Robert Buddan
THE ECONOMY is clearly the focus for this period. Already Mr. Seaga has put in his word about how best to manage the economy. His solution is that which he applied in the 1980s - cutting back spending and reducing interest rates. The confederation of trade unions has rejected any International Monetary Fund (IMF) conditionality programmes and supports a social partnership. This is the best news in years. Mr. Seaga's approach and the partnership approach are very different.
Timothy Ashby wrote the following about the Seaga administration's record of the 1980s: "Despite $1 billion in US development assistance and the close friendship of the Reagan administration, Edward Seaga failed to transform Jamaica's economy during more than eight years in office, becoming a disappointment, as well as a political embarrassment, to his many supporters. His stated commitment to the private sector seemed at odds with an evident distaste for dismantling Jamaica's pervasive statism."
Ashby wrote this in Missed Opportunities: The Rise and Fall of Jamaica's Edward Seaga. It is a short but detailed account of the Seaga years and the role of the US Government and international agencies which tried to make Jamaica into a free enterprise showcase for the Third World. Despite the fact that at one time Jamaica became the leading recipient of US aid, second only to Israel, the focus of attention of the CBI, the Rockefeller Commission and sympathetic donor agencies, Ashby concluded that Seaga only talked the rhetoric of private sector development while running a bureaucratic, highly regulated and corrupt state and losing the confidence of the US.
OLD PARTNERS
The model that the United States contemplated was a partnership of sorts between the United States, the Jamaican private sector and a reduced state under Mr. Seaga. This did not succeed because Mr. Seaga's politics was to build a strong state around him, closely regulate the private sector and use ideological rhetoric to secure grand aid and investment from the US to create an economic miracle and justify his cult of personality as a financial wizard.
In Ashby's account two American economists who had visited Jamaica in 1987 at the invitation of the PSOJ reported in the US that, "We found that Americans are being lied to about the development of free enterprise in Jamaica." International agencies wanted Jamaica to undertake economic and policy reforms but Mr. Seaga found ways to get around them by appealing directly to the White House. Ashby documents Peter McPherson, a Vice-President of Bank of America saying, "There is no question that Seaga resisted our policy efforts and could always go to the White House." But by 1986, the White House had caught on and its support for Seaga cooled. They have provided no visible support to him in elections since.
Mr. Seaga resisted the free market model saying "the state has a very definite role to play." His reasons were that in countries like Jamaica, the private sector did not have the self-regulating machinery of developed countries, was not interested in buying government holdings, and he would not privatize because then "a few rich families" would own everything. All of these reasons were regarded as inventions to stall market reforms.
In one of their interviews, Ashby said Mr. Seaga made it clear that he could not entrust the development of the economy to the private sector. Ashby reports that one official of Jamaica National Investment Promotion (JAMPRO), probably echoing Seaga's mindset, said "the private sector is incapable of taking on investment projects without the assistance of a government agency."
THE SEAGA STATE
In an article in the Daily Gleaner, December 22, 2003, Mr. Seaga called for two solutions to the present economic problems. One is to drastically cut costs and the other is to make banks determine interest rates competitively. He believes the government will do neither for political reasons. Yet, Ashby argues that Mr. Seaga resisted market reforms on the belief that the Reagan administration would always come to his rescue for political reasons.
The 1989 elections presented evidence that political thinking prevailed over economic rationality. Ashby wrote, "As the 1989 elections approached, Seaga completely abandoned his attempts at tight monetary orthodoxy. Trying to woo voters, he promised to spend over J$1 billion on a five-year Social Well-Being Programme which would build new hospitals and schools." Moreover, Seaga tabled a second set of supplementary estimates for US$14.9 million of additional government spending.
Aid funds were not always used for their intended purposes. Ashby said that of about US$70 million, the United States Agency for International Development's (USAID) Inspector General could not account for US$27 million. Jamaican officials blocked the Inspector General's auditors access to books and records. The money was apparently used to pay down on an alarming foreign debt. In addition, other 'statist' problems impeded development. Problems of corruption at customs, bureaucracy, political instability, security concerns and the unaccommodating attitude of Government officials were serious obstacles.
The Seaga administration did not cut back on the size of the state nor make the state more efficient. A Tripartite Commission made up of the IMF, World Bank and USAID, reported that five years after the administration came to power, the state remained the dominant force in the economy through substantial control of economic activity. It was the dominant owner in the sugar industry, the tourism sector, owned all bauxite lands, the telephone company, railway, national airline, the largest commercial bank, the only cement company and the only oil refinery. It reported that there were 48 Government ministries and departments, 230 statutory bodies, and over 200 public enterprises.
NEW PARTNERSHIPS
Mr. Seaga did not cut back on the state as much as he cut back on social spending. And, the apparent suggestion of the Jamaica Labour Party (JLP) that the Government re-enter a borrowing relationship with the IMF does not reflect the acrimonious relationship Mr. Seaga's administration had with that organisation.
Happily, neither the society at large nor the private sector supports conditionality agreements with the IMF. The trade unions have joined the Government in rejecting this option just as they did in Barbados and are doing in Haiti and the Dominican Republic. The unions obviously remember the insensitive JLP/IMF adjustment policies of the 1980s that forced them to call a national strike.
The lessons for a new social partnership are that it is not the IMF that will solve Jamaica's problems, it is Jamaicans that must do so. Another lesson is that, it is not Mr. Seaga and a 'personalist' state that will best manage the economy but a partnership of the state, the trade unions and the private sector. It is this tripartite union that must be given a chance, not the old union of the IMF, World Bank and USAID under the direction of the U.S. Government.Another lesson is that we must think more positively in terms of growth and jobs and less negatively in terms of cut-backs. For example, The Sunday Herald of January 4, 2004 surprisingly advocated cuts in public sector employment and reduction of government ministries and agencies. Rationalisation is necessary but it is the new social partners that must determine what cut backs are possible. More importantly, they must think about growth and expansion, not simply cut-backs and contraction.
Economic management depends on politics to build trust and partnership. Michael Manley and P. J. Patterson have been asking for partnerships for years. One does not alienate overseas and domestic partners on the pattern of the 1980s. One builds partnerships with them. In this way we will avoid more missed opportunities.
Robert Buddan lectures in the Department of Government, UWI, Mona. email:
Robert.Buddan@uwimona.edu.jm
