David Wong, Contributor

If - and the thing is wildly possible - the charge of writing nonsense were ever brought against the author of this brief but instructive essay, it would be based, I feel convinced, on the following paragraph:

"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 in his short essay, 'The End of Laissez Faire', which is available free online." (Adapted with some liberty from the Preface of The Hunting of the Snark by Lewis Carroll).

Discovering themythical snark

Anyone who can find either rhyme or reason in the above paragraph from Don Robotham's article in The Sunday Gleaner of July 26, 'Making the poor pay', should get a Nobel prize for discovering the mythical snark. Sad to observe, Robotham is descending from the plane of the absurd on to the plane of the ridiculous. He tells us that a good place to start to get a feel for the breadth of Keynes's approach (to what? his economics?) is his short essay, 'The End of Laissez Faire', which was published in 1926. I wonder if Robotham followed his own advice and read the essay. If he did, he would find that the essay is an attempt to outline the history of the doctrine of laissez-faire and its role as the ideology of the bourgeoisie with a somewhat spotty attempt by Keynes to outline his own economic philosophy in opposition to laissez-faire.

This essay is not an example of Keynes' writing at its best, and it does not contain any economics or political economy in the proper sense. It certainly gives no hint about the doctrines presented in the The General Theory of Employment, Interest and Money of 1936 that gave rise to Keynesianism as a distinctive body of economic theory and policies. I suspect that Don must have become enamoured with the title of Keynes' essay, and fell in love with the master himself. How else can one interpret Don's recent excessive adulation of Keynes!

Supply problem

Apparently, in an attempt to reply to my charge that Jamaica has an aggregate supply problem and not a problem of deficient aggregate demand that requires expansionary monetary and fiscal policies (Don's Keynesianism), he writes:

"Neo-liberals claim that our economic problem in Jamaica is a supply problem 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 Seawing are in the pipeline with even more rooms.

"But small hotels and villas are in acute crisis. Negril is in deep trouble. Room occupancy rates in Negril fell from 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."

Let me remind Robotham and others who may think that his numbers justify his claim of a deficiency in Jamaican aggregate demand and refute the charge that Jamaica has a problem in its supply system (aggregate supply) that global bauxite production and tourism are monopolistic competitive industries. A permanent feature of such industries is excess capacity, resulting from competition itself. Even in an economic boom, there is excess capacity, as Robotham's numbers show.

According to Robotham's numbers, in 2007, room occupancy in Negril was only 66 per cent. This means that there was a 34 per cent excess capacity before the official start of the global recession. Moreover, there has been serious overbuilding in the Jamaican tourist industry with serious consequences for environmental degradation and destruction, as John Maxwell never tires of reminding everybody.

Problems in the supply system

Robotham's data actually show the problems in the supply system of Jamaica and the need for serious restructuring of the productive structure so that the country can better cope with the global recession. The supply side problem is that there is too much capital invested in some industries and too little in others; the incentives for investing in various industries are distorted by government favouritism with respect to some industries. A simple-minded interpretation of the statistics is usually the result of lack of understanding of the motion of the economic system.

Of course, the global recession has reduced global aggregate demand and this is affecting Jamaica negatively through several channels, as I pointed out some time ago. Also, expansionary monetary and fiscal policies are appropriate for the advanced economies so as to minimise the impact on workers and the poor while the necessary restructuring of production proceeds. However, this does not imply that expansionary monetary and fiscal policies are required in heavily indebted underdeveloped countries such as Jamaica, where inflation is already a big problem for the working class and the poor.

One cannot validly employ a populist sauce-for-the-goose, sauce-for-the-gander-type of reasoning, as Don frequently does, to argue that it is hypocrisy and double standard to sanction expansionary monetary and fiscal policies for the advanced countries and restrictive expenditure policies in the developing countries. While expansionary monetary and fiscal policies in the advanced countries will certainly boost global aggregate demand and the demand for exports from the underdeveloped countries, the same policies in some underdeveloped countries will spell economic collapse without contributing anything to global aggregate demand.

Robotham needs to think more carefully about the issues before he descends even more down the plane of the absurd and the ridiculous. There is too much farce already in Jamaican intellectual circles.

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.