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JAMAICA'S failure since the 1970s to achieve meaningful real economic growth on a sustained basis has been the result of myriad periodically adverse external circumstances and a profoundly inappropriate economic policy over a prolonged period.
Governments of both political parties have been culpable in this disaster that has steadily impoverished the Jamaican people.
Finally, however, the present Government has recognised that the economic policies of the past had to be comprehensively changed. This necessity for a change in economic policy was recognised long ago by many in the private sector, the international financial institutions and the vast majority of the Jamaican people.
Four prerequisites for a new economic policy have belatedly come to the fore:
* First, that debt-financed budgets and excessive borrowing inevitably become unsustainable and must stop. That situation had been reached in early 2010 when more than half the budget was being spent on debt servicing.
* Second, a government that recognises the need for change and is prepared to adjust policy, despite the attendant risk of eroding its support among an electorate, many of whom are both needy and convinced that the budget is a limitless source of expenditure.
* Third, reality had been masked for so long by an addiction to borrowing that senior technocrats came to believe that there was no alternative. Therefore the technical team had to be changed. The finance minister has now assembled a formidable new technical team with Dr Wesley Hughes as financial secretary, Mr Brian Wynter as governor of the Bank Jamaica (BOJ) and recently Professor Gladstone Hutchinson as director-general of the Planning Institute of Jamaica (PIOJ).
Mr Wynter has done a superb job in difficult circumstances and without a contract to boot. Prof Hutchinson brings fresh ideas and a proactive approach to long neglected issues and outdated assumptions about the Jamaican economy.
* Fourth, international financial institutions which can help the stabilisation and adjustment process by providing adequate amounts of concessional finance and technical advice.
It is the fourth requirement where there has been a mixed success. The International Monetary Fund (IMF) and the Inter-American Development Bank (IDB) have come up with huge financing packages. The World Bank has been long on conditionality and short on cash; The IDB and the World Bank have to support the macroeconomic programme agreed to by the IMF and Jamaican Government.
The problem is that the IMF programme is aimed at stabilisation through deflation, but stabilisation is a necessary but not sufficient condition for economic growth. Indeed it increases poverty in the short run. The IMF model assumes that stabilisation will automatically produce growth, but this is a simplistic neo-liberal assumption.
The dilemma for Jamaica is how to meet the terms of the IMF programme while stimulating economic growth. This is the task of the new team of economic technicians.
Failure is not an option.
http://www.jamaicaobserver.com/edito...le-but_7984761
Governments of both political parties have been culpable in this disaster that has steadily impoverished the Jamaican people.
Finally, however, the present Government has recognised that the economic policies of the past had to be comprehensively changed. This necessity for a change in economic policy was recognised long ago by many in the private sector, the international financial institutions and the vast majority of the Jamaican people.
Four prerequisites for a new economic policy have belatedly come to the fore:
* First, that debt-financed budgets and excessive borrowing inevitably become unsustainable and must stop. That situation had been reached in early 2010 when more than half the budget was being spent on debt servicing.
* Second, a government that recognises the need for change and is prepared to adjust policy, despite the attendant risk of eroding its support among an electorate, many of whom are both needy and convinced that the budget is a limitless source of expenditure.
* Third, reality had been masked for so long by an addiction to borrowing that senior technocrats came to believe that there was no alternative. Therefore the technical team had to be changed. The finance minister has now assembled a formidable new technical team with Dr Wesley Hughes as financial secretary, Mr Brian Wynter as governor of the Bank Jamaica (BOJ) and recently Professor Gladstone Hutchinson as director-general of the Planning Institute of Jamaica (PIOJ).
Mr Wynter has done a superb job in difficult circumstances and without a contract to boot. Prof Hutchinson brings fresh ideas and a proactive approach to long neglected issues and outdated assumptions about the Jamaican economy.
* Fourth, international financial institutions which can help the stabilisation and adjustment process by providing adequate amounts of concessional finance and technical advice.
It is the fourth requirement where there has been a mixed success. The International Monetary Fund (IMF) and the Inter-American Development Bank (IDB) have come up with huge financing packages. The World Bank has been long on conditionality and short on cash; The IDB and the World Bank have to support the macroeconomic programme agreed to by the IMF and Jamaican Government.
The problem is that the IMF programme is aimed at stabilisation through deflation, but stabilisation is a necessary but not sufficient condition for economic growth. Indeed it increases poverty in the short run. The IMF model assumes that stabilisation will automatically produce growth, but this is a simplistic neo-liberal assumption.
The dilemma for Jamaica is how to meet the terms of the IMF programme while stimulating economic growth. This is the task of the new team of economic technicians.
Failure is not an option.
http://www.jamaicaobserver.com/edito...le-but_7984761
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