Tweet
No government in Jamaica will get away with feeding people constitutional pap, as a substitute for real food. Mr. Golding's swearing-in speech seemed to ...
Staying the course
published: Sunday | September 16, 2007
Don Robotham, Contributor
Bruce Golding - file
Congratulations to Asafa Powell! As should have been apparent from my article last week (Public Affairs), my confidence in Asafa does not rest on winning medals or breaking world. It's the character behind the person that matters.
The same applies to Bruce Golding. What a mega Cabinet this is! Let us say bluntly: this is not what was promised. This is what the JLP manifesto said:
"1.21 Structure of Cabinet
Establish in the Constitution the core ministries of government with a limit as to the number of additional ministries that can be created.
1.22 Transforming the bureaucracy. Undertake a comprehensive review of the existing structure and operation of government bureaucracy to eliminate waste and unnecessary red tape and improve efficiency and accountability."
Now that the election has been won, efficiency and accountability have been left by the wayside. This is mega government driven by mega 'politricks'. It has nothing to do with good governance. The point of the Cabinet is simply to solidify the loyalists while shafting the uptown lumpen. The first cut is the deepest.
There has also been a deafening on economic policy. It's not clear what track we are moving on here. On the political side, we seem to be stumbling in the dark. On the economic side, we are staying the course. A fresh coat of green paint with and 'ductors'. Same old bus.
The Prime Minister has continued with his conciliatory tone and has emphasised that he is the 'chief servant' of the Jamaican people. Mr. Golding is obviously sincere. This is extremely important and deserves full public support.
However, harping on the political and constitutional - what I call the NDM line - apart from the pork barrels which threaten to it, has inherent limitations. As small a number as one per cent of the Jamaican population indicates that corruption is the major issue. People do regard corruption as important but they regard 'job creation' as more important by far. No government in will get away with feeding people constitutional pap, as a substitute for real food.
THE ECONOMIC COURSE
Mr. Golding's swearing-in speech seemed to postpone 'job creation' to "the medium and long term". He seems to be realising that all these schemes of 'securitisation,' and using PetroCaribe funds for significant debt relief belong in the realm of fantasy.
The appointment of Don Wehby to the Ministry of Finance was therefore absolutely essential to calm financial circles at home and abroad.
What is no fantasy are these figures: our budget deficit target for this year is 4.5 per cent of GDP, or about $35 billion. The target for the quarter ending in June 2007 was two per cent, or about $13.7 billion. Instead, we achieved a budget deficit of 1.1 per cent, or $8.9 billion. Inflation in the first six months of this year fell to 2.9 per cent. The primary surplus was $7.8 billion in June but fell to under $3 billion in July. The deficit for the present quarter is likely to double, moving closer to three per cent. Responding to the 'Shaw Effect', the Jamaican dollar has been taking a beating - plunging to $70.16.
The JLP's campaign promises were costed at $69 billion, or about nine per cent of GDP. Even if we cut this by half, meeting these promises would still send our deficit soaring above eight per cent of GDP. Long before we reached that suicidal point the dollar would have collapsed. In other words, one can tweak it here and there and spin it round and round, but any attempt to change the basic features of our low inflation model is out of the question. Welcome to the real world.
PSYCHOLOGICAL PROBLEMS
The JLP has psychological problems in thinking clearly about such issues. Knee-jerk 'anti-Omarism' is the biggest obstacle. The second problem is the myths of the glorious 1960s and 1980s when they were last in power. These myths obscure one stark fact: the JLP has zero experience of managing the Jamaican economy in conditions of globalisation and openness. In the 1960s, import substitution protected by the Bretton-Woods regime prevailed. But since 1989 this is no more. In the 1980s, the Cold War environment made over US$1 billion in concessionary finance and investment available to the Seaga government. This is inconceivable in the present world.
The greatest obstacle to clear economic thinking in the JLP (and in Jamaica generally) is parochialism. This is why Don Wehby's appointment is potentially so important, if his considerable talents are not restricted to bean counting. In order to find its way through this globalisation maze, GraceKennedy has had to go through deep makeovers to convert itself into a more global company. Don Wehby is more than a super accountant. He knows from experience how difficult the change process really is.
All this raises an interesting question on which we all need to ponder. This is the inherent weakness of the NDM way of thinking about our problems. This way of thinking goes something like this. If we can eliminate corruption, reduce the concentration of power, build up a collaborative political framework, reduce political tribalism, improve the delivery of justice, and show 'political will,' then we shall be well on our way to solving the fundamental problems of Jamaica. 'Justice,' plus 'liberty' equals 'prosperity,' as the admirable JLP website puts it.
Among other weaknesses, such a mentality leads to a downplaying of the central role of economics, as a force in its own right and with its own logic. It is a version of the idea that one can use politics (constitutional provisions, partnerships for progress, 'political will') to trump economic forces - a statist mentality. This is the source of the idea that one needs a 'mega agency' to promote investment in Jamaica. But the mega agency may yet turn out to be like our mega Cabinet - a mega waste of time and resources. The same applies to the idea of having a separate Ministry of Planning and Development.
It is the statist mentality too which is behind the idea that the preferred way to contain the budget deficit is by legislating a fixed limit into law. Ironically, even the idea of an independent central bank, normally associated with conservative distrust of the state, is a peculiar type of statism. The thought here is to rely solely on one organ of the state - the central bank - to sort out market finances. But if the market decides that the Jamaican dollar is worth 1 U.S. cent then you can pass as many constitutional amendments and form as many partnerships as you like, 1 US cent is what you will get.
Constitutional dicta deprive economic managers of the tools of flexibility which are essential to manage any market effectively. It creates artificial expectations and rigidities which can be calamitous. This is especially the case in a globalised economy where a housing crisis in the United States causes banks in Germany to collapse.
As the current sub prime mortgage crisis proves, when trouble arrives, no one dreams of leaving it solely to the US Federal Reserve. All the major political players - the Secretary of the Treasury, the Chair of the Senate Banking Committee, the President of the United States himself - jump right in and let their views be known, loud and clear. Indeed, any other behaviour would be th of political irresponsibility.
Contrary to what some neo-liberals think, markets do not manage themselves. Markets can and need to be managed effectively. But one has to have a deft touch. You have to be able to adapt at very short notice to complex fluctuations, following all the balls in the air while keeping your eyes glued to the main ball, long term. Legal purists, bean counters and politicians, for different reasons, abhor this untidiness. They often try to use the blunt instrument of legislation to ram stability down the market's throat with disastrous consequences. If we wish to solve our developmental problems in Jamaica, we will have to end this infatuation with legalisms, politics and economic gimmicks. We have to stay the economic course.
The letdown with the new Cabinet makes it clear that establishing good governance in Jamaica will not be an easy proposition. Mr. Golding faces party factions who are cynical about his lofty constitutional agenda. He will have to struggle hard to stay the political course as well.
Jamaica Gleaner News
Staying the course
published: Sunday | September 16, 2007
Don Robotham, Contributor
Bruce Golding - file
Congratulations to Asafa Powell! As should have been apparent from my article last week (Public Affairs), my confidence in Asafa does not rest on winning medals or breaking world. It's the character behind the person that matters.
The same applies to Bruce Golding. What a mega Cabinet this is! Let us say bluntly: this is not what was promised. This is what the JLP manifesto said:
"1.21 Structure of Cabinet
Establish in the Constitution the core ministries of government with a limit as to the number of additional ministries that can be created.
1.22 Transforming the bureaucracy. Undertake a comprehensive review of the existing structure and operation of government bureaucracy to eliminate waste and unnecessary red tape and improve efficiency and accountability."
Now that the election has been won, efficiency and accountability have been left by the wayside. This is mega government driven by mega 'politricks'. It has nothing to do with good governance. The point of the Cabinet is simply to solidify the loyalists while shafting the uptown lumpen. The first cut is the deepest.
There has also been a deafening on economic policy. It's not clear what track we are moving on here. On the political side, we seem to be stumbling in the dark. On the economic side, we are staying the course. A fresh coat of green paint with and 'ductors'. Same old bus.
The Prime Minister has continued with his conciliatory tone and has emphasised that he is the 'chief servant' of the Jamaican people. Mr. Golding is obviously sincere. This is extremely important and deserves full public support.
However, harping on the political and constitutional - what I call the NDM line - apart from the pork barrels which threaten to it, has inherent limitations. As small a number as one per cent of the Jamaican population indicates that corruption is the major issue. People do regard corruption as important but they regard 'job creation' as more important by far. No government in will get away with feeding people constitutional pap, as a substitute for real food.
THE ECONOMIC COURSE
Mr. Golding's swearing-in speech seemed to postpone 'job creation' to "the medium and long term". He seems to be realising that all these schemes of 'securitisation,' and using PetroCaribe funds for significant debt relief belong in the realm of fantasy.
The appointment of Don Wehby to the Ministry of Finance was therefore absolutely essential to calm financial circles at home and abroad.
What is no fantasy are these figures: our budget deficit target for this year is 4.5 per cent of GDP, or about $35 billion. The target for the quarter ending in June 2007 was two per cent, or about $13.7 billion. Instead, we achieved a budget deficit of 1.1 per cent, or $8.9 billion. Inflation in the first six months of this year fell to 2.9 per cent. The primary surplus was $7.8 billion in June but fell to under $3 billion in July. The deficit for the present quarter is likely to double, moving closer to three per cent. Responding to the 'Shaw Effect', the Jamaican dollar has been taking a beating - plunging to $70.16.
The JLP's campaign promises were costed at $69 billion, or about nine per cent of GDP. Even if we cut this by half, meeting these promises would still send our deficit soaring above eight per cent of GDP. Long before we reached that suicidal point the dollar would have collapsed. In other words, one can tweak it here and there and spin it round and round, but any attempt to change the basic features of our low inflation model is out of the question. Welcome to the real world.
PSYCHOLOGICAL PROBLEMS
The JLP has psychological problems in thinking clearly about such issues. Knee-jerk 'anti-Omarism' is the biggest obstacle. The second problem is the myths of the glorious 1960s and 1980s when they were last in power. These myths obscure one stark fact: the JLP has zero experience of managing the Jamaican economy in conditions of globalisation and openness. In the 1960s, import substitution protected by the Bretton-Woods regime prevailed. But since 1989 this is no more. In the 1980s, the Cold War environment made over US$1 billion in concessionary finance and investment available to the Seaga government. This is inconceivable in the present world.
The greatest obstacle to clear economic thinking in the JLP (and in Jamaica generally) is parochialism. This is why Don Wehby's appointment is potentially so important, if his considerable talents are not restricted to bean counting. In order to find its way through this globalisation maze, GraceKennedy has had to go through deep makeovers to convert itself into a more global company. Don Wehby is more than a super accountant. He knows from experience how difficult the change process really is.
All this raises an interesting question on which we all need to ponder. This is the inherent weakness of the NDM way of thinking about our problems. This way of thinking goes something like this. If we can eliminate corruption, reduce the concentration of power, build up a collaborative political framework, reduce political tribalism, improve the delivery of justice, and show 'political will,' then we shall be well on our way to solving the fundamental problems of Jamaica. 'Justice,' plus 'liberty' equals 'prosperity,' as the admirable JLP website puts it.
Among other weaknesses, such a mentality leads to a downplaying of the central role of economics, as a force in its own right and with its own logic. It is a version of the idea that one can use politics (constitutional provisions, partnerships for progress, 'political will') to trump economic forces - a statist mentality. This is the source of the idea that one needs a 'mega agency' to promote investment in Jamaica. But the mega agency may yet turn out to be like our mega Cabinet - a mega waste of time and resources. The same applies to the idea of having a separate Ministry of Planning and Development.
It is the statist mentality too which is behind the idea that the preferred way to contain the budget deficit is by legislating a fixed limit into law. Ironically, even the idea of an independent central bank, normally associated with conservative distrust of the state, is a peculiar type of statism. The thought here is to rely solely on one organ of the state - the central bank - to sort out market finances. But if the market decides that the Jamaican dollar is worth 1 U.S. cent then you can pass as many constitutional amendments and form as many partnerships as you like, 1 US cent is what you will get.
Constitutional dicta deprive economic managers of the tools of flexibility which are essential to manage any market effectively. It creates artificial expectations and rigidities which can be calamitous. This is especially the case in a globalised economy where a housing crisis in the United States causes banks in Germany to collapse.
As the current sub prime mortgage crisis proves, when trouble arrives, no one dreams of leaving it solely to the US Federal Reserve. All the major political players - the Secretary of the Treasury, the Chair of the Senate Banking Committee, the President of the United States himself - jump right in and let their views be known, loud and clear. Indeed, any other behaviour would be th of political irresponsibility.
Contrary to what some neo-liberals think, markets do not manage themselves. Markets can and need to be managed effectively. But one has to have a deft touch. You have to be able to adapt at very short notice to complex fluctuations, following all the balls in the air while keeping your eyes glued to the main ball, long term. Legal purists, bean counters and politicians, for different reasons, abhor this untidiness. They often try to use the blunt instrument of legislation to ram stability down the market's throat with disastrous consequences. If we wish to solve our developmental problems in Jamaica, we will have to end this infatuation with legalisms, politics and economic gimmicks. We have to stay the economic course.
The letdown with the new Cabinet makes it clear that establishing good governance in Jamaica will not be an easy proposition. Mr. Golding faces party factions who are cynical about his lofty constitutional agenda. He will have to struggle hard to stay the political course as well.
Jamaica Gleaner News
Wicked response. Houdini couldn't have done better.
Comment