It is evident that Don Robotham's analysis of global capitalism (Gleaner, July 12), which is conspicuous by its absence, is incapable of rising above the charge that the global economy is unfair to the underdeveloped countries and that fairness demands that the expansionary monetary and fiscal policies prescribed for the advanced capitalist economies should be prescribed for the underdeveloped countries as well. Anything else, according to Robotham, is irrefutable evidence of "economic double standards".

I think that we can all agree that, in some sense, the global economy is not fair. Different countries are differently endowed, organise their political and economic affairs differently, receive different shares of global gross domestic product, and play different roles in determining the rules under which the global economy operates. The situation is not much different within each country. There is a fundamental unfairness, stemming from inequality of ownership of resources, within capitalist countries which, naturally, carries over to the global economy. To put it differently, capitalism is premised upon unfairness insofar as it requires that the means of production be the private property of one class of people and the ability to work with the means of production belongs to another class of people who do not own the means of production.

Primitive communal society

This type of unfairness has been with us from the very breakdown of primitive communal society and the rise of class society, and it has been lamented ever since by prophets, poets, philosophers, and populists of all stripes without any lasting effect so far. Clearly, Robotham's constant harping on this theme is unlikely to do much to improve the social and economic progress of Jamaica. Don't get me wrong; I'm neither advocating unfairness nor saying that unfairness does not have political, economic and social significance. Indeed, gross inequality of income in a society can retard economic progress and threaten the society with social and political instability. Jamaica should look to these matters seriously and urgently. However, this is not what Robotham is talking about in his article on economic double standards.

On some level, Robotham must know that his Job-like diatribe against economic double standards is a familiar dead end for he goes on to prescribe somewhat more positively and authoritatively that: "Keynes should be made compulsory reading for all Jamaicans interested in our problems." I wonder whether Robotham has read Keynes yet, and what exactly he is talking about in making this recommendation. However, before I discuss these issues, let me say that I am absolutely in favour of people reading political economy, including Adam Smith, David Ricardo, John Stuart Mill, Karl Marx, Alfred Marshall, John Maynard Keynes, and others.

As a professor of economics, with a strong interest in the history of economic thought, I am obviously biased in favour of everyone reading political economy. But time is a scarce resource and the best of us cannot do all the things that we should do, so what will we learn from reading 'Keynes'? By Keynes, I presume that Robotham means, The General Theory of Employment, Interest, and Money, and not Treatise on Probability or Treatise on Money. In The General Theory, Keynes disputes the claim of 'classical economics', the prevailing orthodoxy in economics in the 1930s, that supply creates its own demand (Say's Law). This classical claim implied that economic policy should be laissez-faire (liberal) and that enough income would be created and distributed to the capitalist society under such an arrangement so as to purchase the entire national production. As a result, the laissez-faire capitalist system could not suffer from a deficiency of aggregate demand.

Classical proposition

To Keynes, the prolonged depression of the British economy after World War I to the 1930s, which was largely due to over-valuation of the pound sterling in terms of gold, was evidence that the classical proposition was incorrect. Keynes argued that severe pessimism by capitalist investors could actually produce a state of affairs in which the capitalist system breaks down due to deficiency of aggregate demand.

The classical laissez-faire mechanism of falling wages, interest rates, and prices, Keynes argued, had definite limits in the real world, and an extreme situation could develop (a so-called liquidity trap in which capitalist investors would not invest, even at zero or negative interest rate due to extreme pessimism) where the mechanism would entirely cease to function. He argued that government could get the system unstuck by acting as a collective capitalist by spending on public projects to create income and restore confidence among the pessimistic private investors.

Even short of the extreme situation of a liquidity crisis, Keynes argued that expansionary monetary policy by itself could act to speed up the deflation of wages, prices, and interest rates, and reduce the extended period of suffering that the classical mechanism would require to restore aggregate demand to the full-employment level. It is well worth noting that Keynes's theory was not one of capital accumulation even though Keynes talks a lot about the importance of future expectations and animal spirits in the current determination of the level of capital investments. It was left to Keynes's official biographer, Sir Roy Harrod, of Harrod-Domar growth fame to resurrect the theory of capitalist accumulation and growth (extended reproduction), where Marx left it by his untimely death in 1883, in a famous paper in The Economic Journal in 1948.

Given the above summary of 'Keynes', what does this have to do with Jamaica's economic and social problems? I wish that Robotham or someone else who shares his viewpoint would explain to those of us who don't understand. In my reading of the situation in Jamaica, the chief economic problem is not a deficiency of aggregate demand. In fact, the chief economic problem of Jamaica is a severe deficiency in aggregate supply. The double-digit inflation that Jamaica is experiencing combined with the high level of structural unemployment and underemployment are prima facie evidence of the deficiency in aggregate supply, not aggregate demand. Aggregate demand in Jamaica is arguably excessive and is compounding the problems of deficient aggregate supply by keeping interest rates too high, which discourages real investments that might raise productivity, and fill the gaps through which foreign investments may spread to the rest of the economy.

Jamaican political economy

The issue of restructuring the Jamaican political economy in the modern global economy so as to promote the rapid development of capitalist production is not a long-run problem that can be put off until the global financial and economic crisis is over. I entirely agree with Ian Boyne's sapient remarks in The Sunday Gleaner of July 12: "And keep in mind that Jamaica's economy was in crisis long before the global economic crisis. The global crisis has merely exacerbated what were severe and deep structural problems of our own economy.

"These problems will not be solved by loans from the IMF, nor will they be solved by our simply wishing them away. The country must start focusing its attention on the hard, tough decisions which must be taken, with or without the International Monetary Fund."

What Jamaica needs right now is micro-economic and macro-economic supply-side economic policies, not so-called Keynesian aggregate demand management, to develop its productive forces and integrate them into the global productive system in order to earn income and meet its people's needs and aspirations for a better life for themselves and their children.

Apparently, my friend, Don Robotham, does not know 'his bed head from his bed foot' in this very serious matter of economic policy as my late, much-loved, and much-missed peasant mother from the parish of St Ann would say. In order to succeed, such policies should be complemented by the construction and maintenance of an adequate social safety net, a modern education system, and a good healthcare system. Crime and corruption will have to be reduced, and mere partisan politics will have to leave centre stage along with ubiquitous government activities.

If there are real opportunities for profit-making in rebuilding the productive structure of the Jamaican economy and integrating it into the global economy, let private firms go for it, and let government tax their profits to pay for the negative spillover costs on the rest of the society.

Government should not try to do everything because, frankly, it cannot do everything; and it generally does not have better information than anyone else. The truth is that a private capitalist with money invested in a business has more incentive than an indifferent government bureaucrat in making sure that that business succeeds.

Long-standing stagnation

Yes, the Jamaican people can, but they cannot realise themselves by carrying on in the old so-so ways. It is time for a positive change now. The long-standing stagnation in Jamaica's productive structure must end before there can be any chance of Jamaica surviving future economic crises in the global capitalist economy. And, yes, there will be future crises of varying degrees of severity. You bet! It's a sure thing.

And finally, let me state a fact and direct a related question to Don Robotham. Consider this: In California and around the United States, police officers, teachers, nurses, 'professors', and other employees of the civil service are being laid off and/or their salaries are being reduced while their workloads are being increased. Is this deplorable? Yes. What does this have to do with the IMF per se? You tell me.

David C. Wong is a professor of economics at California State University, Fullerton. He can be reached at dwong@fullerton.edu. Feedback may also be sent to columns@gleanerjm.com.