Chris
Tufton
LAST YEAR the Government tabled a budget which, in its preparation, must have involved limited analysis, even less consultations and a poor understanding of the likely impact on the economy of the proposed policies. With a $13.8 billion tax package targeting both consumption and production and including, a widening of the GCT net, a cess on imports, and an increase in interest rates, Jamaicans were forced to pay higher prices for goods and services, with no signs of new economic expansion and opportunities.
BUDGETING FOR CREDITORS
In fact, after examining the budget and its implications for both producers and consumers, one has to wonder whether the pre-budget preparation gave any consideration to expanding the productive base of the economy, priority, particularly in the context of a country that has seen extremely limited net economic expansion over the last decade.
With taxes imposed on a wide range of items; from imported raw materials to books, I was convinced then, as I am convinced now, that the budget was crafted with primarily and perhaps the only consideration given to demonstrating to the multilateral agencies and creditors that the government was doing something about addressing its poor fiscal management of the economy. In brief, it was a budget attempting to instil confidence in the Government's earning and consumption patterns, and by extension, a basis to justify arguing for more loans. As I said then, and will say now, it was a budget for creditors.
CONFIDENCE ERODED
One year later and with the luxury of hindsight, it is apparent that the attempts at appeasing creditors have done the direct opposite. With this narrow focus, the Government totally missed the boat, as some would say, imposing measures that were counterproductive at best and destructive at worse. In the process, the measures imposed resulted in a mini revolt by a number of stakeholders while eroding the very confidence it was attempting to instil among both external and internal players in the economy.
This erosion of confidence had its impact on the exchange rate, with more than 20 per cent devaluation occurring last year, inflation of more than 13 per cent, a reduction of the net international reserves, and the contraction of sector activities such as the gaming industry. Additionally, there was a massive increase in the fiscal deficit and an equally major expansion of the country's overall debt, now at approximately 150 per cent of GDP or approximately $700 billion.
No greater evidence was there of the inappropriateness of the budget than the several revisions and changes of positions; from taxes on imports to taxes on lottery winnings. This only added to the economic uncertainties and further eroded confidence.
It is now clear that this budget exercise did not just upset sector groups but also the electorate. One post-budget public opinion survey confirmed that more than 90 per cent of Jamaicans were opposed to the new tax package and just under 62 per cent were of the view that the budget was just 'not a good one'. This disapproval was demonstrated at the parochial elections, by either voter withdrawal, or by going out to vote against the government.
Now it seems that the multinational agencies are similarly not convinced that the Government is doing all it can to restore the country to a path of sustainable economic growth. The IMF through its 2003 Article IV consultations, and a recently concluded World Bank report argues for the Government to face the future with a resolve to tighten its spending and downsize its activities, improve its efficiency, and in the process reduce the massive debt burden, while focusing on controlling crime and facilitating economic expansion.
This is a tall order and one wonders to what extent this government can lead this charge, given their track record. Take the dept burden as an example. In 1991, Jamaica had a total public debt stock of $43 billion. At the end of 2003, that figure had climbed to approximately $700 billion.
A NEW APPROACH?
With the new year, it's close to budget time again and in light of the fiscal deficit and many warnings, the Government is attempting a different approach. An attempt is being made at consulting before taking decisions and the public relations machinery is preparing the ground for what appears to be tough decisions ahead.
NO BASIS FOR TRUST
The private sector has engaged in the debate, attempting to define a leading role for itself by facilitating dialogue among the various stakeholders. The Bev Lopez-led team is calculating that if as a society we sink by this burden of debt then all interests are at stake and, therefore, self-interest dictates that action is taken to at least attempt to influence corrective measures. It's a basic principle of self-preservation and it's neither immoral nor unjust.
This principle of collaboration, in the interests of national progress, cannot be ignored. However, like the institution of marriage, trust is the cornerstone on which these relationships are built and maintained. And, in this context, as in any other, trust has to be earned. It is here, even with the good intentions of the private sector, that the Government faces a dilemma.
The dilemma the Government faces is firstly that after a decade-and-a-half in charge of the reins of the economy, and in particular the events that have occurred over the last year, they have squandered their political capital. They are now hard-pressed to lead the charge for radical changes to the country's economic management.
Given the experiences related to the budget and admissions of political spending in the last general election, this Government faces at least two major hurdles. Firstly, it's a long-standing incumbent faced with more glaring economic failures than successes. As an example, the recent World Bank study on Jamaica indicates that over the last decade approximately 80 per cent of tertiary graduates migrate to lands of greater economic opportunities. The study further points out that during this period net average employment increased by a mere third of a percentage point. This is an obvious indictment on the performance of the Government. And, while the Government can boost about a social safety net in place to deal with the vulnerable, in the eyes of the voter, this is less of an achievement than economic expansion. Jamaicans would much prefer opportunities to handouts.
A CREDIBILITY DILEMMA
So over time the Government has positioned itself in a manner that has not only isolated itself from major sections of the society, but also one has to now question the government's capacity to steer the country toward economic expansion after their track record over the last 15 years, even if one assumes that they have now found renewed levels of competence and sincerity to take the country in a new direction.
The cold facts are that despite the pronouncements of the Prime Minister and Finance Minister about the need for trade unions and others to be prepared to make sacrifices, the large block of voters who have heard this before are likely to ask, isn't this another round of that vicious cycle?
TAKING RESPONSIBILITY
In moving forward, the Government must accept that it has a major credibility problem. Apart from the many missed economic targets, incidences of corruption, incompetence and mismanagement, there is also a refusal on the part of the administration to take responsibility for its past transgressions.
So, the country is being told that the debt crisis is not a consequence of election spending (even with Omar's admission) or waste and corruption from the many Operation PRIDE projects. We also hear it is not due to misjudgment in engaging in rapid liberalisation without an adequate and effective regulatory framework, which in turn, precipitated the financial sector collapse. Rather, this all occurred because the Government had to protect depositors after the financial meltdown which, in turn, was not a consequence of Government actions but rather of a greedy and dishonest private sector. In the face of all the evidence made available in part by a competitive media, and felt on the ground by a deprived voter, this position is just not credible.
FAILURE OF PERSONALITIES
Additionally, the negative perceptions associated with the Government are unlikely to be viewed in isolation, but rather linked very closely to the personalities that have been the drivers of these policies. Therefore, if the administration is viewed as being a failure, in terms of controlling the debt and achieving economic expansion, the faces behind the policies are also going to be viewed as failures. It is impossible to de-link the personality from the policy. In this context, this Government has a major problem. That is that for the most part the Jamaican people view the personalities as being tired and worn and linked to the track record of the administration. This is why organisations must renew themselves and why term limits is a good idea. Voters might be forgiving, but I dare say that only the Almighty has no limit to the extent of his forgiveness.
In the final analysis, the Government is there to lead the process of governance, not the private sector, not the trade unions, and not the Opposition. Given its current challenges, it must firstly accept responsibility for its actions, move to restore a process of governance that is transparent and accountable, and restrict the capacity of a government to borrow and spend in the manner that we have done over the years.
Ultimately, however, democracy dictates that the people be given the opportunity to have their say toward restoring confidence in both the process and personalities involved in leadership. If the government finds that confidence in its capacity to lead continues to be eroded, then it is incumbent on the Government to allow the people to have a day, in which to have their say.
Dr. Chris Tufton is president of Generation 2000, an associate organisation of the Jamaica Labour Party. Comments at cctufton@yahoo.com.
