Earl M. Bartley TWO STATEMENTS from the Government in recent times should confirm for those who still had doubts, the exhaustion, nay bankruptcy, of the Government and the seemingly rudderless drift of development policy.
The first occurred at the end of a recent Cabinet Retreat in Ocho Rios when the Government announced that it was aiming to build our economic future on "tourism and sugar." The one, a low-budget, over-burdened and heavily discounted industry; the other, moribund and in terminal decline.
The second statement was the Prime Minister's recent denunciation of "liberalism" at the United Nations General Assembly. To recall, the Manley-Patterson socialist apostasy, eager to demonstrate their renewed market credentials, adopted the most extreme form of "liberalism," in the 1990s and let it loose in the economy. Now like a jilted lover, Mr. Patterson complains about his unfaithful policy.
DESTRUCTION OF ENTERPRISES
Fellow economist Ralston Hyman often repeats the mouthful "Schumpeterian creative destruction", to describe the rationalising effect of competitive market forces in eliminating inefficient businesses while supporting the emergence of more dynamic ones. But in our case, while a few industries have emerged in the financial sector, the destruction of enterprises and jobs in the real sectors have far exceeded the creation of new ones.
Indeed, if well implemented, structural adjustment may be viewed as a surgical strike. However, in the hands of Manley-Patterson it became a huge 'dirty bomb' exploding with tremendous collateral damage.
Structural adjustment policies were first implemented in Jamaica in early 1981 by the Edward Seaga-led JLP administration. The main pillars of the policy enunciated then were deregulation, divestment and liberalisation. In the first five years of the policy, however, the aspect that was most strenuously pushed by the Government was the divestment of some previously state-owned enterprises. But, the State Trading Corporation, which had been established by the socialist Manley Government to import a large number of basic items continued in operation right up to 1987, though a substantial portion of its operations were transferred to the private sector. In addition, the Seaga Government continued with a wide range of import restrictions and quotas to protect local industry. Seaga's approach to structural adjustment was to slowly lift import restrictions to ensure relative sufficiency of consumer items while continuing to give a large measure of protection to a broad range of local industries.
Overall the Jamaica Labour Party's (JLP) approach to structural adjustment produced cumulative growth of 24 per cent, created 200,000 jobs and reduced the size of Government from 100,000 employees in 1980 to 77,000 in 1989. But the JLP regime was also associated with high double-digit inflation averaging 22 per cent, and there were shortages in certain consumer goods markets, and in the foreign exchange market. As a sub-sector, manufacturing stagnated for much of the 1980s, growing marginally from 15.5 per cent of GDP in 1983 to 16.9 per cent in 1989.
SEAGA'S APPROACH
The problem with Seaga's approach to structural adjustment seems to be that it was generalised rather than strategic. The Government did not undertake a systematic evaluation of enterprises to determine their suitability for continued protection nor their readiness to face freer competition. Nor was there a deliberate policy to support and protect particular industries for their linkage or strategic value in the economy. The upshot was that inefficiencies and low quality persisted in the local manufacturing sector while consumer satisfaction was not always achieved.
Michael Manley seems to have believed that economic policy could be changed as seamlessly and with as few consequences as changing from a bush jacket to a European suit. Eager to reassure the business classes after his disastrous dalliance with socialism in the 1970s, and possibly caught-up with the euphoria and hype about the possibility of a "one world economy" the PNP Government that came into office in 1990 uncritically embraced liberalism.
If the JLP had maintained a generalised protection regime during the 1980s while paying lip service to deregulation, the PNP pursued a generalised liberalisation policy without much in the way of strategic planning and targeting. The positives of PNP structural adjustment policies are single digit inflation, greater availability of consumer goods and foreign exchange. But its policies have being negative in many other respects.
Cumulative growth over the past 14 years has being only six per cent, employment creation 60,000, and the goods producing sectors have declined by seven per cent while the number of persons employed in the state sector have again increased to over 104,000.
The manufacturing sector has being the most seriously affected by the PNP's structural adjustment policies. Implemented in the early 1990s when prices and interest rates were rising, local manufacturers were caught in a double whammy. Because even as their domestic market was being flooded by cheap imports, they could not afford to borrow to retool their enterprises. Higher transportation, security, and fuel costs have only added to their woes causing a number of business closures and migration.
Between 1990-97 the Jamaica Manufacturers Association reports that some 30 manufacturing enterprises ceased operation in Jamaica. But it was only in May 1997 that the Government instituted some very weak policies to shore-up manufacturing through the provision of $150m in grants and loans to help mitigate the higher costs for fuel, security, and interest payments in Jamaica.
MEASLY MEASURES
Reflecting the ineffectiveness of these measly measures, another 34 of Jamaica's major manufacturing enterprises, have closed or migrated since 1997. Overall, within the past 14 years, Jamaica's manufacturing capacity has been slashed by nearly half from 16.9 per cent of GDP in 1989 to about 9 per cent today.
The PNP might defend its swallowing of the "Washington Consensus" hook, line and sinker, as the inability of a small, poor, country to 'buck' world trends, and that after the fall of the Berlin Wall liberalism had become a steamroller. But that would be to excuse the weak, eager to please readiness with which the Manley-Patterson Administration accepted and implemented this policy. Even when it was manifest that its main proponents, the G7 countries, were busy providing subsidies to their farmers and protecting their vulnerable industries like textile and steel.
In truth, it appears the Manley-Patterson cabinet never quite distinguished between science and superstition. That, in the words of Harvard Professor of International Political Economy, Dani Rodrick, "Neo-liberalism is to neo-classicism what astrology is to astronomy." Governments are expected to act wisely, not gullibly.
EMPLOYMENT PROSPECTS
Those who have railed against the import-substitution industries over the past four decades (as screwdriver industries wasteful of foreign exchange) finally have their wish. They are mostly gone! What now remains, is the large opportunity of creating a local manufacturing sector based on the use of indigenous raw materials and renewable resources.
The 1997 National Industrial Policy correctly highlights four industrial clusters for support and encouragement. But on a day-to-day basis, members of the Patterson Administration seem more pre-occupied with serving their interests, and seem unwilling to divert resources to serve public policy objectives.
I have long advocated (and I am not going to stop) Government venture funding of community-based resource processing enterprises as an antidote to the rural-urban drift, high unemployment and social breakdown in our communities across the island. On a few radio discussion programmes I have participated in, I have been confronted with the jarringly narrow neo-liberal dogma that "governments are to confine their activities to providing social and physical infrastructure."
MASSIVE SUBSIDIES
Go tell that to the Japanese! They provided substantial financial and logistical support to help establish their automobile and electronics industries during the 1950s. Tell that to the Europeans and Americans too, who are providing massive subsidies to their farmers that we are bemoaning.
The fact is states have always assisted their industries, and so has the Jamaican Government over the past 50 years. It was the Jamaican Government that established the first factories that were leased at subsidised rates to foreign entrepreneurs under the Industrialisation by Invitation Programme. Likewise, it was the Jamaican government that financed or gave loan guarantees for the building of many of our hotels. It was also the GOJ/IDB loan that built the free-zones in the late 1980s in which foreigners were encouraged to come and operate "sweat-shops." The main difference between these earlier enterprises and community enterprises is that instead of the factories being put in the hands of foreigners or the middle class, they will be put into the hands of poor people who will be trained to make a quality product and to manage the enterprises profitably.
Another potential source of rich employment opportunity for Jamaica is the expected migration of some 3.5 million higher income, knowledge-intensive service jobs from the United States over the next twelve years. The U.S. Department of Labour and Forester Research estimates that in their efforts to contain costs US multinationals will outsource, some 288,000 management jobs; 350,000 in business services; 475,000 in information technology; 1.7 million office jobs and about 250,000 sales jobs, among others.
JOBS
Many of these jobs are expected to go to India and Asia. But Jamaica and the rest of the Caribbean should position ourselves to obtain even 200,000 of these jobs. This means that we will have to train our people in computer and language skills and personal deportment. JAMPRO will have to be proactive in trying to induce some of these companies to outsource their services here. And we will have to clean up our political and public administration and our social and physical environment to make the country attractive to investors.
Over the past 14 years, structural adjustment policies have been implemented like a wrecking-ball in Jamaica, reducing much of our manufacturing sector to rubble. With the right mix of policies and attitudes, I am convinced that in the same way a dirty, crime-ridden, extortion-haven like Singapore was able to transform itself into a prosperous, liveable society, so can Jamaica.
Earl M. Bartley is an economist and businessman. You
can email him at adapapa@cwjamaica.com.
