Robert Buddan

The Gleaner's editorial of September 2 said that the public sector MoU ought not to exist; that it redistributes poverty by paying wages to public sector workers that the Government should fire; and that the Government should not commit itself to saving the jobs of all of the 15,000 public sector workers that the MoU protects.

Moody's, the credit agency, praises the 'remarkable' consensus that exists between the Government and civil society in the form of the MoU. In spite of weak growth and high debts, Moody's decided to retain Jamaica's B1 rating because of (i) steadfast commitment to economic discipline, (ii) a proven ability to respond to exogenous shocks, and (iii) a strong willingness to service obligations.

Favourable political conditions

Moody's went on to discuss some favourable political conditions such as continuity in the economic management team, the fact that Jamaica's constitution requires the Government to treat external debt repayment as a priority, and because Jamaica has gone through the financial crisis, hurricane dislocations, and oil price rises without asking for debt rescheduling.

In a special section on consensus, Moody's reported: "A distinguishing feature of Jamaica's macroeconomic programme has been the ability of policymakers to enlist the support of civil society in a painful, multi-year fiscal adjustment.

"Indeed, it is rare to see such unanimity of support for fiscal tightening within all levels of the population, particular among countries at similar income per capita levels where typically, such programmes are unfeasible after a short period of time when no macroeconomic payoff materialises."

Strong testimony

The report points out that "The continued support of the Jamaica Confederation of Trade Unions (JCTU) is strong testimony of the Government's ability to turn a painful adjustment into a politically and socially viable programme, albeit with some difficulties." For reasons such as this, Moody's has found that "key public debt ratios have begun to reverse direction and head downward."

It is these factors, not Jamaica's debt ratios that earned the B1 rating. That debt situation is still regarded as "very vulnerable" and Moody's notes that the ability of the authorities to stick to the medium-term programme is crucial to the adjustment process over the next few years.

There is nothing in Moody's report that agrees with the view that the MoU should be scrapped nor identified as causing a redistribution of poverty.

Even the nurse's association is being attacked for suggesting that other bargaining interests that negotiate independently of the JCTU settle for an agreement within the limits of the MoU. Yet, many people across many interests are advising that we need to follow the Irish model, the Barbados model, the Singapore model, and such models that predicate economic growth on consensus for fiscal discipline with job protection.

Redistribution of poverty

MoUs do not redistribute poverty; they distribute responsibility. Within a MoU you can contain inflation. Without one, the short-term gains in salary are eaten away by inflation, which becomes difficult to contain. Within an MoU you can preserve jobs, without which those who lose their jobs have no salary at all. It is inflation and job losses that redistribute poverty from those who set their own prices and are employed to those who take prices and are unemployed. Within an MoU you can manage the wage bill and manage public debt. Without it, you pay more wages than you can afford, run up your debt and then have to cut back spending. That redistributes poverty from those who are more independent of state protection to those who need it.

It becomes the responsibility of those who bargain within the limits of an MoU to contain inflation and debt and protect social spending. In fact, where the redistribution of poverty takes place is between those who bargain beyond the MoU and those who do within it. Mrs. Edith Allwood-Anderson of the Nurses Association of Jamaica is therefore quite right to appeal to other bargaining interests to settle within the framework of the MoU. It is neither selfish nor politically self-serving as her media critics claim.

Moody's finds Jamaica's economy puzzling, confounding many observers. The IMF sums up the problem as a high investment-low growth puzzle. It says that investments must be more productive. Here it gets closer to the emerging consensus in Jamaica. There needs to be more linkages between the formal and informal economy and the informal economy itself must be formalised.

The IMF admits that, "There is some evidence that the official Jamaican GDP estimates may understate actual economic growth. In particular, the share of the informal economy in total output is likely to have grown substantially over the 1990s."

Our own economist, Dennis Morrison, has been saying this for some time. We are not measuring enough of the economy. We are only measuring what can be measured. Other (sometimes international) estimates have put growth in the range of three to five per cent when we have estimated it at one to two per cent.

The IMF points to two other less puzzling explanations of the economy. One is the high public debt and the other is the 'brain drain'. In fact, it combines the two by saying that part of the high investment-low growth problem occurs because investments are not productive when it is put into resources that migrate. It says that, "education outcomes and returns were not commensurate with government spending," and it encouraged the authorities "to explore policy options to ensure that government social investment benefited Jamaica first and foremost."

The IMF seems to be saying that migratory professions like teaching and nursing are high risk social investments and the Government would be right to expect that they remain within the framework of the MoU or expect some commitment that they will reinvest their skills to benefit 'Jamaica first and foremost'. It is this kind of migration that redistributes poverty from those who live off Jamaica to those who live in Jamaica.

Improving Productivity

At the end of the day, however, the IMF and the 'Washington consensus' do not even demonstrate a consensus on Jamaica's economic problem. The IMF would like to see Jamaica balance its budget by the end of this fiscal year. Moody's thinks this would be a very ambitious target. The World Bank believes crime costs growth in the economy. The IMF says crime prevention is non-productive spending. Most IMF directors want a balanced budget this year. Others warn that spending on infrastructure and poverty reduction cannot be postponed.

In one way or another international organisations believe that Jamaica needs tight fiscal and debt management for which the MoU is vital; and that we need to bring the informal economy into the mainstream. Along with this is a Jamaican consensus to improve productivity. The Ministry of Labour and a number of private sector companies have launched National Productivity Week to draw attention to the need to improve workers' productivity, the competitiveness of firms, and cooperation between management and labour. The lynchpin of this appears to be a productivity-based wage and income system.

Like the MoU, this system will require consensus and discipline. Hopefully, it will distribute responsibility in a way that will not cause anyone to accuse it of redistributing poverty.

Email the Department of Government at: Robert.Buddan@uwimona.edu.jm.