Don Robotham, Contributor 
Increased health-care provision is important, but few would rank health as a budgetary priority over either security or education. - Ricardo Makyn/Staff Photographer
The more one looks at the Budget, the more puzzling it appears. The point was already made that the Budget is inflationary. There will also be an increase in the budget deficit and, therefore, in our already high debt. The latest report reveals that revenues for February 2008 were seriously off-target leaving a 19 per cent shortfall and a jump in the fiscal deficit for the past 11 months of J$2.6 billion. This is extremely serious, given that we already have an inflation rate of about 18 per cent and a debt-to-GDP ratio close to 140 per cent. It is difficult to see how this Budget can be justified in economic terms. This seems to be a budget driven largely by short-term political calculation.
At this point, a digression to the latest Amnesty International report on Jamaica is in order. This report claims that the reason why more resources are not devoted to relieving inner-city poverty is not because of this enormous debt-to-GDP ratio of 140 per cent; according to Amnesty it is due to an absence of "political will". This is a classic example of what the Germans used to call 'English cant'. Amnesty seems to think that Kingston, like London, is overflowing with Arab and Russian oil money ready to be taxed to finance massive urban social projects. They also seem to be blissfully unaware that the greatest poverty in Jamaica is not in these inner cities, but in the deep rural areas.
If Amnesty did more thorough social and historical research, they would also discover that our inner cities are British colonial creations and not the result of post-colonial policies in independent Jamaica. Our inner cities arose from British free-trade policies in the 19th century which led to the collapse of sugar prices and massive rural-urban migration to Kingston - an earlier phase of globalisation. If you go back to the record, you can easily find many of the comments about poverty and the police in these very same inner cities around 1900. What we are struggling with in our inner-cities is the negative economic heritage of the colonial period which, of course, we have made worse by many of our actions. This report is not totally without merit, but Amnesty needs to deliver on the promise from its new director to do better economic and social analysis. Legalistic liberal cliches about 'social exclusion' and 'political will' are absurdly shallow.
EXPENDITURE MISALLOCATION
But to return to the Budget. Take the question of our high crime rate. Last week, the police announced that there had been a nine per cent increase in murders from 95 killed in February 2007 to 105 killed in February 2008. At the same time, there has been an increase of 25 per cent in reported cases of robbery. Yet, the real increase in the security budget is 1.7 per cent. How can this be justified in economic or security terms?
Take the Education Ministry as another example. Minister Andrew Holness has been announcing interesting new initiatives intended to raise student literacy. Yet, the Budget of this crucial ministry has been cut by about 8.6 per cent in real terms. The allocation to education in the Budget has gone up from $53.3 billion to $58.3 billion. This is a purely nominal increase of 9.3 per cent but, given our 18 per cent inflation rate, represents a substantial real cut in Minister Holness's already tight budget.
On the other hand, the provision for Health has gone up in nominal terms from about $21 billion to $27.45 billion. This is a nominal increase of a whopping 30.7 per cent or a real increase of 12.7 per cent. The provision for the other election promise - the restoration of the SESP fund for members of parliament - has been increased in real terms by an amazing 763.7 per cent - from $279 million to $2.46 billion.
No one would deny that increased health-care provision is important. But I don't know of a single Jamaican who would rank health as a budgetary priority over either security or education. All polls confirm that the priority concerns for Jamaicans are crime, economic conditions, corruption and education. In fact, given that concern with inflation (27 per cent of the population) is running second to concern about unemployment (39 per cent), it would have made more sense for the Government to allocate the additional inflationary expenditure to various forms of price subsidies.
But this Budget is driven by a determination on the part of the Government to avoid the charge that it is failing to honour its election-campaign promises. In order to avoid such a charge, the Government seems willing to slash the education budget, give little to security and run the risk of increased inflation, deficits, debt and devaluation. This is putting the short-term political interests of the JLP above the interest of Jamaica. This is why some have been saying that what this Budget shows is that the JLP is seriously contemplating calling a snap general election.
Given the increased unpopularity of Mrs Simpson Miller, these tactics may well give the Bruce Golding government a temporary boost in the polls and an electoral victory. But this is unlikely to last for long. All indications are that although Mr Golding may be thought of highly as an individual, 40 per cent of the population thinks that the country is heading in the wrong direction, compared to 30 per cent who think we are headed in the right direction. If JLP budgetary opportunism leads to a real economic crisis, one shudders to think of the consequences for us all.
Moreover, all this is occurring in a week in which the Cash Plus crisis came to an abrupt bump. The cost of this has been estimated so far at a loss of $32 billion for depositors - more than the entire budget of the Ministry of Health! This is an enormous sum, which will largely affect middle- and lower-middle-class Jamaicans who are now likely to lose every penny of their life savings. The pressures on the Government to address this crisis will be enormous - we haven't heard the last of that one by a long shot. In fact, that particular drama is just beginning to unfold.
Last week, it was also announced that between January to November 2007, our trade deficit increased from US$528 million to US$3.9 billion. Our oil bill was officially announced to have risen to US$1.7 billion for the same 11-month period. This strongly suggests that our oil bill will soar above the US$2 billion mark for 2007.
Furthermore, there are signs that the expenditure costs for free health care are being seriously underestimated. Apparently, the costing is premised on the notion that a substantial portion of the increased costs will be absorbed by charges to private health-insurance funds held by patients. But this is an extraordinarily shaky premise on which to estimate costs. Private insurance funds are unlikely to materialise in the quantity envisaged, if they materialise at all.
GLOBAL FINANCIAL CRUNCH
My fear is that because of our usual insularity, we are seriously underestimating the impact of a US recession on the Jamaican economy. The idea that in the midst of a severe US recession, the Jamaican economy is going to receive huge investments, grow significantly and generate large numbers of new jobs, defies common sense.
Already last week, there was a report of a tendency of remittances to decline. The estimated losses from the US subprime mortgage crisis runs in the trillions of US dollars. Nobody knows which of the big banks are exposed to this mountain of bad debt - although rumours abound. Last week, two major European banks embarked on write-downs of their assets because of their exposure to subprime mortgages. In the case of UBS, the largest Swiss bank, the write-down reached the enormous sum of US$19 billion, or about twice the size of the entire Jamaican economy. In the case of Deutsche Bank - a financial institution of great importance for the Jamaican Government the write-down was also substantial, US$4 billion.
The Jamaican economy is one of the most open in the world. Long before the term 'globalisation' was invented, Jamaica was globalised. Indeed, the financiers of Cromwell's Western Design, as a result of which Jamaica was wrested from Spain with the Treaty of Madrid in 1670, was a band of London moneybags, including Martin Noell, the founder of the Bank of England, Maurice Thompson and Sir Nicholas Crispe. They also played vital roles in the development of the English trade in enslaved Africans at about the same time arranging the seizure of Cape Coast Castle from the Dutch in present-day Ghana in 1662.
From our inception as a country, we have been the product of the expansion of global economic forces. The global relations within which we remain enmeshed are simply a continuation of these centuries-old relationships. Anyone making economic policy for Jamaica, therefore, must have an up-to-date and realistic grasp of this global economy and understand how deeply it impacts on our affairs.
