Robert Buddan, Contributor
DR. OMAR DAVIES has been trying for years to challenge the society to a debate over economic models and debt management and to get those with alternatives to put them forward.
Some in the society have responded in tired, political ways making mocking claims that Government was now admitting that its economic model is wrong after 13 years. It was not, and Government members backed the model in Parliament last week.
The Jamaica Labour Party (JLP) has provided different responses to this model. Edward Seaga has called for a better growth strategy and for Government to indicate any adjusted policies to come. G2K has suggested a debt strategy which I hope the Minister can clarify and respond to.
In the press, Delroy Chuck has been banefully political. In one piece he asked if the Opposition should be expected to help government's management of the economy and responded "I think the government should be allowed to bury itself in the sinkhole that it is obviously digging for the country."
Clearly, Mr. Chuck's attitude is not helpful and the JLP leadership should not want this kind of extremism to tarnish the re-imaging that it is working towards.
To be fair to the saner minds in the JLP, it is right to challenge a situation in which there has been effectively no growth. But it should not do so for the wrong reasons.
The JLP must bring its own model to the table as the basis for attacking the governing model. We cannot have a debate with one side asking all the questions and the other limited to answering them.
It is time that the JLP comes up with fresh thinking and I'm sure it has people who can do so. After all, the JLP's economic model of the 1980s did not work.
It was a simple model based on wage repression that the IMF disguised with the euphemism, "structural adjustment." Harvard economist, Jeffrey Sachs, calls this model, "a complete failure."
Throughout its years in opposition, the JLP has been criticised for failing to produce an economic model even when challenged in Parliament to do so.
In fact, Delroy Chuck himself, before joining the party, charged that the JLP was merely waiting for the PNP to fail as the basis for getting power, a charge that has become standard. Now Mr. Chuck is attacking the PNP's model without offering anything at all. He has become part of the problem.
Dr. Davies had invited Mr. Seaga years ago to lay out his economic model for debate. He has not done so. My fear is that the JLP's economic model, such as one exists, is based on old realities. For example, in its 1997 manifesto, it spoke rather lamely about bottom-up development in opposition to the 'trickle down' theory, a stale argument settled decades before.
In its 2002 manifesto, it promised economic growth but when pushed to say how it would achieve this, Mr. Shaw came up with unrealistic numbers about getting low interest international loans which just did not exist anywhere on the world market.
RETHINKING ECONOMIC MODELS
One new consensus among economists is that today's realities do not necessarily fit yesterday's economic models. The standard preoccupation with the supposedly magical relationships that exist between interest rates, inflation and growth are terms of old economic models and too limited, mechanical, and universal for a small, open, dependent, economy with its own underdeveloped entrepreneurial culture, unproductive patterns of consumption, migratory habits of capital and labour, and a host of social-psychological, cultural labour and consumer sensitivities.
Today's realities require deeper understanding. For example, there is much talk about a new economy. What we don't debate enough is the new reality that has made this new economy worth the phrase.
The truth is that no economic model can respond if the structures of society do not. The question therefore is, do we have a growth oriented society? The mistake we have made is to assume that once an economic policy changes, the economic factors of production will respond in the expected way.
This might have been more likely when economies were simpler and cause-effect relationships were more direct.
Today's economic model must take culture, technology, democracy, and globalism into account, the very things that traditional economists treat as 'externalities' and leave out.
Governments cannot afford such economic thinking because societies cannot be reduced to crude supply and demand curves and the presumption that the factors of production are in the right quantity, the required quality and are automatically responsive to the prescribed stimuli.
For example, one school of thought believes, quite rightly, that a country must reach a certain threshold of skills to break through from a lower to a higher level of development.
But being a small, open and democratic society, Jamaica suffers from brain drain as the debate on migration continuously reminds us. Economic models assume closed societies where there can be perpetual motion within a virtuous cycle. Devaluation, interest rate policies, demand and supply graphs, all make the same unrealistic assumption.
GLOBAL ECONOMICS
What we should be thinking about is a global model, one in which small states must conduct their business under globalism with all the vulnerabilities that this implies.
This is a dimension of thinking that is new to economic theoreticians and governments have been in the forefront of debate with international agencies to consider the special conditions of trade, finance, inflation, market size, etc., that such societies face.
There is political advantage in suggesting that our problems are purely national and so our solutions (which presumably lie with wise national governments) must therefore be.
Dr. Sachs, Harvard economist and critic of the old economic models of the IMF and World Bank, disagrees: "National economic failures are often blamed solely on governance, even though some countries have natural geographic advantages that help them prosper in the global economy, and others have natural obstacles to prosperity. Unfortunately, almost all existing macro-economic texts and models fail to take these huge factors into account."
Sachs is also critical of IMF and World Bank models, the U.S.'s role in globalisation, and the assumption that globalisation is a level playing field for everyone.
He goes on to say, "The world is really a more complex structure, and development is really a much more complex process, than some of the simple visions that we have."
He stresses the importance of social development, economic reform and workable industrial policies.
The disappointment with IMF and World Bank models means we must do our own thinking. Joseph Stiglitz, who resigned as chief economist at the World Bank in disgust, argued that the East Asian crisis was not caused by imprudent government but an imprudent private sector which gambled away money on real estate and that the IMF made things worse by treating the Asian crisis as though it was the same as the earlier Latin American crisis. He attacked the IMF for being undemocratic and for violating democracy in its client countries giving parliaments and civil society little time to debate and understand its policies.
We would be wise to bear in mind Stligltz's remark about economic leaders in developing countries: "The economic leaders of these countries are pretty good, in many cases brighter and better educated than the IMF staff, which frequently consists of third-rank students from first-rate universities." Stiglitz had taught at Oxford, MIT, Standford, Yale and Princeton, and said the IMF almost never succeeded in recruiting any of their best students.
We should also respect our own economic leaders because of their experience. Stiglitz confirms that IMF economists who are dispatched to countries have little experience of these countries and little time to get any. They work with outdated mathematical models and sometimes transfer models wholesale from one country to another. Finance ministers often have to intervene to make these models more realistic.
The Asian model is no longer an alternative. The decline of their economies has led economic and political leaders there to say that the old economic approaches do not seem to be working and new ones were needed.
Let us debate the economic model but let us work towards a model that is our own and one that is sufficiently new. This debate must be about models of development since growth does not translate automatically into sustained development. The concept of equity and human development must be a part of the debate, but so too must be the concept of democracy. After all, development is equitable human development with human rights in a growing economy.
Robert Buddan lectures in the Department of Government, UWI, Mona. E-mail: rbuddan@uwimona.edu.jm.
