnership. The devil, however, will be in the details.
While the strategic vision that would animate a social partnership is widely shared -namely, that all stakeholders should make short-term sacrifices in order to yield medium and long-term collective gains - the tactics involved in its implementation would tax the ingenuity of all involved. Indeed, it seems likely that one of the things which undermined previous initiatives at social partnership in Jamaica was that the details were left unresolved; this was because the initiatives were driven largely by voluntary action, and lacked the sort of research support which would have enabled all these vexing issues to be broached. Most of those consulted were struck by the fact that the Irish model was built upon a National Economic and Social Council (NESC), which had a full-time staff devoted top advising the government on proper implementation."
Last year in early November, the PSOJ organised a national planning summit entitled "Jamaica Tomorrow".
In his opening address to the summit, designed to emphasise the need for action following a closely contested election, Prime Minister Golding noted that "Jamaica must not only be open for business but ready and anxious for investment."
All of Jamaica's private sector entities were represented, as well as the majority of the new government ministers and key civil servants.
Jamaica's key challenges, as identified in five of the eight background policy papers prepared for the summit, included its need to reduce bureaucracy and red tape, improve the effectiveness of its promotion of investment (and thus job creation), improve education and training, reduce crime, and achieve tax reform orientated towards increasing production. The other papers included the critical issue of Jamaica's huge debt, land titling (reflecting the urgent need to formalise land ownership for many Jamaicans), and a paper on the same Irish model more recently outlined by Haran. The process was actually highly transparent, as all of these papers are on the PSOJ website available for the general public to read, and the reform agenda outlined is very similar to that the Government has outlined.
A monitoring committee was formed to ascertain progress in the topic areas covered at the summit, but overall the process appears to be behind its original planned schedule.
Arguably, it requires specific, measurable, verifiable, performance targets as far as the government's undertakings are concerned, akin to a standard IMF standby or extended fund pact, to get back on track. In this regard, Jamaica should look at how Ireland structured its National Economic and Social Council to see if there are any lessons to be learned.
The remarks of Edward Chin Mook, head of the Small Business Association, probably captures the views of many business people. "Since the Summit, not much has been done in developing a co-ordinated strategy of the state and how each government department and agency is to work in harmony to mitigate the global fall-out. Each minister is still operating under their own plan, and there is still no big picture strategy to advance the country".
Keith Collister
Wednesday, November 26, 2008
The US economy faces the prospect of a major recession at best, or a modern-day depression at worst, as the ongoing financial crisis now appears to be morphing into a worldwide economic crisis.
The US Government's current economic team, particularly Treasury Secretary Paulson and Federal Reserve Governor Bernanke, have made a number of very serious mistakes over the past year and a half, not the least of which is their failure to recognise the severity of the crisis they were facing.
However, the seeds of the current financial crisis were laid much earlier, with both Former Federal Reserve chairman Alan Greenspan and the US Congress having played starring roles. President-Elect Barack Obama appears to be constructing a strong economic team, including appointing current New York Federal Reserve chairman Timothy Geithner as his future Treasury Secretary and famous economist (and former Clinton Treasury secretary) Larry Summers to head his National Economic Council.
However, the new team will face almost unprecedented economic challenges.
To begin with, the financial crisis is far from fixed as the best measure of global financial stress, the London interbank offered rate or Libor (the interest rate banks charge each other for three-month loans in dollars), is starting to rise again.
This benchmark of global borrowing costs, derived from the British Bankers' Association's survey of 16 banks, climbed for a third day yesterday to 2.2 per cent. This is despite the Federal Reserve and Treasury having pumped more than US$3-trillion into the US financial system so far, and Citibank having just had to be bailed out by the US government.
Beyond the financial crisis, and the US's big three automakers are now seeking a bailout, and the world's biggest economies continue to officially fall into a recession. Following housing's collapse, the US is now facing the scary prospect of the first consumer-led recession in decades.
All of this suggests that Jamaica requires a unified approach in addressing its problems. A week ago on Wednesday, local independent think-tank the Caribbean Policy Research Institute (CAPRI), in conjunction with the Caribbean Council, hosted a seminar entitled "Social Partnership in Jamaica - Elements of Success".
The seminar included speeches from Opposition Spokesperson on foreign affairs and trade Anthony Hylton, Minister Dwight Nelson, minister without Portfolio, Ministry of Finance & Public Service, Chris Zacca, President of the Private Sector Organisation of Jamaica and Vincent Morrison, representing the Jamaica Confederation of Trade Unions.
The key presentation of the seminar, entitled "Ireland's Transformation - An Insight" was made by Irishman Paul Haran. Haran, who had retired as the secretary general of Ireland's Department of Enterprise, Trade and Employment in 2004, held one-on-one meetings with representative stakeholders in Jamaican society including government, opposition, unions and private sector at which Haran both shared the Irish experience, and answered questions from the stakeholders he was meeting.
In a post-conference draft paper entitled "Jamaica United", Capri argued:
"This exercise was instructive and useful. The most important thing that can be said was that there was a broad, shared commitment to the principle of social partnership. The devil, however, will be in the details.
While the strategic vision that would animate a social partnership is widely shared -namely, that all stakeholders should make short-term sacrifices in order to yield medium and long-term collective gains - the tactics involved in its implementation would tax the ingenuity of all involved. Indeed, it seems likely that one of the things which undermined previous initiatives at social partnership in Jamaica was that the details were left unresolved; this was because the initiatives were driven largely by voluntary action, and lacked the sort of research support which would have enabled all these vexing issues to be broached. Most of those consulted were struck by the fact that the Irish model was built upon a National Economic and Social Council (NESC), which had a full-time staff devoted top advising the government on proper implementation."
Last year in early November, the PSOJ organised a national planning summit entitled "Jamaica Tomorrow".
In his opening address to the summit, designed to emphasise the need for action following a closely contested election, Prime Minister Golding noted that "Jamaica must not only be open for business but ready and anxious for investment."
All of Jamaica's private sector entities were represented, as well as the majority of the new government ministers and key civil servants.
Jamaica's key challenges, as identified in five of the eight background policy papers prepared for the summit, included its need to reduce bureaucracy and red tape, improve the effectiveness of its promotion of investment (and thus job creation), improve education and training, reduce crime, and achieve tax reform orientated towards increasing production. The other papers included the critical issue of Jamaica's huge debt, land titling (reflecting the urgent need to formalise land ownership for many Jamaicans), and a paper on the same Irish model more recently outlined by Haran. The process was actually highly transparent, as all of these papers are on the PSOJ website available for the general public to read, and the reform agenda outlined is very similar to that the Government has outlined.
A monitoring committee was formed to ascertain progress in the topic areas covered at the summit, but overall the process appears to be behind its original planned schedule.
Arguably, it requires specific, measurable, verifiable, performance targets as far as the government's undertakings are concerned, akin to a standard IMF standby or extended fund pact, to get back on track. In this regard, Jamaica should look at how Ireland structured its National Economic and Social Council to see if there are any lessons to be learned.
The remarks of Edward Chin Mook, head of the Small Business Association, probably captures the views of many business people. "Since the Summit, not much has been done in developing a co-ordinated strategy of the state and how each government department and agency is to work in harmony to mitigate the global fall-out. Each minister is still operating under their own plan, and there is still no big picture strategy to advance the country".