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SYSTEM' WORKING AGAINST US
Rejecting the common myopic view that Jamaica's economic woes are entirely home-grown - a myth nourished by the two political parties in their gamesmanship - the Observer says, "The IMF should be assisting debtor countries with financing and letting its imprimatur assist debtor countries to restructure their debt." Noting that the IMF's terms "were so onerous for Belize that it went ahead without the IMF", the editorial lists among "the imperatives for action" to crank up growth here as the "injection of concessionary financing from the IMF and the World Bank". The World Bank, it charges, "feigns concern but underfunds the region".
When anyone suggests that global economic factors play an important part in our economic fortunes and that the international economic system is skewed against countries like Jamaica, he is likely to be immediately lectured about the corruption, kleptocracy, political mismanagement, mendicancy, stifling bureaucracy and incompetence of leaders in developing countries like Jamaica. But the Observer editorial writer was careful to make the right disclaimers. Part of our problem, indeed, has been "misguided government policies" and "borrowing to finance expansionary government expenditure".
But no serious analysis of the economic challenges which face Jamaica can downplay exogenous factors. The IMF itself, in a paper dated February this year but released on April 1, Caribbean Small States: Challenges of High Debt and Low Growth, admits, "The Caribbean is one of the most disaster-prone regions in the world." It quotes one study as saying that the six Eastern Caribbean states rank in the top 10 most disaster-prone countries in the entire world per land area or population. "Over the last 60 years, the Caribbean has suffered from 187 natural disasters ... with Jamaica and The Bahamas having the highest probability of a hurricane in any given year."
Jamaica has paid heavily for these natural hazards and there is no budgetary allocation for these contingencies. They have a toll on GDP, as the IMF paper notes. The paper further admits, "To varying degrees and with some exceptions, Caribbean small states are facing extreme versions of the problems described in the main paper - low growth, high debt, significant vulnerabilities and limited resilience to shocks."
Our analysts generally don't factor these things into their discussions at all. You are not likely to see much play given to these exogenous factors in any Claude Clarke commentary. But the IMF economists are forced, by their exposure to the data and to scholarly work in development economics, to reckon with these facts, even when their neoliberal dogma proscribes them from taking appropriate action. The IMF paper goes on to say that "non-commodity exporters of the Caribbean were hit hard by the global economic crisis of 2008-2009 through lower tourism arrivals, remittances and exports. Weak fiscal positions deteriorated further, as policymakers tried to offset lower external demand while already-heavy burdens increased in most countries".
Yes, our crisis started long before the 2008 crash. But remember there was the Second Oil Shock of the 1980s, then the rise in international wheat and food prices in the Asian financial meltdown of the 1990s.
It is commonplace to contrast Trinidad's performance with Jamaica's, with little recognition given to Trinidad's oil. (Now, I grant we have done lamentably worse that non-oil-producing countries in the region such as Barbados and even smaller states). Says the IMF paper: "Commodities exporters, namely Belize, Guyana, Suriname and Trinidad and Tobago, together produce oil/gas minerals and agricultural goods and have had an overall better economic performance in the last decade due to the positive impact of high commodity prices." Note, not just "due to" better domestic economic management, but "due to" high commodity prices on the international market. Exogenous factors.
International context matters
Contrast that with Jamaica where our bauxite exports declined significantly as a result of the crisis of 2008, our remittances slipped badly, and exports generally declined. Before the 2008 crash, there was the forced structural adjustment programme of the World Bank in the 1980s which badly incapacitated our manufacturing sector. World Trade Organization (WTO) rules took away a lot of our policy space and opened us up to a level of competition in our local market which proved injurious to our productive sector, including our export sector.
People like Claude Clarke, who was an industry minister, and a competent one, should know how external factors have affected our productive sector. But there is little recognition of that in his writing. Yes, he is right to lambaste our policymakers for their own errors, misguidedness, political short-sightedness and outright corruption. Sock it to 'em, yes, Claude. But be balanced and nuanced.
In his speech to some securities people recently, published as a two-part commentary in this newspaper, Claude gave an anecdote about a mutual friend who is now living in Europe but who once worked here in a policymaking capacity. This bright young man had "written a paper recommending that Jamaica examine the economic strategies employed by both Ireland and Trinidad and give it to his minister". A minister I knew quite well, too.
Amazingly, Claude gave that speech on March 14, 2013, when almost no one anywhere else in the world would have had the nerve to mention that former Celtic tiger which has now been so shamelessly tamed. Ireland has crashed badly and Trinidad cannot be analysed outside of its being an oil-producing country. The IMF itself situates its growth in that context.
To illustrate the importance of international context and experience, let's talk about South Korea, which Claude trumpets as a model of a free-enterprise, competitive economy. You would never know from reading Claude that the state played a pivotal role in Korea's economic transformation. In his column of March 24, 'Shaping a future to overcome the past', Claude, in attempting to demonstrate that governments are no good at business and that they almost invariably mess up things, mentions South Korea. He said he once believed in "picking winners" until, as minister, he was disabused of that by a visiting World Bank team.
"What the South Korean government and other Asian tigers realised is that by far the most important agent of economic development is a competitive domestic economic environment ... ." But what Claude fails to point out is that, as has been famously demonstrated in that landmark World Bank study, 'The East Asian Miracle: Economic Growth and Public Policy', the East Asian tigers used heterodox policies to spur growth. Those economies had strong state intervention and facilitation. It was not a neoliberal economic model.
Indeed, one of the world's most prominent development economists is the South Korean Ha-Joon Chang, who has written Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism and Kicking Away The Ladder. He has demonstrated how South Korea and other tigers used state-led initiatives to drive economic growth. Plus, East Asia was important to the United States strategically in the Cold War era and so much external financial assistance was poured into that region. Jamaica has absolutely no strategic significance to the US today, so we have no clout with the IMF, though a black man is in the White House.
Erroneous purist outlook
Dani Rodrik has also done a vast amount of empirical work to prove that the Asian tigers used heterodox policies which today would be forbidden by the WTO and other multilateral institutions. They did not use classic free-market policies. Yes, they embraced market strategies, but government worked with the private sector to drive development. There was bank-directed credit, subsidies for marketing and technical assistance, and export subsidies. There were also strict import controls and quotas, heavily regulated foreign investment, and outright bans in certain cases.
Inappropriate liberalisation has hurt Jamaican manufacturing, and the productive sector, generally.
We have been too purist in our policy outlook: either doctrinaire socialist or laissez-faire capitalist. We need a blend of policies and a creative mix, including proper sequencing. Orthodoxies of the Right or the Left are limiting. While Claude and others despair of the State's role in economic development, does it not occur to them that the economies which have been booming over the last few years have also had heavy government involvement - China, India, Brazil, Chile?
Scandinavia, which the Economist magazine featured recently as a model region, is nothing if not heavily state-influenced (though, with strong market orientation). Government action saved capitalism in America. America's growth could not have resumed without the state's stimulus package. That is what put back some dynamism in the global economy.
Ralston Hyman has shown that the 7.5 per cent primary surplus target imposed by the IMF is unrealistic and dangerous to the economy, having "serious implications for social stability, investments and economic growth". (Jamaica Business, February issue) A more supportive international environment would not see us being forced to accede to that IMF diktat.
Ian Boyne is a veteran journalist. Email feedback to columns@gleanerjm.com and ianboyne1@yahoo.com.
Rejecting the common myopic view that Jamaica's economic woes are entirely home-grown - a myth nourished by the two political parties in their gamesmanship - the Observer says, "The IMF should be assisting debtor countries with financing and letting its imprimatur assist debtor countries to restructure their debt." Noting that the IMF's terms "were so onerous for Belize that it went ahead without the IMF", the editorial lists among "the imperatives for action" to crank up growth here as the "injection of concessionary financing from the IMF and the World Bank". The World Bank, it charges, "feigns concern but underfunds the region".
When anyone suggests that global economic factors play an important part in our economic fortunes and that the international economic system is skewed against countries like Jamaica, he is likely to be immediately lectured about the corruption, kleptocracy, political mismanagement, mendicancy, stifling bureaucracy and incompetence of leaders in developing countries like Jamaica. But the Observer editorial writer was careful to make the right disclaimers. Part of our problem, indeed, has been "misguided government policies" and "borrowing to finance expansionary government expenditure".
But no serious analysis of the economic challenges which face Jamaica can downplay exogenous factors. The IMF itself, in a paper dated February this year but released on April 1, Caribbean Small States: Challenges of High Debt and Low Growth, admits, "The Caribbean is one of the most disaster-prone regions in the world." It quotes one study as saying that the six Eastern Caribbean states rank in the top 10 most disaster-prone countries in the entire world per land area or population. "Over the last 60 years, the Caribbean has suffered from 187 natural disasters ... with Jamaica and The Bahamas having the highest probability of a hurricane in any given year."
Jamaica has paid heavily for these natural hazards and there is no budgetary allocation for these contingencies. They have a toll on GDP, as the IMF paper notes. The paper further admits, "To varying degrees and with some exceptions, Caribbean small states are facing extreme versions of the problems described in the main paper - low growth, high debt, significant vulnerabilities and limited resilience to shocks."
Our analysts generally don't factor these things into their discussions at all. You are not likely to see much play given to these exogenous factors in any Claude Clarke commentary. But the IMF economists are forced, by their exposure to the data and to scholarly work in development economics, to reckon with these facts, even when their neoliberal dogma proscribes them from taking appropriate action. The IMF paper goes on to say that "non-commodity exporters of the Caribbean were hit hard by the global economic crisis of 2008-2009 through lower tourism arrivals, remittances and exports. Weak fiscal positions deteriorated further, as policymakers tried to offset lower external demand while already-heavy burdens increased in most countries".
Yes, our crisis started long before the 2008 crash. But remember there was the Second Oil Shock of the 1980s, then the rise in international wheat and food prices in the Asian financial meltdown of the 1990s.
It is commonplace to contrast Trinidad's performance with Jamaica's, with little recognition given to Trinidad's oil. (Now, I grant we have done lamentably worse that non-oil-producing countries in the region such as Barbados and even smaller states). Says the IMF paper: "Commodities exporters, namely Belize, Guyana, Suriname and Trinidad and Tobago, together produce oil/gas minerals and agricultural goods and have had an overall better economic performance in the last decade due to the positive impact of high commodity prices." Note, not just "due to" better domestic economic management, but "due to" high commodity prices on the international market. Exogenous factors.
International context matters
Contrast that with Jamaica where our bauxite exports declined significantly as a result of the crisis of 2008, our remittances slipped badly, and exports generally declined. Before the 2008 crash, there was the forced structural adjustment programme of the World Bank in the 1980s which badly incapacitated our manufacturing sector. World Trade Organization (WTO) rules took away a lot of our policy space and opened us up to a level of competition in our local market which proved injurious to our productive sector, including our export sector.
People like Claude Clarke, who was an industry minister, and a competent one, should know how external factors have affected our productive sector. But there is little recognition of that in his writing. Yes, he is right to lambaste our policymakers for their own errors, misguidedness, political short-sightedness and outright corruption. Sock it to 'em, yes, Claude. But be balanced and nuanced.
In his speech to some securities people recently, published as a two-part commentary in this newspaper, Claude gave an anecdote about a mutual friend who is now living in Europe but who once worked here in a policymaking capacity. This bright young man had "written a paper recommending that Jamaica examine the economic strategies employed by both Ireland and Trinidad and give it to his minister". A minister I knew quite well, too.
Amazingly, Claude gave that speech on March 14, 2013, when almost no one anywhere else in the world would have had the nerve to mention that former Celtic tiger which has now been so shamelessly tamed. Ireland has crashed badly and Trinidad cannot be analysed outside of its being an oil-producing country. The IMF itself situates its growth in that context.
To illustrate the importance of international context and experience, let's talk about South Korea, which Claude trumpets as a model of a free-enterprise, competitive economy. You would never know from reading Claude that the state played a pivotal role in Korea's economic transformation. In his column of March 24, 'Shaping a future to overcome the past', Claude, in attempting to demonstrate that governments are no good at business and that they almost invariably mess up things, mentions South Korea. He said he once believed in "picking winners" until, as minister, he was disabused of that by a visiting World Bank team.
"What the South Korean government and other Asian tigers realised is that by far the most important agent of economic development is a competitive domestic economic environment ... ." But what Claude fails to point out is that, as has been famously demonstrated in that landmark World Bank study, 'The East Asian Miracle: Economic Growth and Public Policy', the East Asian tigers used heterodox policies to spur growth. Those economies had strong state intervention and facilitation. It was not a neoliberal economic model.
Indeed, one of the world's most prominent development economists is the South Korean Ha-Joon Chang, who has written Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism and Kicking Away The Ladder. He has demonstrated how South Korea and other tigers used state-led initiatives to drive economic growth. Plus, East Asia was important to the United States strategically in the Cold War era and so much external financial assistance was poured into that region. Jamaica has absolutely no strategic significance to the US today, so we have no clout with the IMF, though a black man is in the White House.
Erroneous purist outlook
Dani Rodrik has also done a vast amount of empirical work to prove that the Asian tigers used heterodox policies which today would be forbidden by the WTO and other multilateral institutions. They did not use classic free-market policies. Yes, they embraced market strategies, but government worked with the private sector to drive development. There was bank-directed credit, subsidies for marketing and technical assistance, and export subsidies. There were also strict import controls and quotas, heavily regulated foreign investment, and outright bans in certain cases.
Inappropriate liberalisation has hurt Jamaican manufacturing, and the productive sector, generally.
We have been too purist in our policy outlook: either doctrinaire socialist or laissez-faire capitalist. We need a blend of policies and a creative mix, including proper sequencing. Orthodoxies of the Right or the Left are limiting. While Claude and others despair of the State's role in economic development, does it not occur to them that the economies which have been booming over the last few years have also had heavy government involvement - China, India, Brazil, Chile?
Scandinavia, which the Economist magazine featured recently as a model region, is nothing if not heavily state-influenced (though, with strong market orientation). Government action saved capitalism in America. America's growth could not have resumed without the state's stimulus package. That is what put back some dynamism in the global economy.
Ralston Hyman has shown that the 7.5 per cent primary surplus target imposed by the IMF is unrealistic and dangerous to the economy, having "serious implications for social stability, investments and economic growth". (Jamaica Business, February issue) A more supportive international environment would not see us being forced to accede to that IMF diktat.
Ian Boyne is a veteran journalist. Email feedback to columns@gleanerjm.com and ianboyne1@yahoo.com.
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