"The only 'development' which we will get from reducing interest rates are more luxury apartments in upper St Andrew!"

The current global economic crisis has nothing to do with Jamaican public-sector workers. It was caused by two things: the speculation in derivatives by the big global financial institutions and the blind adherence to the ideology of neo-liberal free market fundamen-talism. Yet neo-liberals want the global poor to pay for this crisis.

Market fundamentalism, having wreaked global economic havoc, has not had the guts to 'fess up' to its catastrophic consequences. In Jamaica, some of its advocates who use to tout the Irish miracle, still have the gall to proffer advice, even though Ireland is in almost total meltdown as a consequence of this very same neo-liberalism.

global prosperity

These neo-liberals totally abandoned John Maynard Keynes. Keynes was no socialist but, like Max Weber, a liberal disillusioned with liberalism. He was convinced that capitalism either agreed to be reformed with a huge dose of state intervention or it would collapse. Keynesianism reigned supreme globally from 1944-1971 and that is why we had global prosperity.

Since 1971 we have been living with the disastrous consequences of the abandonment of Keynesianism and the triumph of free market fundamentalism. Although an accomplished mathematician, Keynes was not a narrow-minded economic statistician. He had broad philosophical and artistic interests, was married to the ballerina Lydia Lopokova and also happened to lead a very healthy homosexual life in Cambridge, at least before he got married in 1925. If Keynes were alive today, he could not be a member of Golding's Cabinet! A good place to start to get a feel for the breadth of Keynes' approach is his short essay, 'The End of Laissez Faire', which is available free online.

LIVING WITHIN OUR MEANS

Many have forgotten Keynes and naively parrot phrases about Jamaica 'living beyond its means'. But which country today is living within its means? The United Kingdom, with its huge public-sector borrowing requirement and its massive derivatives bubble? Spain with its 8.1 per cent budget deficit? The United States with its national debt now exceeding US$11 trillion, excluding Social Security, Medicaid, Medicare and Veterans obligations? Which social groups in Jamaica are living beyond their means? Is it the teachers, or the nurses, or the civil servants? Perhaps, it is the small farmers, or maybe the laid-off bauxite workers!

Neo-liberals claim that our economic problem in Jamaica is a supply problem and not a problem of the collapse of global demand. Three bauxite plants are lying idle due to the global recession. Hotel room occupancy rates fell 2.8 per cent in 2008 to 60.4 per cent. In 2008, 2,056 new rooms were added and up to US$3.5 billion was invested in hotels and tourism infrastructure over 2007-2008. Other large projects, such as the Secrets Resort, Palmyra Phase II, Oyster Bay and Seawind are in the pipeline with even more rooms.

acute crisis

But small hotels and villas are in acute crisis. Negril is in deep trouble. Room occupancy rates in Negril fell from about 66 per cent in 2007 to about 55 per cent in 2008. Many small Negril hotels had occupancy levels fall to as low as 31.5 per cent and experienced a 15 percentage point decline, despite very heavy discounting.

Someone needs to enlighten my darkness as to which one of the IMF conditionalities will help those small hotel owners in Negril, Ocho Rios, Port Antonio or St Mary? Or which one will lead to a re-opening of even one deggeh deggeh bauxite plant? Or which one will restore the flow of remittances from the current 15 per cent collapse? The solution to our problems depends on a revival of global demand and not on any IMF-inspired budgetary punishment of public sector workers. From a neo-liberal point of view, however, the name of the game is to transfer the burden of the crisis from those who caused it - big global finance - to the weak and vulnerable.

IMF CONDITIONALITIES

Except for one crucial area, we know what the IMF conditionalities will be. The first will be a massive budget cut to about four to five per cent of GDP. We are currently heading towards 10 per cent. Teachers, forget about that $8 billion in back pay - you will be lucky if you have a job! Petrojam will be in serious trouble. Likewise, JUTC and bus fares. The less said about Air Jamaica and the sugar estates the better. If you work in any of these bodies or use their services, forget it.

Obviously, the effect of this will be to create further severe economic hardship in Jamaica. However, expect IMF and World Bank representatives to mumble on about 'safety nets' and 'protecting the vulnerable'. If you really wish to protect the vulnerable, then concede us more generous terms, end of story.

The second conditionality to be imposed has to do with the passage of a fiscal responsibility law. What this will do is to take the deficit targets imposed by the IMF and enshrine them in law. This is a very clear intrusion on our national sovereignty. It will mean that we will be bound by law to keep the burden of economic adjustment permanently on the backs of public sector workers - making the poor pay as a matter of law. If this is not a human rights violation what is? Amnesty and Jamaicans for Justice, where art thee? It will also deprive us of the policy flexibility which is required for effective macro-economic management in a small, very open developing economy vulnerable to external shocks.

The third area of conditionality involves cutting interest rates and reducing the debt. Here a hilarious, but rather dangerous game is being played. Some commentators mistakenly concluded from Audley Shaw's presentation that the IMF was ready to sanction debt renegotiation. Gradually, however, various semi-official spokesmen of the Government made it clear that was far from being the case. 'Restructuring' with our 'social partners' (the banks!) using 'moral suasion' is more what the government and the IMF have in mind. The larger point, however, was not so much the debt as to find a way to reduce interest rates.

Yet, none of these spokesmen who went on and on singing the praises of interest rate reduction had the guts to say plainly what is at stake here. There is a foolproof way to dramatically cut interest rates without all this rigmarole. They know it and I know it, but no one dares mention it. What a game!

All the talk about high interest rates 'crowding out' a long line of local investors dying to sink their funds into the Jamaican economy is just that - talk. Small farmers excepted, from the days of Martin Noell and the other London bankers in 1655, through Rothchild's floating of the £20 million emancipation compen-sation loan bail-out for slave masters and their creditors in 1833, through the 1950s and 1960s, the key to Jamaican economic growth was foreign not local investment. The only 'development' which we will get from reducing interest rates is that type associated with real estate speculators - more luxury apartments in upper St Andrew!

POLITICAL APPROACH

The issue before us is not to find an alternative to the IMF. The real issue is how to get the best possible terms without making the poor pay. The Government is taking a secretive, purely technocratic approach. I advocate a public political approach. Perhaps, for diplomatic reasons, the Government is loath to take the latter approach. No matter - let us help them. Remember, this is only the first in a series of IMF agreements. More are sure to follow!

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