Martin Henry THE FIGURES climb upwards almost daily as the country's public debt stock approaches 150 per cent of Gross Domestic Product at least as measured by the formal economy.
In stark terms, we owe people one and a half times the value of total goods and services produced in the formal economy. And while the debt grows, economic output as captured by Government statistics for the formal economy doesn't.
At constant (1986) prices, according to the Economic and Social Survey, 2001 which is the most recent put out by the PIOJ, GDP has been bouncing about J$19.5 billion dollars per annum for the last five years. The fact that there has been significant "increases" at current prices is a measure of the slide of the Jamaican dollar by devaluation. We have recently achieved and surpassed the 50:US$1 ratio as the relentless slide continues.
Real GDP growth in 1986 dollars for the five-year period 1997-2001 has been mostly negative, bouncing from a low of
-1.7 per cent to barely visible growth of +1.7 per cent. The Government is again promising growth this year, and the Prime Minister has further promised to reverse the negative Standard and Poor's credit rating the country received last year. A negative credit rating might be a great blessing in only very thin disguise if it helps arrest the growth of debt.
Promises of growth have reached as high as six per cent per annum, in the stratosphere of unrealism, for the National Industrial Policy when it was launched in 1996. The NIP now quietly rests in file 13.
Government expenditure is approaching one-third of the GDP. Much of this is hijacked from the private sector through loans to Government in the domestic market and through excessive taxation. Government is the biggest borrower in the domestic credit market and some sectors like agriculture are actually registering declines in loans for productive purposes. Wage earners paying taxes on income and taxes on expenditure from the GCT to the myriad other taxes hidden in the costs of goods and services are relieved of upwards of 50 per cent of income by an expropriating state. Recent punitive tax increases, particularly on motorists as fees and fines, have led to protests by taxi operators.
There has to be a point at which the commandeering of resources by the state makes the state a parasite on the productive capacity of its citizens rather than a facilitator.
Jamaica, as a sovereign nation, has been borrowing since Independence. But our relationship with the IMF in the mid-1970s marked the real turning point from borrowing as a means of capital development and increasing productive capacity to borrowing for survival. For quite some time now we have been in the ridiculous position of borrowing to service what was borrowed before!
In our first three decades, productivity only improved by a mere 18.8 per cent. Barbados managed nearly a 120 per cent growth and Singapore achieved almost a four-fold growth in productivity. Productivity actually declined in the decades of the 70s and 80s as borrowings took off!
The one thing that has grown relentlessly with the debt has been the size and grasp of Government. Government's take of the formal GDP has grown. Government's appropriation of taxes has grown. Government has been in and out of the productive sectors as owner through bail-outs as things collapse: sugar, bauxite, hotels, financial institutions, transportation, etc, etc. Government ownership of productive capacity is perhaps now more extensive than when the Manley Government of the 1970s set out to control the commanding heights of the economy.
The Public Service establishment has grown, despite several efforts at administrative reform and public sector modernisation. The biggest item of expenditure of Government is debt-servicing approaching 60 per cent of revenue. The next biggest item is the maintenance of a bloated under-productive Civil Service. The Government's own statistical services do not keep or publish, perhaps deliberately so, disaggregated data on Civil Service emoluments and benefits as opposed to funding for the actual delivery of goods and services.
Finance Minister Dr. Omar Davies last week told visiting MBA students from Harvard and Wharton that, "in terms of containing expenditure, the message is being sent out to all ministries and agencies that much tighter controls will hold, beginning now. For example, the resources allocated for both domestic and external travel have grown much too rapidly and clear limits will be placed on such expenditure." The Minister also referred to the wastage from cost over-runs on contracts.
A decade ago, the Rex Nettleford-led Committee of Advisers on Government Structure identified some 300 public sector agencies on the books, some of which could not be found on the ground. If anything, the number may have grown since then from additions without the necessary pruning of the redundant and obsolete. Some consolidations have been done like the creation of the National Environment and Planning Agency by merging several others but creations seem to have outnumbered such mergers and the extensive cuts of positions from merged functions did not occur.
In a perverse way, access to the surplus of others through credit has not improved our own productive capacity but has facilitated the growth of the bureaucracy.
No policy of debt reduction can work without cutting the size and consumption of the state. But the state has become a safety valve employer and provider without production and can only ease out of that role at great risk of social upheaval.
Martin Henry is a communication specialist.
