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Mission must be national, not political
Published: Sunday | January 27, 2013 3 Comments
Claude Clarke
Prime Minister Portia Simpson Miller and Finance Minister Peter Phillips display contrasting emotions at a press briefing on January 14. -Rudolph Brown/Photographer
1 2 >
I am disappointed but not surprised. True to the pattern of responsibility-shunting and blame-gaming that has characterised our politics, the Government has elected to frame the harsh measures expected to come with a new [COLOR=blue !important][COLOR=blue !important]International [COLOR=blue !important]Monetary [/COLOR][COLOR=blue !important]Fund[/COLOR][/COLOR][/COLOR] (IMF) agreement as something for which its political rivals are responsible.Through statements from the Government and its surrogates, the not-so-subtle message being sent to the public is that the country might have been able to avoid the severity of the IMF demands had the last Jamaica Labour Party (JLP) administration not broken its promises to the Fund. Translation: The painful measures we face now are the price we must pay for the JLP's transgressions.
When stripped of the political colouring, however, the "prior actions" on which the IMF is insisting before finalising an agreement with the Government represent measures the Fund believes are critical if its assistance to the country is to have the desired beneficial effect. No doubt, the Fund also believes that these actions are necessary for the economy to be restored to health and for the country to develop the capacity to honour its obligations to our creditors.
Yes, they will be very tough measures. But the taste of the "bitter medicine", as they are described, would have been no worse had it been administered in 2011, 2012 or 2013. It was its fear of the political consequences of that "bitter medicine" that caused the Golding administration to dither over their implementation in 2011; and it is that same fear that is responsible for the present Government's inertia in accepting the responsibility of administering the medicine now.
NO PARTISAN DEBT
But it is neither the People's National Party's (PNP) nor the JLP's medicine; it is treatment Jamaica needs to overcome our persistent economic malady, and should have been administered by us, even before the IMF was called in.
Although administrations of both parties have contributed to our debt, there is no JLP or PNP debt, just an enormous Jamaica debt. And there is no PNP or JLP [COLOR=blue !important][COLOR=blue !important]IMF [COLOR=blue !important]programme[/COLOR][/COLOR][/COLOR], just the inescapable urgency of addressing our [COLOR=blue !important][COLOR=blue !important]economic [COLOR=blue !important]problems[/COLOR][/COLOR][/COLOR]. And neither a JLP nor a PNP administration would be able to avoid swallowing the unpleasant prescriptions at this time.
The Government needs to simply state that fact without painting it in political colours; because the enormity of the challenge of reviving the ailing economy and putting the country on its feet again transcends political parties. And if the tough personal pain that the people must endure for the country to succeed is cast in partisan terms, there is little chance of a truly national effort to make the sacrifices needed to yield the economic dividends we desire.
The public's forbearance, endurance and determination are, by far, the most important ingredients for the success of the tough economic reforms needed to achieve our shared objective of economic opportunity and prosperity for all Jamaicans.
This is perhaps the most important lesson to be learned from the Greek experience. Greece, with which the Chicago Tribune has paired Jamaica as a hemispheric economic basket case, has signally failed to bring its people along in the effort to dig itself out of its stubborn five-year recession. The country has had to endure devastating riots and civil unrest because its people could not be convinced of the need to accept the austerity required for economic recovery.
GREATER CHALLENGE
Without public buy-in, this could easily be Jamaica's fate. Only, it would be far worse. Jamaica has no benefactor equivalent to the European Union to provide an insurance policy against economic devastation.
Jamaica's challenge is even greater than Greece's. Not only do we have less room to manoeuvre, but we have a much farther way to go. The extent of the devastation of our productive capacity which occurred during the last 20 years and the degree of our uncompetitiveness, combined with the absence of anything resembling a clear and credibly articulated mission, places a heavy and urgent burden on our Government to abandon political games and win the entire public's support for the mission ahead.
It will not do to promote the empty idea that there is a viable non-IMF path. The hard, cold facts of our economic condition and a plan of action incorporating the macroeconomic adjustments that need to be made must be clearly spelled out, and the understanding, acceptance and support of the public sought.
The necessary areas of adjustment are known. What is lacking is the courage to accept them and to act. The most important of all is to drastically compress costs within the economy. This will involve not only reducing the public-sector wage bill but cutting the heavy cost that incomes generally impose on the production of goods and services in the country. Incomes, particularly at the top, are far higher than can be justified by the value of our economic output.
If these costs are not reduced, the country cannot be competitive, demand for our goods and services will continue to decline and our impoverishment will persist. There must be a major contraction of the Government's wage bill and our income policy must aggressively reduce the growth of incomes in both the public and private sectors to the point where they are in line with the real economic value the country is producing. The income policy of the late 1980s was a principal reason for Jamaica's relative economic success during that period.
We also need a tax-reform programme that progressively taxes all significant income and at the same time provides incentives for income to be invested in productive activity. The Government should commit to using creatively designed incentives to encourage consumption of Jamaican goods and services and attract investments by Jamaicans and foreign interests in Jamaican production.
A new [COLOR=blue !important][COLOR=blue !important]trade [COLOR=blue !important]policy[/COLOR][/COLOR][/COLOR] is also urgently needed. The new trade policy must include changes to our treaty arrangements supported by fiscal changes to establish a framework within which Jamaica can be competitive. Already victimised by macroeconomic and energy policies that virtually guarantee their uncompetitiveness, Jamaican businesses are today facing competitive forces that are decidedly unfair to them, within our own market and abroad. Our regional and international [COLOR=blue !important][COLOR=blue !important]trading [COLOR=blue !important]partners[/COLOR][/COLOR][/COLOR] are better positioned than Jamaican enterprises to exploit the opportunities of our own market as well as theirs.
EXPLOITATION
The dream of regional free trade has become an economic nightmare as our weak economic position has been mercilessly exploited by our trading partners. Our market has become their most fertile pasture, while their markets remain increasingly beyond our competitive reach. We rushed into an Economic Partnership Agreement without first ensuring that we had the means to capitalise on any advantage it promised. Our obligations to CARICOM have diminished Government's revenue intake while putting at a disadvantage our producers and our workers.
These treaties must be renegotiated. At the very least, moratoria must be sought to provide us with breathing space to make the necessary adjustments to our competitiveness. Trinidad reversed its declining economic fortunes in the 1980s with the disguised use of such a moratorium on its CARICOM trade.
Although not a matter being considered under the current IMF deal, the Government must not resile from the urgent task of dramatically reducing the spiralling energy costs that condemn almost every good and service produced in Jamaica to uncompetitiveness. The problem has to be addressed on two fronts. First, Government must use fiscal and other policy measures to discourage the wasteful consumption of energy in the country. Jamaica has among the highest energy intensity among non-oil-producing countries, which means we use energy highly inefficiently. This simply cannot continue if we are to compete in the world.
The other side of the energy equation is the cost of electricity, the cleanest and most convenient form of energy, without which no modern society can function. The country does not have to wait until new plants are commissioned for the cost of electricity to be reduced. It is mystifying that with all the financial and technical wizards around, no one has yet designed a financial model to bring down the price of electricity at the front end of a sensible and comprehensive project to upgrade our electricity-generation system. Our economy needs a significant jump-start because other countries will not be waiting on us. And competitive electricity prices, sooner rather than later, must be part of it.
There is much that needs to be done to put the country on the path to prosperity. But it must all begin with the Government demonstrating the leadership needed to mobilise every Jamaican to sign on to the mission.
It will take courage. Most important, it will require us to shun the easy road of partisan point-scoring, to put country ahead of party and the achievement of our national goal before the winning of the next election.
Claude Clarke is a businessman and former minister of industry. Email feedback to columns@gleanerjm.com.
should be the target. Longer responses/comments should be sent to "Letters of the Editor" using the feedback form provided.
http://jamaica-gleaner.com/gleaner/2...cleisure2.html
Mission must be national, not political
Published: Sunday | January 27, 2013 3 Comments
Claude Clarke
Prime Minister Portia Simpson Miller and Finance Minister Peter Phillips display contrasting emotions at a press briefing on January 14. -Rudolph Brown/Photographer
1 2 >
I am disappointed but not surprised. True to the pattern of responsibility-shunting and blame-gaming that has characterised our politics, the Government has elected to frame the harsh measures expected to come with a new [COLOR=blue !important][COLOR=blue !important]International [COLOR=blue !important]Monetary [/COLOR][COLOR=blue !important]Fund[/COLOR][/COLOR][/COLOR] (IMF) agreement as something for which its political rivals are responsible.Through statements from the Government and its surrogates, the not-so-subtle message being sent to the public is that the country might have been able to avoid the severity of the IMF demands had the last Jamaica Labour Party (JLP) administration not broken its promises to the Fund. Translation: The painful measures we face now are the price we must pay for the JLP's transgressions.
When stripped of the political colouring, however, the "prior actions" on which the IMF is insisting before finalising an agreement with the Government represent measures the Fund believes are critical if its assistance to the country is to have the desired beneficial effect. No doubt, the Fund also believes that these actions are necessary for the economy to be restored to health and for the country to develop the capacity to honour its obligations to our creditors.
Yes, they will be very tough measures. But the taste of the "bitter medicine", as they are described, would have been no worse had it been administered in 2011, 2012 or 2013. It was its fear of the political consequences of that "bitter medicine" that caused the Golding administration to dither over their implementation in 2011; and it is that same fear that is responsible for the present Government's inertia in accepting the responsibility of administering the medicine now.
NO PARTISAN DEBT
But it is neither the People's National Party's (PNP) nor the JLP's medicine; it is treatment Jamaica needs to overcome our persistent economic malady, and should have been administered by us, even before the IMF was called in.
Although administrations of both parties have contributed to our debt, there is no JLP or PNP debt, just an enormous Jamaica debt. And there is no PNP or JLP [COLOR=blue !important][COLOR=blue !important]IMF [COLOR=blue !important]programme[/COLOR][/COLOR][/COLOR], just the inescapable urgency of addressing our [COLOR=blue !important][COLOR=blue !important]economic [COLOR=blue !important]problems[/COLOR][/COLOR][/COLOR]. And neither a JLP nor a PNP administration would be able to avoid swallowing the unpleasant prescriptions at this time.
The Government needs to simply state that fact without painting it in political colours; because the enormity of the challenge of reviving the ailing economy and putting the country on its feet again transcends political parties. And if the tough personal pain that the people must endure for the country to succeed is cast in partisan terms, there is little chance of a truly national effort to make the sacrifices needed to yield the economic dividends we desire.
The public's forbearance, endurance and determination are, by far, the most important ingredients for the success of the tough economic reforms needed to achieve our shared objective of economic opportunity and prosperity for all Jamaicans.
This is perhaps the most important lesson to be learned from the Greek experience. Greece, with which the Chicago Tribune has paired Jamaica as a hemispheric economic basket case, has signally failed to bring its people along in the effort to dig itself out of its stubborn five-year recession. The country has had to endure devastating riots and civil unrest because its people could not be convinced of the need to accept the austerity required for economic recovery.
GREATER CHALLENGE
Without public buy-in, this could easily be Jamaica's fate. Only, it would be far worse. Jamaica has no benefactor equivalent to the European Union to provide an insurance policy against economic devastation.
Jamaica's challenge is even greater than Greece's. Not only do we have less room to manoeuvre, but we have a much farther way to go. The extent of the devastation of our productive capacity which occurred during the last 20 years and the degree of our uncompetitiveness, combined with the absence of anything resembling a clear and credibly articulated mission, places a heavy and urgent burden on our Government to abandon political games and win the entire public's support for the mission ahead.
It will not do to promote the empty idea that there is a viable non-IMF path. The hard, cold facts of our economic condition and a plan of action incorporating the macroeconomic adjustments that need to be made must be clearly spelled out, and the understanding, acceptance and support of the public sought.
The necessary areas of adjustment are known. What is lacking is the courage to accept them and to act. The most important of all is to drastically compress costs within the economy. This will involve not only reducing the public-sector wage bill but cutting the heavy cost that incomes generally impose on the production of goods and services in the country. Incomes, particularly at the top, are far higher than can be justified by the value of our economic output.
If these costs are not reduced, the country cannot be competitive, demand for our goods and services will continue to decline and our impoverishment will persist. There must be a major contraction of the Government's wage bill and our income policy must aggressively reduce the growth of incomes in both the public and private sectors to the point where they are in line with the real economic value the country is producing. The income policy of the late 1980s was a principal reason for Jamaica's relative economic success during that period.
We also need a tax-reform programme that progressively taxes all significant income and at the same time provides incentives for income to be invested in productive activity. The Government should commit to using creatively designed incentives to encourage consumption of Jamaican goods and services and attract investments by Jamaicans and foreign interests in Jamaican production.
A new [COLOR=blue !important][COLOR=blue !important]trade [COLOR=blue !important]policy[/COLOR][/COLOR][/COLOR] is also urgently needed. The new trade policy must include changes to our treaty arrangements supported by fiscal changes to establish a framework within which Jamaica can be competitive. Already victimised by macroeconomic and energy policies that virtually guarantee their uncompetitiveness, Jamaican businesses are today facing competitive forces that are decidedly unfair to them, within our own market and abroad. Our regional and international [COLOR=blue !important][COLOR=blue !important]trading [COLOR=blue !important]partners[/COLOR][/COLOR][/COLOR] are better positioned than Jamaican enterprises to exploit the opportunities of our own market as well as theirs.
EXPLOITATION
The dream of regional free trade has become an economic nightmare as our weak economic position has been mercilessly exploited by our trading partners. Our market has become their most fertile pasture, while their markets remain increasingly beyond our competitive reach. We rushed into an Economic Partnership Agreement without first ensuring that we had the means to capitalise on any advantage it promised. Our obligations to CARICOM have diminished Government's revenue intake while putting at a disadvantage our producers and our workers.
These treaties must be renegotiated. At the very least, moratoria must be sought to provide us with breathing space to make the necessary adjustments to our competitiveness. Trinidad reversed its declining economic fortunes in the 1980s with the disguised use of such a moratorium on its CARICOM trade.
Although not a matter being considered under the current IMF deal, the Government must not resile from the urgent task of dramatically reducing the spiralling energy costs that condemn almost every good and service produced in Jamaica to uncompetitiveness. The problem has to be addressed on two fronts. First, Government must use fiscal and other policy measures to discourage the wasteful consumption of energy in the country. Jamaica has among the highest energy intensity among non-oil-producing countries, which means we use energy highly inefficiently. This simply cannot continue if we are to compete in the world.
The other side of the energy equation is the cost of electricity, the cleanest and most convenient form of energy, without which no modern society can function. The country does not have to wait until new plants are commissioned for the cost of electricity to be reduced. It is mystifying that with all the financial and technical wizards around, no one has yet designed a financial model to bring down the price of electricity at the front end of a sensible and comprehensive project to upgrade our electricity-generation system. Our economy needs a significant jump-start because other countries will not be waiting on us. And competitive electricity prices, sooner rather than later, must be part of it.
There is much that needs to be done to put the country on the path to prosperity. But it must all begin with the Government demonstrating the leadership needed to mobilise every Jamaican to sign on to the mission.
It will take courage. Most important, it will require us to shun the easy road of partisan point-scoring, to put country ahead of party and the achievement of our national goal before the winning of the next election.
Claude Clarke is a businessman and former minister of industry. Email feedback to columns@gleanerjm.com.
should be the target. Longer responses/comments should be sent to "Letters of the Editor" using the feedback form provided.
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