Delroy ChuckIN SPITE of the rough times, we might as well prepare for even further dislocations, uncertainty and hardships. No doubt, the war in Iraq, thousands of miles away, will be the main excuse for everything that goes wrong or continues to go wrong. Two months ago, the Minister of Finance denied there was a crisis. Now, he is admitting there is a crisis, and that the crisis could get worse. But for the war, we will soon hear, Jamaica would be experiencing peace, prosperity and progress.
To be sure, the war will have some effect, perhaps a devastating effect, on Jamaica but it would be a gross insult to our intelligence for the government to use it as another excuse for its policy failures. It is Govern-ment's stupid, reckless and inconsistent economic policies that are largely, perhaps wholly, responsible for our economic crisis, social disintegration and reverberating hopelessness everywhere. Let the buck stop somewhere, and if the leadership of the country cannot accept the responsibility, it is not worth the trust and confidence reposed in it. When things go wrong, weak and feckless leadership finds excuses, when what is required is good, strong, leadership to accept the responsibility and quietly seek to correct the wrongs.
Jamaica has been on the wrong path for a long time. It doesn't take a prophet or an economic guru to foresee the consequence of policies that can only bring dislocation, disequilibrium and disaster. It takes only common sense and a simple understanding of economics to know that government's prolonged monetary policies only exacerbate instead of solving the economic problem. For over ten years, I have written strongly against the high interest rate policy, as I know it only stifles real production and any possibility of real economic growth. This high interest rate policy should be used mainly as a short, stopgap measure to correct economic imbalances, yet this government has used it primarily, nay solely, to protect the currency.
While protection of the currency is a worthwhile economic objective, it cannot be the sole objective when everything else is falling apart. In fact, as I have argued repeatedly, the very monetary policies being used to stabilise the currency are more likely, in the long run, to destabilise the currency. The dollar continues to devalue in spite of the high interest rate. Still, the government sticks to this asinine and futile high interest rate policy, as it desperately seeks to contain the devaluation. Now, this high interest rate policy is losing its effectiveness and usefulness.
I can easily visualise Dr. Omar Davies' passionate and relentless advocacy amongst his colleagues for sticking to his economic model to protect the currency, to contain inflation and grow the net international reserves but I daresay it is only a matter of time before this model implodes. Once we are unable to borrow to meet our fiscal imbalances then everything crashes. Surely, a model that relies on increasing loans, remittances and grants cannot be sustained. Under this model, our national debt has doubled, our currency has depreciated unrelentingly and our economy gets worse. It is time to change course, either with new policies or with a new minister.
To be sure, there are hard times ahead. The real issue is whether we are to continue on the present path with no hope of better times or change path with some hope that things will improve. Once again, I strongly urge the Government to face the reality, the monetary policies are not working and cannot work in an economy that is not producing and growing. We have to lower interest rates and bear the consequences of so doing. I readily admit that low interest rate is not a panacea for a sick economy or
a jumpstart for a stagnant economy but it sets the stage for investors to seek alternative investments to the total reliance on government paper, stocks and bonds.
It simply cannot make sense for Jamaica to have interest rates at 20 per cent and above, when our trading partners in this hemisphere and elsewhere have interest rate below five per cent. We can never become competitive in the global economy, which must be our economic objective, with this level of interest rates. Somebody needs to explain to the Government that high interest rate compounds the problem, delays the real economic crunch and, in the meantime, distributes even more poverty across the society. In simple economic terms, we need policies that tilt the balance in favour of production, exports, and the creation of wealth.
Interestingly, government spokespersons are quickly recognising that Government has a limited role in wealth creation and it is in fact businesses and the private sector that are the chief architects, creators and producers of wealth. What is missing is trust and confidence in government policies. In a market economy, policies have to be consistent and sustainable, and so far this government has failed to inspire an economic environment of trust and credibility. With a war in Iraq, the currency in trouble, and looming disaster ahead, it is about time the Government levels with the country, tells the truth, accepts responsibility for our economic problems and, perhaps, the hard times ahead can be faced honestly and together.
Delroy Chuck is an attorney-at-law and Opposition Member of Parliament. He can be contacted by e-mail at delchuck@hotmail.com.
