Robert BuddanAny model of development needs the will to make it work. A model must have its own will. By will I mean a collective mind among major
decision-makers.
This in turn requires that these decision-makers recognise the components and dangers of a crisis; have a commitment to protect social and political order; be able to transcend their secondary differences to achieve order and progress; and have the ability to forge appropriate solutions.
THE CASE OF IRELAND
During the 1980s, the Irish economy experienced serious problems. Inflation and unemployment were higher than Jamaica's present levels. Its public sector debt reached 130 per cent of GNP, where ours is at present. These two small economies were undergoing strikingly similar problems. The economy had failed for many years to contain inflation, create jobs and manage public expenditure. It had stagnated since the 1970s. Ireland had become one of Europe's poorest economies.
But by the 1990s, Ireland was being dubbed, the Celtic Tiger. Its economic miracles were being equated with those of the Asian Tigers. It had one of the fastest growing economies among developed countries. In fact, Jamaicans have been touched by this economic turn-around.
In 1998, the Irish Government deregulated the telecoms sector. New players entered the market and thus a company like Digicel could emerge to become a global player.
Digicel has made Jamaica into one of the fastest growing markets in the world for cell phones endowing itself with $5 billion worth of assets in the process in just two years. So what had happened in Ireland?
The turning point came in 1987. A coalition Government had fallen and the political crisis seemed likely to compound the economic one. The fall-out came about because one coalition partner refused to endorse a new and painful economic strategy to cut public expenditure as a necessary condition for reducing the national debt.
Out of this disaster came a light. The opposition leader declared his support for the necessary measures. He declared that the resolution to Ireland's public finance problem was the key to everything. The startling part of his speech was, "when the Government is moving in the right overall direction, I will not oppose the central thrust of policy."
Ireland had reached a crisis point in 1987 and critical decision-makers recognised the dangers of the crisis. They came to a collective mind that the public debt had to be dealt with. The opposition leader transcended other differences with the Government. He implicitly agreed to the public sector cuts in state expenses. This in itself, however, was not the actual solution.
IRELAND'S SOCIAL PARTNERSHIP
Later that year, the Government unveiled a plan called the Programme for National Economic Recovery. This was the point at which the state made its decisive intervention. The plan of action was not purely economic. It was a plan to construct a new a strategic form of governance that could deliver a "world class economy" and avoid social dislocation.
The new form of governance was based on a social partnership. Does this sound familiar?
A social partnership was the preferred negotiated form of economic and social governance. The Government undertook to develop a flexible labour market, reduce fraud and inefficiencies in the welfare system, and improve economic competitiveness.
These are objectives Jamaica has had for a long time. The missing ingredient though, might be the most important of all a social partnership.
The Irish social partnership involved strong commitments to employment. Unions and business were brought along. The partnership gave both sectors greater policy access and created an opportunity for shared policy learning on the part of all three. Business entered the partnership because of its concern for the state of public finances, high taxes, and the level of industrial unrest.
The National Development Plan explored the use, wherever possible, of public/private partnerships. Indeed, such partnerships emerged in areas such as waste management, roads, light, water and rail. Private companies learned to share the risks and rewards of providing services.
State and unions were able to agree on promoting active and flexible labour markets and other employment-creating devices such as counseling, mentoring and the use of employment placement services. Unions were especially interested in gaining policy access since they had been marginalised from the corridors of power.
From 1994 onwards, Ireland has been able to break the back of its long-term unemployment problem. Unions are stronger for this. One union leader said: "Back in 1987, the Irish economy was on the brink of chaos. We had very high inflation, high interest rates and high unemployment. So the trade union movement agreed to very modest wage increases, and we helped to turn the situation around."
REFORM AND THE
PACE OF CHANGE
Tony Blair made some important points at the World Economic Forum in 2000: "The key to the management of change is reform. The pace of reform has to match the pace of change. Societies that are open, flexible, able to distinguish between fundamental values which they must keep, and policies which they must adapt, will prosper. Those that move too slowly or are in hock to vested interests or what I have called elsewhere the forces of conservatism, reacting negatively to change, will
fall back."
For too long Jamaica has talked about social partnerships while business and labour stand on the margin bickering over details. It was good to hear the the Government announce a renewed attempt to institute a social partnership and the president of the Jamaica Manufacturers Association calling on members of the association to become more involved in social partnerships.
The failure to do so has meant that our reforms have not matched the pace of global change and this has cost us dearly. Old vested interests must give way to innovative ways of governance.
Britain, France and all the developed countries are re-framing their economic models under the consequences of globalisation. We need to do the same.
We see, as they already have, that the expected trade-off between inflation and employment does not exist in the way that older economic models expected. Britain, for example, thinks in terms of a new growth model that harmonises domestic economic reforms with globalisation.
BUILDING INSTITUTIONAL PARTNERSHIP
We shouldn't aim to imitate Ireland's social partnership. Ireland's success has been helped by big subsidies from the European Union for its infrastructure. Besides, unions are not happy over income distribution. We need our own version but we should accept the principles behind the model. We should be bold enough to work towards a partnership at the national level rather just company-specific ones.
We know that macroeconomic stability is a condition for social stability and economic predictability. But this macroeconomic stability won't be achieved if unions are only willing to demand higher wages without taking part in employment creation.
Unions have a vested interest in keeping the support of those who are employed and who therefore pay dues but little interest in those not employed.
The cost of paying the employed wages above productivity and inflation is money foregone that could be used to create jobs for those not employed. Business associations suffer from the same vested interests on behalf of their members. Organised interests that do not have a broader responsibility for those who are 'out' as they have for those who are 'in' will have a vested interest only in serving the 'ins' at the expense of the 'outs'. Thus the ranks of the unemployed and those in marginal informal businesses grow.
We have found that financial discipline is important because it affects our international credit ratings. It is therefore important that all player unions, business and political parties accept the need for tough measures that cut public spending.
Tough measures are easily exploited and governments fear taking them. With a social partnership, different players will share in policy learning and have the access to policy makers to ensure that the right kind of toughness is adopted and that the wrong people don't suffer. For example, business can help government to cut waste.
Fiscal and monetary instruments alone aren't good enough to deal with our stubborn problems.
The capacity of major institutions must be recruited to back the measures. The network of institutions in Jamaica must be rewired in a more effective way, one that can provide the common will behind the model of partnership, a model which itself is the best recipe for growth and
employment.
At the time when Irish political, business and labour institutions were rewiring their relationship in the mid-1990s, Jamaican institutions were perceived as failures.
A survey by Stephen Rodriguez, a graduate student in the Department of Government, found that most Jamaicans felt that the major institutions political parties, business organisations and trade unions had failed the country.
No doubt, this has been a result of the years of adversarial relations. There is a way to change this perception.
Robert Buddan is a lecturer in the Department of Government, UWI, Mona: E-mail: rbuddan@uwimona.edu.jm"
