THERE ARE only two ways to determine the value of the Jamaican dollar: by free trading on the currency market, or by Government decree. The recent shock of free trading when the dollar lost value significantly in response to public policy as announced in the Budget has resurrected fears of control by decree.
The Bank of Jamaica has been quick to advise that only licensed dealers may trade in foreign exchange even as the St. James Police under SSP Amos is declaring that they have not been able to ascertain the legal grounds on which to prosecute the informal street traders who are such a fixture in the country's tourism capital.
Prices have moved up as the value of the dollar has moved down. The Minister of Commerce, Phillip Paulwell, has announced in Parliament that he has instructed the Consumer Affairs Commission (CAC), a state agency, to investigate increases in the prices of basic goods following the depreciation of the currency. Towards what end? Opposition MPs, led by Karl Samuda who once served as a junior Minister of Commerce in a PNP Government, viewed the announcement as an attempt to re-introduce price controls through the back door.
The Government has already created conditions, as unplanned consequences of public policies, for the slashing of prices. In a flat economy with competing enterprises and a massive informal economy undermining the formal sector there is little room for sustained inflated pricing.
Even before the Minister announced his questionable probe major players have been announcing price reductions, as the dollar rallied through infusions from the net international reserves to satisfy demand, and this against all the uncertainties of the future direction of the exchange rate.
Governments in general seldom trust the market, preferring their own wisdom and power in directing exchanges. The PNP in Government has a historical ideological problem with market forces, but, as is proven over and over again, politics ultimately cannot defeat the laws of economics. When there is excessive state interference in free exchanges the market simply goes underground.
Consumers would be better served by a powerful non-governmental price watchdog. The Government is itself a major seller of goods and services mostly from a monopoly position, and is the architect of public policies with enormous impact on prices. A state-run CAC has obvious limitations in protecting the interests of consumers.
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