Don Robotham, Contributor THE WEEK-LONG decline in the stock market is a serious warning to us all. There is real nervousness that the country could self-destruct and commit economic suicide.
Proposals from advisors to the Prime Minister-designate to reduce interest rates by decree and to peg the exchange rate are obviously causing alarm. So is the cement crisis.
We must do all we can to calm the markets. Crises are in nobody's interest, least of all that of Prime Minister-designate, Portia Simpson Miller.
The fixed exchange rate proposal is a formula for re-inflating the economy and building up back the budget deficit as existed in the 1970s and 1980s. It is also a formula for the generation of a large black market, again, like in the seventies and eighties.
Idle talk which attempts to correlate a fixed exchange rate with growth neglects to mention that Belize with its fixed rate is in deep trouble, Barbados with its growing budget deficit of late is also facing downgrade while the Dominican Republic with its dirty float (like ours) is booming.
It is simple-minded to correlate the exchange rate regime and growth, without analysing the economic circumstances of each country in depth.
MYTH OF THE HAPPY EIGHTIES
Some in the Jamaica Labour Party (JLP) get apoplectic when their myth of the happy 1980s is punctured. They break out in rashes and run a high fever.
They need the myth to sustain their morale through the long years in the political wilderness.
As usual, they have never looked at the data, for the financial wizard always kept them in the dark. He ran a tight ship and regarded the very idea of consultation with his colleagues as ludicrous. Who was there to consult with, he would rightly ask? An excellent question, which no one has ever been able to answer!
Well, below is the World Bank assessment of the 1981-85 period. I quote verbatim from the World Bank document, for your reading pleasure.
"By the closing of the third SAL [Structural Adjustment Loan] in 1985, some progress had been made in:
Reducing the size of the government bureaucracy;
Reducing the public sector deficit;
Correcting the over-valued exchange rate; and
Rationalising import licensing.
But in several ways the economy, now burdened with a massive foreign debt, was worse off than at the start of the first SAL:
Total output was lower than in 1979;
The public sector deficit, though much reduced, was still more than 13 per cent of GDP;
External public debt was 180 per cent of GDP, up from 61 per cent in 1979, and interest payments on external debt took one fourth of external earnings;
The numbers of unemployed seeking jobs had grown by almost one fourth, despite massive emigration;
Government spending on health, education, and social services had been cut back, and living standards of the poor had worsened."
The report goes on to say: "Trends in demand for food suggest that food consumption per capita dropped by six per cent in 1984 and by one per cent in 1985. For small children, time series data point to some true nutritional deterioration in 1985, apparently in line with a longer-term trend. Data do not permit one to assess the effects of the provision of food under government programmes." (Structural Adjustment in Jamaica, 1981-1985. The World Bank, Washington D.C., pp.1-2.)
'NYAM DEM OUT' STRATEGY
The truth is that Jamaica pursued a 'nyam dem out' strategy between 1981-85, which is why the World Bank packed up and left for two whole years.
Output in 1985 lower than in 1979! Budget deficit over 13 per cent of GDP in 1985! Debt to GDP ratio of 180 per cent! A fall in per capita food consumption of six per cent! Unbelievable.
Surely the World Bank must be talking about the regime of that dreadful socialist Michael Manley? No, it is talking about the regime of the financial wizard himself. He of Carinosa fame.
Between 1981-1985, Jamaica was the highest recipient of U.S. aid, second only to Israel.
And, in addition, during this very same period, Jamaica was also the highest recipient of World Bank aid on a per capita basis in Latin America and the Caribbean. Jamaican political leaders traipsed up and down in the White House, posturing like leaders of some Great Power.
Can you imagine? But what did we do with all that gold and goodwill? We used it to continue the budget deficits and to expand the debt to GDP ratio.
Simply put, we 'nyam dem out.' I can promise the JLP and People's National Party (PNP) one thing: we won't get the chance to play that game of 'bups' twice. Dream on.
Omar Davies has had to deflate the Jamaican economy without one penny of this financial largesse from abroad. He has had to finance it all on the private market, hence the hardships and the wealth transfers.
Yet, people who ran deficits of over 13 per cent and debt to GDP ratios of 180 per cent have the gall to even open their mouths when Davies runs a budget deficit of 2.8 per cent
JLP SILENCE
In the midst of the debate which has raged over the fixed exchange rate proposal, the leadership of the JLP has been strangely silent.
At least, Mr. Seaga thinks and puts forward ideas.
But Mr. Golding? Does he agree with the madness being proposed or does he oppose it? Nobody knows. He stands on the sidelines tongue-tied.
Mr. Chuck seems to oppose it, but then he is not the spokesperson on Finance.
Lord knows where Mr. Shaw stands. Maybe Mr. Golding and Mr. Shaw disagree, hence the silence.
If Mr. Golding and Mr. Shaw agree with the proposal to fix the exchange rate then they must cross over to the PNP side with Mr. Dabdoub and the others if and when this becomes policy.
If they disagree, they should say so bluntly and forcefully. This is no time to be nattering on about constitutional reform.
A political party is not a law school debating club or an online talk show. They won't be any constitution left to reform if there is an economic meltdown.
This stupendous silence is a classic case of the complete lack of leadership from the JLP aide. What kind of Opposition party is this?
