Tweet
Peter's Pie In The Sky
Published: Sunday | January 13, 2013 1 Comment
No, it's not the bitter medicine! Lola Hamilton grimaces as nurse Shantel Yap pricks her finger during a blood sugar and cholesterol test. Columnist Gordon Robinson says the watchword of our labour force should be productivity. - Gladstone Taylor/Photographer
Gordon Robinson, Contributor
Peter Phillips' recent statement on IMF "negotiations" is a masterpiece of obfuscation and an education on how to say nothing at length.
He said nothing new. So, apart from trying to paper over the embarrassment of his losing prediction of December success, why bother to speak? Was it out of concern for transparency, or his party's political fortunes?
He began:
"On assuming office, one of the most urgent priorities ... was to reopen the line of communication with the IMF and negotiate a new agreement that would satisfy the interest of Jamaica's economic recovery, as well as the board of the IMF ... ."
Why the pompous rhetoric, Peter? What "would satisfy the interest of Jamaica's economic recovery"? What, fundamentally, caused Jamaica's economic decline? Wasn't it the huge unsustainable "external" debt (which we can't pay)? What other reason was there to go to the IMF? This seemed the main thrust of your Budget speech.
IMF funds will bolster our net international reserves, allowing us to defend the dollar without repeating the 1990s financial ruin. This keeps our external debt down in Jamaican-dollar terms. That's important because we don't earn enough net foreign exchange to pay the debt, and because much of our "external" debt is locally held. Right, Peter? The IMF seal of approval will allow us to borrow from multilaterals to help pay the same debt. Right, Peter?
So, it's OUR debt that's the problem. Right, Peter?
So, why the mealy-mouthed nonsense about IMF board satisfaction? Have you forgotten that we approached the IMF, not the other way around? The IMF doesn't require satisfaction. It doesn't need to lend us a dollar, and it won't unless we take steps we should've taken decades ago towards fiscal responsibility. Government isn't seeking IMF satisfaction but, like an undisciplined child, is checking the boundaries of what the IMF will put up with from a nation proven too irresponsible to be entrusted with its own fiscal policy.
So, your prior hand-wringing about "sovereignty" because the IMF insisted on eliminating tax waivers is exposed as populist politics, having more to do with a reluctance to give up political fiefdoms than "the interest of Jamaica's economic recovery".
HOLLOW SOVEREIGNTY ARGUMENT
This just in, Peter: We can't afford tax waivers. We haven't been able to afford them for decades. But the ability to apply ministerial whim and fancy to the largesse that are waivers is too shiny a political toy to surrender. Had we long ago concluded an IMF agreement including a 'no waivers' clause, could we have imported 16 SUVs for ministers almost tax free? Is "sovereignty" to grant waivers connected to the level of political parties' campaign contributions? As long as campaign contributions continue in secrecy, we'll never know.
Why isn't there agreement on simple fiscal issues after 12 months? What exactly are the "complex and weighty issues" Peter insists are "at stake"?
Who's fooling who? Peter says:
"Over the past two months, discussions intensified with the visit of senior officials to Washington, and while many of us enjoyed the holidays, the negotiating team worked throughout the Christmas period ... . Government is working to bring the negotiations to a conclusion that's mutually satisfactory to Jamaica and the board of the IMF. This agreement must be in [Jamaica's] best interest and provide protection for the most vulnerable."
Let's get one thing clear, Peter. Very few of us enjoyed the holidays. The overwhelming majority of us weren't assigned a new Audi to drive for Christmas. We endured weekly gas-price increases. We suffered with frozen salaries or decreased earnings further eroded by inflation rates ignored by STATIN. We endured buying less for more. Many would've enjoyed working through the Christmas period, but some got just two weeks on the JEEP, others no work at all. So please don't patronise us. Tell us the truth.
The truth is, the IMF has no axe to grind. It has no "satisfaction" index. It's Jamaica whose past follies drive its Government's expressed need for IMF approval. It's Jamaica's Government which placed all its eggs in the IMF basket with no apparent alternative plan and then tried to talk tough to the IMF. What's your Plan B, Peter, if the IMF insists on no tax waivers and you insist on "sovereignty"? What's next when the "sticking point" sticks in our throats?
But, the IMF says:
"Jamaican authorities and the International Monetary Fund have been engaged intensely over the past few months, working on the technical elements of a possible Fund-supported programme."
Let's break this down for those hostile to the English language. Has Peter noticed that the IMF doesn't seem to think it's involved in any "negotiations"? The teams are "engaged intensely" on "the technical elements" of our fiscal programme. The sticking points (including tax-waiver elimination) are "technical" and unrelated, except indirectly, to policy or "sovereignty". How do you exercise "sovereignty" over illusions like the feasibility of tax waivers? If it doesn't exist, no amount of "policy" will create it. Fiscal policy includes deciding you need to cut spending and upon what to spend 'what lef''. What to cut are technical matters upon which technocrats usually advise governments, whose veto ought to be used sparingly when overall fiscal policy demands.
Further, IMF support is only "possible". Translation: "Look, enough time-wasting. Do whatever you want. We'll drink your milkshake and, when YOU decide what's fiscally responsible, we'll say if we approve."
Breathing space
I believe Audley understood this message and swiftly presented an approvable programme he possibly knew he couldn't keep. Jamaica needed breathing space. So he implemented JDX and agreed to several fiscally responsible but politically impossible future actions to that end. Now it appears Peter is being fried in Audley's fat and asked to implement "elements" of Audley's future actions as "prior actions" before any further agreement is finalised. Instead of accepting the inevitable to avoid economic disaster, we're treated to spectacles of tearful concern for the poor and belligerent defences of "sovereignty".
How will the poor fare without an IMF agreement, Peter? How many of them benefit from the sovereign exercise of Government's power to waive taxes?
Peter says: "The discussions with the Fund technical staff are virtually at an end." But the IMF says: "The IMF remains fully committed to helping Jamaica achieve these fundamental objectives and prepare the path for a more prosperous future, and discussions in this direction are continuing."
Whose crystal ball is correct? Unless the path is "for a more prosperous future", the IMF won't support it. Discussions are "in this direction" only, which doesn't sound like "at an end".
What does the IMF consider Jamaica's "fundamental objectives"? A rare IMF public retort identified them: "Create the conditions for sustained higher growth, achieve fiscal and debt sustainability, improve competitiveness, preserve financial sector stability, and foster social cohesion, including through an effective social safety net."
Create conditions for sustained higher growth:
The important word is "create". It follows that those conditions don't currently exist. Countries like Jamaica with high debt-to-GDP ratios and small economies can only "create" these conditions by radical structural reform. This means deep public-sector cuts which, twinned with real incentives for small businesses, can replace unproductive public-sector workers with productive private-sector entrepreneurs. Closing Petrojam, investing in alternative energy, and embracing expansion of new horizons like gaming could also help.
We can't afford to discard productive citizens. Raised retirement ages; productive graduates from education systems; relaxed service-sector regulations (regulators become facilitators); and fewer monopolies are national imperatives. The watchword should be productivity. Environmentalists need to appreciate that Earth is no longer pristine. Man de yah. For example, environmentally speaking, roads are inherently invasive but pro-production.
Achieve fiscal and debt sustainability:
This isn't rocket science. Austerity is necessary, but insufficient. Spending cuts are essential (no SUVs). Tax collection must increase. However, our insane tax rates (especially customs) must be reduced. Productivity the watchword; growth the key. Realistic constitutional debt caps, inviolable without a referendum, must be deeply entrenched.
Preserve financial-sector stability:
Keep interest rates and inflation down. Financial-sector regulation, unlike in other services, must be strict.
Foster social cohesion, including through an effective social safety net.
This is different from Peter's pronouncement that the agreement must "provide protection for the most vulnerable". The IMF won't approve without "social cohesion", which simply means the fiscal programme MUST have bipartisan and civil-society support. The "effective social safety net" is but a permissible route to achieving "social cohesion", not a requirement of itself. An "effective safety net" may or may not protect "the most vulnerable". It depends on how one measures "effectiveness". The effectiveness of the safety net is sufficient when "social cohesion" is achieved.
LOST IN TRANSLATION
While the IMF speaks easily understandable language, Peter appears not to grasp the essentials of fiscal responsibility, and still clings to "sovereignty". He's "actively focused" on: "1) the approach and timetable for a comprehensive policy on tax waivers and 2) safeguards against fiscal slippage in this fiscal year and the examination of even higher primary surpluses in the medium term to underpin targets for debt reduction."
While he's insisting on a "policy" on tax waivers, the IMF has reduced the tax waiver issue to a "technical" level. Does that sound like discussions are "virtually at an end"? A juxtaposition of the IMF's simple statement of requirements (action) and Peter's "active focus" ("approach"/"examination") will expose the crapstorm we're facing.
The IMF insists on a higher primary surplus (read: public-sector cuts and tax-collection enhancements); while Peter waffles about investing "great effort in advancing pension reform, wage negotiations, reducing the effective size of the public-sector Establishment, tax administration, introduction of a centralised Treasury management system, and various pieces of enabling legislation ...". What effort? What's been done? What's an "effective size"? Has the public-sector wage bill been reduced? How does "enabling legislation" translate into implementation? Debt can only be reduced from primary surpluses. If your plan is to forever borrow to pay debt, resign and let somebody else try.
NOTHING has been done towards real fiscal responsibility. Once again, we're hoping to trick the IMF into accepting a "mouth cut" to close the deal. But, it's obvious to all but the most politically sycophantic that the IMF is saying, "Fool me once; shame on you. Fool me twice; shame on me!"
Peace and love.
Gordon Robinson is an attorney-at-law. Email feedback to columns@gleanerjm.com.
Published: Sunday | January 13, 2013 1 Comment
No, it's not the bitter medicine! Lola Hamilton grimaces as nurse Shantel Yap pricks her finger during a blood sugar and cholesterol test. Columnist Gordon Robinson says the watchword of our labour force should be productivity. - Gladstone Taylor/Photographer
Gordon Robinson, Contributor
Peter Phillips' recent statement on IMF "negotiations" is a masterpiece of obfuscation and an education on how to say nothing at length.
He said nothing new. So, apart from trying to paper over the embarrassment of his losing prediction of December success, why bother to speak? Was it out of concern for transparency, or his party's political fortunes?
He began:
"On assuming office, one of the most urgent priorities ... was to reopen the line of communication with the IMF and negotiate a new agreement that would satisfy the interest of Jamaica's economic recovery, as well as the board of the IMF ... ."
Why the pompous rhetoric, Peter? What "would satisfy the interest of Jamaica's economic recovery"? What, fundamentally, caused Jamaica's economic decline? Wasn't it the huge unsustainable "external" debt (which we can't pay)? What other reason was there to go to the IMF? This seemed the main thrust of your Budget speech.
IMF funds will bolster our net international reserves, allowing us to defend the dollar without repeating the 1990s financial ruin. This keeps our external debt down in Jamaican-dollar terms. That's important because we don't earn enough net foreign exchange to pay the debt, and because much of our "external" debt is locally held. Right, Peter? The IMF seal of approval will allow us to borrow from multilaterals to help pay the same debt. Right, Peter?
So, it's OUR debt that's the problem. Right, Peter?
So, why the mealy-mouthed nonsense about IMF board satisfaction? Have you forgotten that we approached the IMF, not the other way around? The IMF doesn't require satisfaction. It doesn't need to lend us a dollar, and it won't unless we take steps we should've taken decades ago towards fiscal responsibility. Government isn't seeking IMF satisfaction but, like an undisciplined child, is checking the boundaries of what the IMF will put up with from a nation proven too irresponsible to be entrusted with its own fiscal policy.
So, your prior hand-wringing about "sovereignty" because the IMF insisted on eliminating tax waivers is exposed as populist politics, having more to do with a reluctance to give up political fiefdoms than "the interest of Jamaica's economic recovery".
HOLLOW SOVEREIGNTY ARGUMENT
This just in, Peter: We can't afford tax waivers. We haven't been able to afford them for decades. But the ability to apply ministerial whim and fancy to the largesse that are waivers is too shiny a political toy to surrender. Had we long ago concluded an IMF agreement including a 'no waivers' clause, could we have imported 16 SUVs for ministers almost tax free? Is "sovereignty" to grant waivers connected to the level of political parties' campaign contributions? As long as campaign contributions continue in secrecy, we'll never know.
Why isn't there agreement on simple fiscal issues after 12 months? What exactly are the "complex and weighty issues" Peter insists are "at stake"?
Who's fooling who? Peter says:
"Over the past two months, discussions intensified with the visit of senior officials to Washington, and while many of us enjoyed the holidays, the negotiating team worked throughout the Christmas period ... . Government is working to bring the negotiations to a conclusion that's mutually satisfactory to Jamaica and the board of the IMF. This agreement must be in [Jamaica's] best interest and provide protection for the most vulnerable."
Let's get one thing clear, Peter. Very few of us enjoyed the holidays. The overwhelming majority of us weren't assigned a new Audi to drive for Christmas. We endured weekly gas-price increases. We suffered with frozen salaries or decreased earnings further eroded by inflation rates ignored by STATIN. We endured buying less for more. Many would've enjoyed working through the Christmas period, but some got just two weeks on the JEEP, others no work at all. So please don't patronise us. Tell us the truth.
The truth is, the IMF has no axe to grind. It has no "satisfaction" index. It's Jamaica whose past follies drive its Government's expressed need for IMF approval. It's Jamaica's Government which placed all its eggs in the IMF basket with no apparent alternative plan and then tried to talk tough to the IMF. What's your Plan B, Peter, if the IMF insists on no tax waivers and you insist on "sovereignty"? What's next when the "sticking point" sticks in our throats?
But, the IMF says:
"Jamaican authorities and the International Monetary Fund have been engaged intensely over the past few months, working on the technical elements of a possible Fund-supported programme."
Let's break this down for those hostile to the English language. Has Peter noticed that the IMF doesn't seem to think it's involved in any "negotiations"? The teams are "engaged intensely" on "the technical elements" of our fiscal programme. The sticking points (including tax-waiver elimination) are "technical" and unrelated, except indirectly, to policy or "sovereignty". How do you exercise "sovereignty" over illusions like the feasibility of tax waivers? If it doesn't exist, no amount of "policy" will create it. Fiscal policy includes deciding you need to cut spending and upon what to spend 'what lef''. What to cut are technical matters upon which technocrats usually advise governments, whose veto ought to be used sparingly when overall fiscal policy demands.
Further, IMF support is only "possible". Translation: "Look, enough time-wasting. Do whatever you want. We'll drink your milkshake and, when YOU decide what's fiscally responsible, we'll say if we approve."
Breathing space
I believe Audley understood this message and swiftly presented an approvable programme he possibly knew he couldn't keep. Jamaica needed breathing space. So he implemented JDX and agreed to several fiscally responsible but politically impossible future actions to that end. Now it appears Peter is being fried in Audley's fat and asked to implement "elements" of Audley's future actions as "prior actions" before any further agreement is finalised. Instead of accepting the inevitable to avoid economic disaster, we're treated to spectacles of tearful concern for the poor and belligerent defences of "sovereignty".
How will the poor fare without an IMF agreement, Peter? How many of them benefit from the sovereign exercise of Government's power to waive taxes?
Peter says: "The discussions with the Fund technical staff are virtually at an end." But the IMF says: "The IMF remains fully committed to helping Jamaica achieve these fundamental objectives and prepare the path for a more prosperous future, and discussions in this direction are continuing."
Whose crystal ball is correct? Unless the path is "for a more prosperous future", the IMF won't support it. Discussions are "in this direction" only, which doesn't sound like "at an end".
What does the IMF consider Jamaica's "fundamental objectives"? A rare IMF public retort identified them: "Create the conditions for sustained higher growth, achieve fiscal and debt sustainability, improve competitiveness, preserve financial sector stability, and foster social cohesion, including through an effective social safety net."
Create conditions for sustained higher growth:
The important word is "create". It follows that those conditions don't currently exist. Countries like Jamaica with high debt-to-GDP ratios and small economies can only "create" these conditions by radical structural reform. This means deep public-sector cuts which, twinned with real incentives for small businesses, can replace unproductive public-sector workers with productive private-sector entrepreneurs. Closing Petrojam, investing in alternative energy, and embracing expansion of new horizons like gaming could also help.
We can't afford to discard productive citizens. Raised retirement ages; productive graduates from education systems; relaxed service-sector regulations (regulators become facilitators); and fewer monopolies are national imperatives. The watchword should be productivity. Environmentalists need to appreciate that Earth is no longer pristine. Man de yah. For example, environmentally speaking, roads are inherently invasive but pro-production.
Achieve fiscal and debt sustainability:
This isn't rocket science. Austerity is necessary, but insufficient. Spending cuts are essential (no SUVs). Tax collection must increase. However, our insane tax rates (especially customs) must be reduced. Productivity the watchword; growth the key. Realistic constitutional debt caps, inviolable without a referendum, must be deeply entrenched.
Preserve financial-sector stability:
Keep interest rates and inflation down. Financial-sector regulation, unlike in other services, must be strict.
Foster social cohesion, including through an effective social safety net.
This is different from Peter's pronouncement that the agreement must "provide protection for the most vulnerable". The IMF won't approve without "social cohesion", which simply means the fiscal programme MUST have bipartisan and civil-society support. The "effective social safety net" is but a permissible route to achieving "social cohesion", not a requirement of itself. An "effective safety net" may or may not protect "the most vulnerable". It depends on how one measures "effectiveness". The effectiveness of the safety net is sufficient when "social cohesion" is achieved.
LOST IN TRANSLATION
While the IMF speaks easily understandable language, Peter appears not to grasp the essentials of fiscal responsibility, and still clings to "sovereignty". He's "actively focused" on: "1) the approach and timetable for a comprehensive policy on tax waivers and 2) safeguards against fiscal slippage in this fiscal year and the examination of even higher primary surpluses in the medium term to underpin targets for debt reduction."
While he's insisting on a "policy" on tax waivers, the IMF has reduced the tax waiver issue to a "technical" level. Does that sound like discussions are "virtually at an end"? A juxtaposition of the IMF's simple statement of requirements (action) and Peter's "active focus" ("approach"/"examination") will expose the crapstorm we're facing.
The IMF insists on a higher primary surplus (read: public-sector cuts and tax-collection enhancements); while Peter waffles about investing "great effort in advancing pension reform, wage negotiations, reducing the effective size of the public-sector Establishment, tax administration, introduction of a centralised Treasury management system, and various pieces of enabling legislation ...". What effort? What's been done? What's an "effective size"? Has the public-sector wage bill been reduced? How does "enabling legislation" translate into implementation? Debt can only be reduced from primary surpluses. If your plan is to forever borrow to pay debt, resign and let somebody else try.
NOTHING has been done towards real fiscal responsibility. Once again, we're hoping to trick the IMF into accepting a "mouth cut" to close the deal. But, it's obvious to all but the most politically sycophantic that the IMF is saying, "Fool me once; shame on you. Fool me twice; shame on me!"
Peace and love.
Gordon Robinson is an attorney-at-law. Email feedback to columns@gleanerjm.com.
Comment