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Vision Or Mere Fantasy?
Published: Sunday | June 30, 20138 Comments
Claude Clarke, Guest Columnist
Whenever I hear pronouncements on our governments' 'vision' to make Jamaica a developed country by the year 2030, I am reminded of the old Scottish joke in which someone asks for directions and receives the answer, "If I were going there, I wouldn't start from here."
Recent Jamaican governments and their economic planners seem to have fallen victim to that witless advice since their plans all seem to begin somewhere other than where we are. Our vision to be "the place of choice to live, work, raise families and do business" by the year 2030 is a dream we would all love to share.
But while it may be laudable for governments to set ambitious goals, we also expect them to operate within the realm of reality, not in a land of fantasy. This element of fantasy may, however, be what explains the unusual concurrence between our two political parties in designing Jamaica's flagship development plan, Vision 2030. The goals are clearly unattainable and the means of reaching them are absent.
This separation from reality is apparent first from the Government's unawareness of what qualities would make a country "the place of choice to live, work, raise families and do business". Such a place would be defined by its prosperity, its orderliness, and the legitimate pathways to economic success available to its people. Our Government could not possibly have understood how far we are from such a state when they made this a goal to be achieved by 2030.
Recent Jamaican governments and their economic planners seem to have fallen victim to that witless advice since their plans all seem to begin somewhere other than where we are. Our vision to be "the place of choice to live, work, raise families and do business" by the year 2030 is a dream we would all love to share.
But while it may be laudable for governments to set ambitious goals, we also expect them to operate within the realm of reality, not in a land of fantasy. This element of fantasy may, however, be what explains the unusual concurrence between our two political parties in designing Jamaica's flagship development plan, Vision 2030. The goals are clearly unattainable and the means of reaching them are absent.
This separation from reality is apparent first from the Government's unawareness of what qualities would make a country "the place of choice to live, work, raise families and do business". Such a place would be defined by its prosperity, its orderliness, and the legitimate pathways to economic success available to its people. Our Government could not possibly have understood how far we are from such a state when they made this a goal to be achieved by 2030.
Were they aware that the existing economic policies and institutions had plunged the country in a downward spiral and that our trade deficit
had increased tenfold in two decades and the output of the manufacturing sector was halved?
Did they realise that our economy was unable to retain the value of 80 per cent of our tertiary graduates? Did they not know they had an obligation to outline the specific steps that would be taken to address these problems before the goals they set could be achieved? Or is it that they believed the simple act of writing a document would be sufficient?
Except for micro states, developed countries are distinguished by economies that are industrialised or post-industrial. The average annual income of their citizens is usually well above US$25,000. Jamaica's economy is nowhere near industrialised, and the Government's development plan provides neither the policy nor institutional means to make industrialisation possible.
To be among the places of choice to live, work, raise families and do business is an even higher mountain to climb. Such a country would have an economic environment in which the highest quality of life is available to all its citizens. It would be distinguished by the high standards of nutrition, housing and recreation available to all its citizens. Its social environment would be orderly and peaceful and its education and healthcare at all levels would be of the highest international standard. Above all, safety and personal security would be assured.
What makes Jamaica's 'Vision' so remarkable is that for many years, our capital city, Kingston, along with places like Port-au-Prince, Baghdad and Bangui, Central African Republic, has been numbered among the 30 least liveable cities in the world. Yet our 'Vision', without a clear strategy to grow the economy or build social capital, suggests we will be among the most liveable places on earth by 2030.
Countries like Australia, Norway and Switzerland, which are seen as highly desirable places to live, work, raise families and do business now enjoy peace and prosperity founded on decades of orderly social and economic evolution underpinned by an ethos of discipline, order and national pride.
Far be it from me to suggest that experts who have determined that Jamaica can become one of the most desirable places in the world to live, work, raise families and do business by 2030 are wrong. After all, manna could fall from heaven. But short of that, a country has to take concrete steps to develop an economy of prosperity that would make such a state of high liveability possible: an economy generating high levels of economic output and capable of self-propulsion.
Such a self-propelled economy has not been seen since the 'Vision' was conceived. In fact, since this fantastically hopeful objective of becoming a developed country by 2030 was proclaimed five years ago, Jamaica's economy has not grown. On the contrary, it has contracted by five per cent.
Bailed out
And even after being bailed out with an IMF extended fund facility, the economy is not expected to grow by more than an accumulated 15 per cent by the year 2020. During this time, the rest of the world and the Latin American and Caribbean would have left us further behind. The 2013 Conference Board Global Economic Outlook projects Latin America and the world economies will grow by around 25 per cent by 2020.
In the year 2020, with 10 years to go to for the goals of the 'Vision' to be achieved, the average annual income of Jamaicans will be less than US$6,000 at today's prices, US$19,000 short of what would be expected for a country that could be properly described as developed.
To meet the economic target of the Vision, Jamaica would have to quadruple its per capita income in 10 years, which would require an economic growth rate of more than 15 per cent per year on average, having with the help of the IMF managed growth of no more than an average two per cent in the preceding eight years. Step aside, China.
Such spectacular projections for our economic performance might not be so absurd if the Government had, in setting its economic objectives, laid out the policy and institutional changes that might make it possible. Instead, the Vision simply gave us a set of desirable goals and outcomes; as if the mere act of writing them down would ensure their accomplishment.
Economic growth and development require capital. But the owners of capital are, if nothing else, pragmatists, not dreamers. Their capital is used to gain the best returns available. This is true even where the capital is owned by a government, except to the extent that 'return on capital' may sometimes be calculated to include diplomatic or geopolitical gains, as might be the case with China today.
What we can be sure of is that the domestic and foreign capital we must attract to finance the increased output we need can only be attracted if investors are convinced that the returns from investments in Jamaican production will meet the basic criterion of earning adequate returns.
Some time ago I made the point (disputed by some who might not yet have seen it in a book) that all the Asian Tigers based their economic success on having low-cost economies. Notwithstanding any assistance that might have come from government, the main factor that motivated decisions to invest in those countries is the fact that their production input costs were more competitive than elsewhere.
Productive investments
The idea that we can bring productive investments to Jamaica on any basis other than that the return on the investor's capital is likely to be greater than its opportunity cost is a pipe dream.
It should, therefore, be obvious that to attract the capital needed to make increased production and growth in Jamaica, macroeconomic action capable of narrowing the difference between the cost and market value of our production must be taken.
Regrettably, the growth strategies provided by the Jamaican Government in its Budget and the IMF letter of intent reveal nothing capable of accomplishing this. What we got is a plan to reduce the cost of government for the purpose of paying down our debt, not a plan to reduce costs that flow into Jamaican production.
According to the latest World Bank Competitiveness Index, Jamaica's macroeconomic costs are among the highest on earth. The return on capital invested in production here will naturally be lower than can be achieved in other countries or in activities other than production. That is where Jamaica is and where our journey towards economic recovery must start.
Bringing the cost of production to levels that will make the returns on capital invested in production more competitive should, therefore, be Job No. 1 of any economic development plan for Jamaica. But there is nothing written or said by Government that addresses this fundamental prerequisite for economic growth.
What we have are plans for mega projects which the Government now says are not a part of its growth projections. It is, therefore, not clear on what the projected growth, though meagre, is based when its fiscal programme is so heavily contractionary and does nothing to compress internal production costs.
Economic planning must always be grounded in reality, not fantasy. Hopefully, the day will come when realism will enter the thinking of Government and its economic experts and allow them to figure out where we are, where we want to go, what must be done to get there, and how long the journey will be.
The current economic plans have no relevance to today's reality. Jamaica will not be a developed country to which the world will be flocking to reside in 2030. But we can be a viable economy with policies, institutions and social attitudes that put us on the path to development. What is important is that we commit to the simple logic of starting our journey from where we are.
Claude Clarke is a businessman and former minister of industry. Email feedback to columns@gleanerjm.com
Did they realise that our economy was unable to retain the value of 80 per cent of our tertiary graduates? Did they not know they had an obligation to outline the specific steps that would be taken to address these problems before the goals they set could be achieved? Or is it that they believed the simple act of writing a document would be sufficient?
Except for micro states, developed countries are distinguished by economies that are industrialised or post-industrial. The average annual income of their citizens is usually well above US$25,000. Jamaica's economy is nowhere near industrialised, and the Government's development plan provides neither the policy nor institutional means to make industrialisation possible.
To be among the places of choice to live, work, raise families and do business is an even higher mountain to climb. Such a country would have an economic environment in which the highest quality of life is available to all its citizens. It would be distinguished by the high standards of nutrition, housing and recreation available to all its citizens. Its social environment would be orderly and peaceful and its education and healthcare at all levels would be of the highest international standard. Above all, safety and personal security would be assured.
What makes Jamaica's 'Vision' so remarkable is that for many years, our capital city, Kingston, along with places like Port-au-Prince, Baghdad and Bangui, Central African Republic, has been numbered among the 30 least liveable cities in the world. Yet our 'Vision', without a clear strategy to grow the economy or build social capital, suggests we will be among the most liveable places on earth by 2030.
Countries like Australia, Norway and Switzerland, which are seen as highly desirable places to live, work, raise families and do business now enjoy peace and prosperity founded on decades of orderly social and economic evolution underpinned by an ethos of discipline, order and national pride.
Far be it from me to suggest that experts who have determined that Jamaica can become one of the most desirable places in the world to live, work, raise families and do business by 2030 are wrong. After all, manna could fall from heaven. But short of that, a country has to take concrete steps to develop an economy of prosperity that would make such a state of high liveability possible: an economy generating high levels of economic output and capable of self-propulsion.
Such a self-propelled economy has not been seen since the 'Vision' was conceived. In fact, since this fantastically hopeful objective of becoming a developed country by 2030 was proclaimed five years ago, Jamaica's economy has not grown. On the contrary, it has contracted by five per cent.
Bailed out
And even after being bailed out with an IMF extended fund facility, the economy is not expected to grow by more than an accumulated 15 per cent by the year 2020. During this time, the rest of the world and the Latin American and Caribbean would have left us further behind. The 2013 Conference Board Global Economic Outlook projects Latin America and the world economies will grow by around 25 per cent by 2020.
In the year 2020, with 10 years to go to for the goals of the 'Vision' to be achieved, the average annual income of Jamaicans will be less than US$6,000 at today's prices, US$19,000 short of what would be expected for a country that could be properly described as developed.
To meet the economic target of the Vision, Jamaica would have to quadruple its per capita income in 10 years, which would require an economic growth rate of more than 15 per cent per year on average, having with the help of the IMF managed growth of no more than an average two per cent in the preceding eight years. Step aside, China.
Such spectacular projections for our economic performance might not be so absurd if the Government had, in setting its economic objectives, laid out the policy and institutional changes that might make it possible. Instead, the Vision simply gave us a set of desirable goals and outcomes; as if the mere act of writing them down would ensure their accomplishment.
Economic growth and development require capital. But the owners of capital are, if nothing else, pragmatists, not dreamers. Their capital is used to gain the best returns available. This is true even where the capital is owned by a government, except to the extent that 'return on capital' may sometimes be calculated to include diplomatic or geopolitical gains, as might be the case with China today.
What we can be sure of is that the domestic and foreign capital we must attract to finance the increased output we need can only be attracted if investors are convinced that the returns from investments in Jamaican production will meet the basic criterion of earning adequate returns.
Some time ago I made the point (disputed by some who might not yet have seen it in a book) that all the Asian Tigers based their economic success on having low-cost economies. Notwithstanding any assistance that might have come from government, the main factor that motivated decisions to invest in those countries is the fact that their production input costs were more competitive than elsewhere.
Productive investments
The idea that we can bring productive investments to Jamaica on any basis other than that the return on the investor's capital is likely to be greater than its opportunity cost is a pipe dream.
It should, therefore, be obvious that to attract the capital needed to make increased production and growth in Jamaica, macroeconomic action capable of narrowing the difference between the cost and market value of our production must be taken.
Regrettably, the growth strategies provided by the Jamaican Government in its Budget and the IMF letter of intent reveal nothing capable of accomplishing this. What we got is a plan to reduce the cost of government for the purpose of paying down our debt, not a plan to reduce costs that flow into Jamaican production.
According to the latest World Bank Competitiveness Index, Jamaica's macroeconomic costs are among the highest on earth. The return on capital invested in production here will naturally be lower than can be achieved in other countries or in activities other than production. That is where Jamaica is and where our journey towards economic recovery must start.
Bringing the cost of production to levels that will make the returns on capital invested in production more competitive should, therefore, be Job No. 1 of any economic development plan for Jamaica. But there is nothing written or said by Government that addresses this fundamental prerequisite for economic growth.
What we have are plans for mega projects which the Government now says are not a part of its growth projections. It is, therefore, not clear on what the projected growth, though meagre, is based when its fiscal programme is so heavily contractionary and does nothing to compress internal production costs.
Economic planning must always be grounded in reality, not fantasy. Hopefully, the day will come when realism will enter the thinking of Government and its economic experts and allow them to figure out where we are, where we want to go, what must be done to get there, and how long the journey will be.
The current economic plans have no relevance to today's reality. Jamaica will not be a developed country to which the world will be flocking to reside in 2030. But we can be a viable economy with policies, institutions and social attitudes that put us on the path to development. What is important is that we commit to the simple logic of starting our journey from where we are.
Claude Clarke is a businessman and former minister of industry. Email feedback to columns@gleanerjm.com
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