D.K. Duncan THE TURBULENCE in the economy over more than three decades has produced some interesting results. The roller-coaster ride has resulted in a significant increase in the public's consciousness. This has been particularly so in the last decade.
INTEREST RATES
The rapid increase in the numbers of financial institutions in the early to mid-nineties in response to the liberalisation process was initially seen as very positive. This had the effect of increasing the public's awareness of interest rates and their impact on personal savings. While some financial entities catered to funds from large institutional investors, others focused on the small investors. This created an attitudinal shift among many who formerly opted for the traditional institutions as a haven for their relatively small savings. As large interest rate movements attracted some to new institutions, the awareness of aspects of the economy grew.
INFLATION
It could be argued that so far the liberalisation process has not produced the most critical intended consequence. That is, the country has not experienced the explosion of economic activity in the 'real economy' as was predicted by some. Another unintended consequence in the early to mid-90s which followed on the liberalisation process was the explosion in inflation rates. The negative effects led to a greater appreciation of the more recent years of single digit inflation. Workers and others involved in economic planning at all levels became more painfully aware of this economic term. Like devaluation in the '70s and '80s, the concept of inflation rates has become indelibly etched on the public's consciousness unlikely to be reversed.
THE NIR
Over many years, terms like the Growth Rate, National Debt and Net International Reserves (NIR) have been liberally used. They have for the most part, remained abstract. In the 1970s the quantitative restrictions on foreign exchange may have forced some to make a link with the NIR. However, as more public discussions focus on the economy an increasing number of individuals are becoming familiar with the practical implications of these macro-economic indicators. The fact that the NIR has remained in strong positive balance over recent years has taken the edge from the discussions on this indicator. The Finance Minister constantly bemoans the fact that while years ago the negative NIR was a source of unflattering debate the new situation attracts very little comment.
FISCAL DEFICIT
Minister Davies can take comfort, however, in current developments. The recent need for corrections in the economy has brought the Trade Union leadership to the table. The more recent experiences arising from, and the possible future consequences of an uncontrolled fiscal deficit provided the clincher. After years of calls for a social contract, a real possibility has occurred an unintended consequence.
GOVERNMENT PAPER
Principal concerns of the Private Organisation of Jamaica(PSOJ)-led 'Partnership for Progress' are reduction in the debt, the fiscal deficit as well as interest rates. The Government's decade-old policy of mopping up liquidity by the use of high interest financial instruments has contributed to this new initiative. As a consequence of their co-operation many financial institutions have become vulnerable as holders of Government Paper. This unintended consequence of Government's actions has been a strong motivation for this latest move by the 'Partners'.
Separately, in the mid-nineties the straying from core activities was blamed for the failure of some financial institutions. It now seems that a commitment to core activities has the potential to bring about the same consequence.
STATISTICS
Another major consequence of the prevailing social and economic environment has been the increase in both the underground and the informal economy. The lack of significant growth and little or no job creation has resulted in a situation where a large section of the economy falls outside the tax net. A consequence is insignificant growth in government revenue. To compound matters it is now being suggested that our statistics for the GDP and growth rates may be understated. This may result in even more unintended consequences, for which the Government has so far been the main beneficiary.
When Jamaicans migrated en masse to the UK, Canada and the USA from the 1950s to the present we complained about losing skills. Little did we know that one consequence was that their remittances would become the largest net foreign exchange earner for the country in recent times. This may be the greatest insurance against potential social unrest the darkest fear of the political leadership. One Love, One Heart.
A dental surgeon, Dr. D.K. Duncan is a former General Secretary and Cabinet Minister in the PNP Administration of the 1970s.
