ON JANUARY 21, 2003, the issue of the economic model that Jamaica should pursue, for its economic path, came up in the Lower House of Parliament. The Opposition, led by its leader, through the presentation of a moot (details available in THE FINANCIAL GLEANER of January 24, 2003), criticised the current economic model of the Government, and proposed a change to a "low inflation, economic growth" model. The Government, using its majority numbers, voted to retain the current model.
The issue of how to achieve economic development has therefore resurfaced, which is good. What is also good is that it occurred in Parliament, which may inspire hope that it could again be the focus of government.
What is not so good however is that there seems to be a lack of understanding of what economic models are and, the various economic development theories that have been postulated to lead developing countries into the ranks of the newly-industrialised countries (NICs). As we shall see later there seems to be a major shift towards services and while production/productivity is going to be critical, global competition is going to be very intense, regardless of the model chosen. The critics of the current economic model seem to be unaware of the external factors that influence small country growth and the contradictions inherent in internal factors, even if we agreed on the end results desired.
Many eminent thinkers (including W. Arthur Lewis, the only Caribbean Nobel Prize winner in Economics) have tried to identify the necessary prerequisites for sustained economic growth. Some countries have even tried to follow these prescriptions, some achieving varying degrees of success, others being failures. We need to look at our factor endowment base (i.e. not just the raw materials but labour productivity, the management and leadership levels, motivation of workers and last but not least, the socio-cultural variables of a particular country).
It may well be that this government concentrates heavily on trying to contain inflation and over commits resources to futile attempts at exchange rate stability but it must also be clear that various objectives create conflicts, so to achieve one may worsen another. For example, to cut interest rates is nice but how does that match the need to rein in the high debt burden and at the same time avoid contractionary fiscal and monetary policies? How do you generate growth given the decline in absolute and relative levels of traditional export earners? Which industries will prove valuable in the long-term (Information technology and exotic agriculture) or which services (tourism and entertainment)? What will our biases be in favour of so-called winners? What about the low levels of productivity at present; the low savings rate; the high conspicuous consumption rate? How does free trade and the WTO scenario figure in the changing economy?
The Opposition speakers may be arguing about management of the economy, which is different from the economic model being used, where dependent countries like Jamaica have to a large extent followed the 'Washington Consensus', i.e. IMF, World Bank and US State Department model. No model is immune from external factors but it is also linked to internal factors and there is no ideal economic model, anywhere. Without stability, there may be more difficulties in achieving economic growth but, at the same time to promote economic growth, you may have to allow strong inflation, to stimulate prices (wages and products). All models seek investment and production/productivity and it just may take more than who is in charge, to create the scenario desired.
In the end, it may take a complete change in generation to change the mindset to create the appropriate conditions for better use of our natural resources; to increase work ethic; appropriate government in charge; better use of technology utilisation; vibrant entrepreneurship; increased savings and innovation and better access to external markets, plus facilitate all the linkages, complementaries and inter-connections that we would like to see.
