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Where's this 'growth' to come from?
Published: Sunday | February 19, 2012
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Gordon Robinson, Contributor
With all the artificial optimism only a recent election victory can spark, successive governments keep assuring us they intend to produce 'growth'.
So far, we've seen significant growth in crime, in environmental degradation (including from spontaneous fires on a gargantuan garbage dump euphemistically called a 'landfill' by government officials), in inflation, in poverty, and unemployment. Energy costs are showing marked growth, while tourism numbers are declining, as is Jamaica's gross domestic product (GDP). So, where's this 'growth' to come from? Talk? Jamaica Emergency Employment Programme (JEEP)?
At some point, a Jamaica government will stop playing childish political games with our economy and tell us the truth, but it doesn't appear likely to begin any time soon. The previous government spoke of 'bitter medicine' to come, but steadfastly refused to specify. This present crew keeps talking about growth; promising JEEP; and then talking some more about IMF 'negotiations' (whatever those are supposed to be) while flitting off on this or that trip to do some more talking.
Meanwhile, back at the ranch, we the people are patiently waiting for the talking to translate into rescue from our economic woes. Most of us have taken on-board the very strong impression that an IMF agreement will mean rescue. Others prefer the immediacy of JEEP. Neither is, or approaches, the truth. Why won't anybody speak the unvarnished truth?
The IMF agreement will ensure that our external debt is paid. JEEP will ensure that we fall deeper into the economic hole we've dug for ourselves for more than 20 years, as urgently needed fiscal resources are created from mid-air to be spent on short-term, patchwork buying of votes for a long-overdue local-government election.
Neither is related to growth. In order to understand how we'll generate real growth, we must begin with a reasoned analysis of where we are now, and the future outlook.
Where are we now? With debt exceeding 130 per cent of GDP and annual recurrent budget deficits, Jamaica is technically bankrupt. The only way to make any progress towards revival is to take one baby step at a time. We must reduce our recurrent expenses to match our revenue collections (this assumes we make our debt payments). Or increase our revenue collections to match our expenditure. Preferably both.
Any analysis of our local economic prospects must include an overall analysis of the global economic prospects because, as we all know, when the United States (US) sneezes, we catch a cold. With the US also technically bankrupt and owned by China, that adage must now extend to the Far East and places in-between. Since we insist on tagging our currency to the US dollar, we should analyse the strength of that currency and where that economy is heading. Add the European financial crisis (with China circling the European skies as well, ready to pounce) and we'll soon see that, back home at the old thatched hut, it just can't be business as usual.
What Gov't isn't telling you
Here's what your Government isn't telling you (well, I hope that's true because, if it's that they don't understand, we're doomed). The US isn't decisively emerging from its recent recession any time soon. In fact, I guarantee you that it'll be sinking into a new, deeper recession within the next 12 months. The devaluation of the US dollar will accelerate. Rapid inflation is on the way both in the US and in Jamaica. Soon and very soon, interest rates in the US, kept artificially low for some time now, will start to rise.
Hopefully, this time, our Government will have noticed the several indicators of the renewed disaster to come, none more so than the price of gold. In the final 30 years of the last millennium, gold prices were reasonably stable, save for a mild peak at US$750 per ounce around 1979-80. Since 2002, (US$450 per ounce) gold prices have steadily climbed to US$1,750 per ounce at the end of 2010. Persons convert their cash to gold as a hedge against inflation.
That this is happening at a greatly accelerated rate should make it obvious to all, save our textbook economists, that gold prices are predicting imminent inflation. In the US, as it has been in Jamaica, artificially low interest rates (regulated in US; made by JDX in Jamaica) have resulted in more investment in real estate. In Jamaica, the construction industry is on the uptick, producing the illusion of additional short-term jobs but also burdening the society with (literally) concrete examples of poor urban planning, as plazas and housing schemes pop up like acne on teenagers without the required supporting infrastructure.
The official inflation rate in Jamaica has moved from 5.8 per cent in 2006 to 13 per cent in 2010 (including a 22 per cent spike in 2008). If I'm correct to predict increased inflation for the US, what's that mean for Jamaica, whose main activity remains higgling everything from jewellery to manufacturing and agricultural inputs from the US? Trust me, we're about to see hyperinflation in Jamaica this year, followed by that which follows inflation as night follows day, namely, higher interest rates. Suddenly, all that borrowed money invested in those concrete structures will begin turning into non-performing loans (again) and our banks will find themselves in trouble (again).
America will be in a tailspin
Meanwhile, America will be in a tailspin; Europe will have buckled under its own financial crises as Germany, England and France scramble to distance themselves from poor relations, Greece and Italy; America whose banks are exposed to European debt to the tune of more than $1 trillion, will fall deeper and deeper into a recession, from which it might never recover. The last time the US national debt reached 150 per cent, as official figures project will be the case by 2020, was around 1945.
Then, there was an industrial revolution and explosion of small businesses to fashion a rescue. This time, there is nothing but a stubborn insistence on spending non-existent fortunes on silly wars (one with Iran is now being threatened) by short-sighted politicians in a muscle-flexing contest anxious to maintain the illusion of the USA as a superpower and to achieve, by force, the impossible, which is to turn back the clock to before nuclear weapons were invented. There's no sign of the required American humility which will result in a return to basics to lift it from its current depression. Soon and very soon, China and India will rule the world and Americans will be wearing turbans.
Will our political leaders admit to this clear vision of the future or continue to bumble along, pee, pee, cluck, cluck behind America begging for largesse? In Jamaica, growth won't be realised by traditional policies. Jamaica must level with the public and admit that real growth is impossible as a short-term objective. We must take baby steps and have a vision of 2050, instead of this brainless stumbling from election cycle to election cycle. The first two baby steps are back to basics - reduced expenditure and revenue enhancement.
On the side of reduced expenditure, the obvious place to start is our public sector, which is too big and expensive. The new finance minister is reported to have recently delivered himself of the following inane, gigantic non-sequitur in support of avoiding the politically dangerous but practically prudent decision to cut the public sector. According to The Gleaner:
"The finance minister pointed to the fact that close to 80 per cent of public-sector employees are in the critical areas of education, health and national security, with no scope for mass dismissals.
"These sectors are essential to the maintenance and, indeed, the improvement of the quality of life of the Jamaican people, and any sharp reduction in employment would involve cutting in those sectors which already have service-delivery deficits."
Seriously, Peter? Accepting for the moment that your 80 per cent figure is accurate and that these sectors are essential (Army? Essential? Are we expecting an invasion?), does their essential nature automatically mean they aren't overstaffed or inefficient? And what exactly do you mean by "service-delivery deficits?" Are you saying that you need MORE staff? Or could it be that lack of required equipment, proper human resource management, and a downright lazy and uncaring approach by many public servants (including ministers) could possibly have contributed significantly to these "deficits"?
Please stop playing politics with our recurrent budget. Cut and rationalise the public sector, and do it NOW.
Real growth also begins with a commitment to education. There'll never be any real growth in Jamaica while our adult population remains undereducated. If we create 1,000 jobs but must ask foreigners to perform those jobs, what have we accomplished? Our vision must be to produce 100 per cent quality secondary-school graduates by 2050, regardless of the cost. It doesn't end there.
Policies must focus on small business
Both fiscal and monetary policies must focus on small business. It's when small businesses become big that there's real growth and consequential revenue enhancement without additional taxation.
In 1938, young Ferdinand Sangster had no job. He strapped his suitcase filled with Reader's Digest and Ring magazines to the back of his bicycle and rode from house to house selling his wares. Thus, from zero employment, he employed one. From these humble beginnings, Sangster's Publishing and Book Stores were born. Between 1941, when he opened his first store at Harbour Street, and 1984, when the company was acquired by The Gleaner, Sangster's opened six branches islandwide, employing hundreds. That's what I call growth.
Tax waivers to large, already successful corporations, or concessions to huge telecoms companies crying "Wolf! Wolf!" won't grow this economy. Deep commitments to education and to facilitate small businesses are the first baby steps to success. Policies to assist small businesses will go hand in hand with the needed public-sector reduction as separated career civil servants can find real opportunities to invest redundancy payments in their own thing.
I'm warning this Government and all political leaders: It's time to stop playing politics with our economic problems. We've no more time for electability concerns or useless finger-pointing. We've been avoiding the 'bitter medicine' for decades. It's time to swallow the medicine, and with it our pride; our words of blame; every negative impulse but an urgent desire to cure; or leave the hospital.
Peace and love.
Gordon Robinson is an attorney-at-law. Email feedback to columns@gleanerjm.com.
http://jamaica-gleaner.com/gleaner/2...cleisure2.html
Published: Sunday | February 19, 2012
1 2 >
Gordon Robinson, Contributor
With all the artificial optimism only a recent election victory can spark, successive governments keep assuring us they intend to produce 'growth'.
So far, we've seen significant growth in crime, in environmental degradation (including from spontaneous fires on a gargantuan garbage dump euphemistically called a 'landfill' by government officials), in inflation, in poverty, and unemployment. Energy costs are showing marked growth, while tourism numbers are declining, as is Jamaica's gross domestic product (GDP). So, where's this 'growth' to come from? Talk? Jamaica Emergency Employment Programme (JEEP)?
At some point, a Jamaica government will stop playing childish political games with our economy and tell us the truth, but it doesn't appear likely to begin any time soon. The previous government spoke of 'bitter medicine' to come, but steadfastly refused to specify. This present crew keeps talking about growth; promising JEEP; and then talking some more about IMF 'negotiations' (whatever those are supposed to be) while flitting off on this or that trip to do some more talking.
Meanwhile, back at the ranch, we the people are patiently waiting for the talking to translate into rescue from our economic woes. Most of us have taken on-board the very strong impression that an IMF agreement will mean rescue. Others prefer the immediacy of JEEP. Neither is, or approaches, the truth. Why won't anybody speak the unvarnished truth?
The IMF agreement will ensure that our external debt is paid. JEEP will ensure that we fall deeper into the economic hole we've dug for ourselves for more than 20 years, as urgently needed fiscal resources are created from mid-air to be spent on short-term, patchwork buying of votes for a long-overdue local-government election.
Neither is related to growth. In order to understand how we'll generate real growth, we must begin with a reasoned analysis of where we are now, and the future outlook.
Where are we now? With debt exceeding 130 per cent of GDP and annual recurrent budget deficits, Jamaica is technically bankrupt. The only way to make any progress towards revival is to take one baby step at a time. We must reduce our recurrent expenses to match our revenue collections (this assumes we make our debt payments). Or increase our revenue collections to match our expenditure. Preferably both.
Any analysis of our local economic prospects must include an overall analysis of the global economic prospects because, as we all know, when the United States (US) sneezes, we catch a cold. With the US also technically bankrupt and owned by China, that adage must now extend to the Far East and places in-between. Since we insist on tagging our currency to the US dollar, we should analyse the strength of that currency and where that economy is heading. Add the European financial crisis (with China circling the European skies as well, ready to pounce) and we'll soon see that, back home at the old thatched hut, it just can't be business as usual.
What Gov't isn't telling you
Here's what your Government isn't telling you (well, I hope that's true because, if it's that they don't understand, we're doomed). The US isn't decisively emerging from its recent recession any time soon. In fact, I guarantee you that it'll be sinking into a new, deeper recession within the next 12 months. The devaluation of the US dollar will accelerate. Rapid inflation is on the way both in the US and in Jamaica. Soon and very soon, interest rates in the US, kept artificially low for some time now, will start to rise.
Hopefully, this time, our Government will have noticed the several indicators of the renewed disaster to come, none more so than the price of gold. In the final 30 years of the last millennium, gold prices were reasonably stable, save for a mild peak at US$750 per ounce around 1979-80. Since 2002, (US$450 per ounce) gold prices have steadily climbed to US$1,750 per ounce at the end of 2010. Persons convert their cash to gold as a hedge against inflation.
That this is happening at a greatly accelerated rate should make it obvious to all, save our textbook economists, that gold prices are predicting imminent inflation. In the US, as it has been in Jamaica, artificially low interest rates (regulated in US; made by JDX in Jamaica) have resulted in more investment in real estate. In Jamaica, the construction industry is on the uptick, producing the illusion of additional short-term jobs but also burdening the society with (literally) concrete examples of poor urban planning, as plazas and housing schemes pop up like acne on teenagers without the required supporting infrastructure.
The official inflation rate in Jamaica has moved from 5.8 per cent in 2006 to 13 per cent in 2010 (including a 22 per cent spike in 2008). If I'm correct to predict increased inflation for the US, what's that mean for Jamaica, whose main activity remains higgling everything from jewellery to manufacturing and agricultural inputs from the US? Trust me, we're about to see hyperinflation in Jamaica this year, followed by that which follows inflation as night follows day, namely, higher interest rates. Suddenly, all that borrowed money invested in those concrete structures will begin turning into non-performing loans (again) and our banks will find themselves in trouble (again).
America will be in a tailspin
Meanwhile, America will be in a tailspin; Europe will have buckled under its own financial crises as Germany, England and France scramble to distance themselves from poor relations, Greece and Italy; America whose banks are exposed to European debt to the tune of more than $1 trillion, will fall deeper and deeper into a recession, from which it might never recover. The last time the US national debt reached 150 per cent, as official figures project will be the case by 2020, was around 1945.
Then, there was an industrial revolution and explosion of small businesses to fashion a rescue. This time, there is nothing but a stubborn insistence on spending non-existent fortunes on silly wars (one with Iran is now being threatened) by short-sighted politicians in a muscle-flexing contest anxious to maintain the illusion of the USA as a superpower and to achieve, by force, the impossible, which is to turn back the clock to before nuclear weapons were invented. There's no sign of the required American humility which will result in a return to basics to lift it from its current depression. Soon and very soon, China and India will rule the world and Americans will be wearing turbans.
Will our political leaders admit to this clear vision of the future or continue to bumble along, pee, pee, cluck, cluck behind America begging for largesse? In Jamaica, growth won't be realised by traditional policies. Jamaica must level with the public and admit that real growth is impossible as a short-term objective. We must take baby steps and have a vision of 2050, instead of this brainless stumbling from election cycle to election cycle. The first two baby steps are back to basics - reduced expenditure and revenue enhancement.
On the side of reduced expenditure, the obvious place to start is our public sector, which is too big and expensive. The new finance minister is reported to have recently delivered himself of the following inane, gigantic non-sequitur in support of avoiding the politically dangerous but practically prudent decision to cut the public sector. According to The Gleaner:
"The finance minister pointed to the fact that close to 80 per cent of public-sector employees are in the critical areas of education, health and national security, with no scope for mass dismissals.
"These sectors are essential to the maintenance and, indeed, the improvement of the quality of life of the Jamaican people, and any sharp reduction in employment would involve cutting in those sectors which already have service-delivery deficits."
Seriously, Peter? Accepting for the moment that your 80 per cent figure is accurate and that these sectors are essential (Army? Essential? Are we expecting an invasion?), does their essential nature automatically mean they aren't overstaffed or inefficient? And what exactly do you mean by "service-delivery deficits?" Are you saying that you need MORE staff? Or could it be that lack of required equipment, proper human resource management, and a downright lazy and uncaring approach by many public servants (including ministers) could possibly have contributed significantly to these "deficits"?
Please stop playing politics with our recurrent budget. Cut and rationalise the public sector, and do it NOW.
Real growth also begins with a commitment to education. There'll never be any real growth in Jamaica while our adult population remains undereducated. If we create 1,000 jobs but must ask foreigners to perform those jobs, what have we accomplished? Our vision must be to produce 100 per cent quality secondary-school graduates by 2050, regardless of the cost. It doesn't end there.
Policies must focus on small business
Both fiscal and monetary policies must focus on small business. It's when small businesses become big that there's real growth and consequential revenue enhancement without additional taxation.
In 1938, young Ferdinand Sangster had no job. He strapped his suitcase filled with Reader's Digest and Ring magazines to the back of his bicycle and rode from house to house selling his wares. Thus, from zero employment, he employed one. From these humble beginnings, Sangster's Publishing and Book Stores were born. Between 1941, when he opened his first store at Harbour Street, and 1984, when the company was acquired by The Gleaner, Sangster's opened six branches islandwide, employing hundreds. That's what I call growth.
Tax waivers to large, already successful corporations, or concessions to huge telecoms companies crying "Wolf! Wolf!" won't grow this economy. Deep commitments to education and to facilitate small businesses are the first baby steps to success. Policies to assist small businesses will go hand in hand with the needed public-sector reduction as separated career civil servants can find real opportunities to invest redundancy payments in their own thing.
I'm warning this Government and all political leaders: It's time to stop playing politics with our economic problems. We've no more time for electability concerns or useless finger-pointing. We've been avoiding the 'bitter medicine' for decades. It's time to swallow the medicine, and with it our pride; our words of blame; every negative impulse but an urgent desire to cure; or leave the hospital.
Peace and love.
Gordon Robinson is an attorney-at-law. Email feedback to columns@gleanerjm.com.
http://jamaica-gleaner.com/gleaner/2...cleisure2.html
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