Chris Tufton, Contributor
THE CHALLENGE to the low income earner is always how to balance consumption needs with income earned. It's a delicate juggling act of setting priorities, forgoing semi-necessities, and abandoning luxuries. Normally, the key to breaking the cycle of not having enough to 'make ends meet' is to raise income levels, by building value or earning capacity.
For many Jamaicans it's through migration, doing multiple jobs and/or through education. The worst possible strategy to alleviate poverty in these cases is to increase consumption, using other people's earnings, unless that consumption adds value to your earning capacity. Otherwise, poverty perpetuates indefinitely and the income earner becomes a slave to the bill collectors. The bill collectors will then claim your most prized collaterals and your reputation.
The same applies to countries. In Jamaica's case, we are now a slave to our bill collectors.
TAXATION: FOCUS AND IMPACT
With a budget seeking to raise $13.8 billion in taxes, primarily from measures like a cess on imports and the widening of the GCT net, it is inevitable that consumers will pay higher prices on most, if not all items in the new financial year. Some estimates suggest 15-25 per cent. This will undoubtedly dampen consumption.
Further, given that this tax package hits directly the productive sector, there is little incentive and by extension little prospect for economic expansion. With the current high interest rates, projected Government contraction, and the general uncertainties in the global environment, the stage is set for a tough year, with no apparent locomotive to promote increased economic activity.
So for the common citizen and average investor, the 2003/4 Budget offers no incentives and little protection. No one is immune; consumers, manufacturers, traders and service provider. Indeed, this Budget is an indiscriminate attempt at collecting revenues across all socio-economic groups with little if any consideration for the context, circumstances, or challenges faced by these respective interests groups, and even less attention paid to the need for economic growth.
The overriding theme of the 2003/4 financial year is to increase Government revenues and by so doing to reduce the deficit. Not that this is an inappropriate theme, but should it be the only theme?
LIMITED OPTIONS
In one sense the Government had no alternative but to focus on improving revenues and cutting back on expenditures. The concerns raised in the international community regarding Jamaica's debt position, first by CreditSights and later by Prudential, have weakened the Government's capacity to borrow on our behalf. But then again Jamaicans should not be disappointed about these warnings. Clearly these agencies are firstly concerned about protecting their international clients, but in another sense, they are doing us an invaluable service. They are saving us from ourselves or, more specific, they are saving us from irresponsible governments.
By issuing these warnings these agencies are providing our policy makers with a reality check. Because, like the low income earner, you cannot continue to consume more than you earn and not run into serious difficulties. Unfortunately in Jamaica, this practice seems to have become generally accepted, at times even applauded.
MISPLACED PRIORITIES
It has almost become a part of our culture to celebrate with fanfare a successful loan agreement, as if it is some major achievement that we all should be proud of. Time and time again we hear Government representatives, and their sympathetic financial analysts, boast about Jamaica's credit worthiness, even when it was abundantly clear that the trends indicated that we were heading into unhealthy territory by consistently consuming more than we earned. Now that we are feeling genuinely fearful about scaring off our current and potential lenders, we are now forced to at least appear to be acting with greater levels of financial prudence.
The downside to all this urgency, however, is that the Government's strategy seems more geared towards appeasing our international lenders, than it is focused on addressing some of the more fundamental challenges that we face as a country, the primary and overarching one being, how do we achieve economic growth and prosperity.
The irony of this crisis is that while it is facilitating greater levels of urgency on the part of our policy makers, the dependence on our creditors is playing a greater role in influencing policy prescriptions, than is the need to enhance our economic independence and well-being.
With over 15 years of no real growth, while others around us, regionally and globally, experience high levels of growth, it does not seem that the Patterson Administration ever had a strategy to achieving economic expansion, although they have consistently expressed that intention. At one point or another during this period, the productive sector has been plagued by a number of issues related to bureaucratic inefficiencies, high interest rates, high costs of inputs, all contributing to low levels of productivity and competitiveness. The 2003/4 Budget does nothing to change things.
In fact, Government policy continues to promote a vicious and unsustainable cycle.
Picture this: We borrow because we consume more than we earn and we are failing to grow; we tax to repay our creditors who we had to borrow from because we failed to grow; and we continue failing to grow because we tax indiscriminately, in order to re-pay our creditors from whom we had to borrow because we failed to grow in the first place. A little confusing, maybe, but an accurate description of how this Government has conducted its affairs over the last 14 years. With all the growth projections; the industrial policy projected six per cent per annum, these have never been achieved.
For me the budgeting is disappointing because it is a contradiction. It rightly places priority on earning greater revenues, but discourages the very sources from which sustainable revenues can be earned; the productive sector.
In the end, we are likely to remain the same, even as things change. For the only change will be further economic contraction and the accompanying social degradation. If the Government fails to accept that fiscal prudence must be accompanied by appropriate strategic planning and execution towards economic expansion, as a country we are unlikely to see the light at the end of the tunnel. In the strictest sense, we will continue in the practice of budgeting for creditors.
Dr. Chris Tufton is a lecturer in the Department of Management Studies, UWI, and General Secretary of Generation 2000, an associate organisation of the Jamaica Labour Party.
