Ian Boyne
OPPOSITION LEADER Edward Seaga, with all the passion and stridency in his voice, made a remarkable declaration on the 'Breakfast Club' on Wednesday morning. He asserted that the crux of the crisis we face, is that the People's National Party (PNP) simply does not know how to run a market economy, for "they are repentant socialists, reluctant capitalists". There can be absolutely no solution while the PNP is in power. In fact, he went further, making the astounding declaration that getting rid of this PNP Government is not even the ultimate solution. Even if the JLP comes back to power and cleans up the mess, Seaga posits, the PNP would return to power at sometime in the future to mash up things all over again, continuing the one step forward, two step backwards syndrome he has lamented before. The PNP leaders of the future would still be influenced by the genetic defects of their party. It is no wonder that he would pour cold water on the efforts of the private sector to come up with solutions to the economic challenges of the country, and why he never publicly supported the negotiations between the Government and the Jamaica Confederation of Trade Unions, which signed the historic Memorandum of Understanding last week. Seaga believes that if he and his party are not in power, and perhaps if the PNP is not totally eliminated from the political scene, there is no hope for Jamaica.
Mark Wignall might cite this as another example of Mr. Seaga's staggering 'delusions of grandeur', and his detachment from reality. But I say, more charitably, that we should examine his thesis analytically, to see whether it matches up to the empirical data. Is the PNP totally incompetent in running a market economy? Is it true that Omar Davies and the Cabinet don't know how to drive the capitalist economy, being "repentant socialists, reluctant capitalists"?
OVERZEALOUS FREE MARKETERS
Mr. Seaga, himself, provides the first and primary line of evidence against his own thesis. It has been Mr. Seaga's firm insistence over the years, and now he has backing from the esteemed International Monetary Fund and the World Bank, that the primary causing factor for our economic crisis, was the liberalisation of exchange controls in 1991.
The lifting of exchange controls is one of the cardinal doctrines of the free marketers. Countries which have been reluctant to do so, have been labelled statist, and given low ratings in the economic freedom scale. By Mr. Seaga's own admission, the PNP has proven to be overzealous free marketers, not by any means "reluctant capitalists". They rushed headlong into liberalisation of exchange controls when they should have delayed.
The International Monetary Fund (IMF) and the World Bank, reportedly influenced Michael Manley, in 1991, to abolish exchange controls, a move which was supposed to have boosted confidence and removed the distortions in the economy, as well as to open the floodgates of investments. This was a cardinal dogma of the IMF and World Bank, before the crash of the East Asian economies and the sharp criticisms of leading economists Joseph Stiglitz, Jeffrey Sachs and Dani Rodrik, as well as from billionaire financier George Soros.
Seaga might be right that Manley should not have bowed to the IMF/World Bank pressures, and face the consequences then, but Manley and the PNP can't be attacked for being "reluctant capitalists", nor should he say they don't know how to manipulate the capitalist economy and juggled the figures to fool up those institutions. Precisely because they are "repentant socialists" they have, if anything, been too eager in demonstrating penance to the local and international capitalist class.
It is a fact that Eddie Seaga has never been a purist free marketer. Seaga is a pragmatist, who used market principles to achieve social goals. He was never a doctrinaire neo-liberal and, in fact, could be more classified as a statist. If you have any doubt about his orientation, read the JLP manifesto of 2002. In my view, developing economies need more of the strategic, selected, flexible and carefully targeted state interventionist approach of Eddie Seaga than the purist neo-liberal approach. A small book, 'A New Economic Strategy for Jamaica' by UWI economists, Dillon Alleyne and Nikolaos Karagiannis, makes a good case for the activist, developmentalist state, tackle Jamaica's structural problems.
The case cannot be rationally and empirically sustained, that the PNP Government has been "reluctant capitalists". We give the PNP Government far less credit for its economic management than we should, because of our political tribalism, lack of intellectual exposure, and provincialism. Omar Davies might be cursed in every bar and most verandas in Jamaica, but the people in the key multilateral institutions in Washington, removed from our political narrowness, know better.
The IMF itself, in its latest Article IV report on Jamaica, says, "Over the past decade, the Jamaican economy has undergone significant structural change. Economic liberalisation and structural reform have resulted in a more open and market oriented economy, with reduced Government intervention." This is the IMF speaking.
ECONOMIC FREEDOM
The Economic Freedom Network, one of the premier watchdog institutions of the purist free marketers, the Amnesty International of the neo-liberal world, publishes an annual 'Economic Freedom of the World' report. In its latest 2003 annual report, some interesting data is given. Contrary to Mr. Seaga's view that the PNP are "reluctant capitalists", the 'Economic Freedom of the World Report 2003' puts Jamaica at number 35 out of 123 countries assessed for a wide range of criteria of economic freedom. Only four countries in the entire Latin American region and one in the Caribbean,Trinidad, come before Jamaica in terms of economic freedom and the practise of capitalist principles.
Jamaica beats Barbados, which is number 82, and also trounces the Dominican Republic, Brazil and Mexico. Jamaica is also ahead of a number of countries in Europe, including France, and ties with Italy and Spain. Just to reinforce the significance of Jamaica's making the number 35 position, consider that three Asian tigers, South Korea, Japan and Taiwan, are at 26. The Jamaican Government, reluctant capitalists?
Let's go to the World Bank report on Jamaica, issued in December last year and titled 'Jamaica: The Road to Sustained Growth'. Seaga and the JLP have frequently criticised the PNP for drying up investment, boasting of its, (the JLP's), record in the 1980s. We constantly hear that "nobody is investing in Jamaica". Hear the World Bank, safe from our political squabbles: "Despite the slow G.D.P. and high real interest rate or large debt overhang, the estimated rate of gross fixed capital formation is, and has been fairly high. Gross fixed capital formation averaged nearly 28 per cent of (nominal) G.D.P. over the last decade and rose to nearly 30 per cent in 2001."
Now note this, "Jamaica's average investment rate was in the top quartile of countries in the 1990s, and well above the average investment rate of about 21 per cent across countries. The average investment rate from 1996-2000 was nonetheless higher than in the 1980s". The "reluctant capitalists" were able to achieve more than the supposedly knowledgeable and enthusiastic capitalists of the 1980s! The World Bank also notes that new foreign direct investment has remained strong, which is usually a good indicator of favourable market conditions."
The World Bank also says, "Jamaica has a positive enabling environment for business establishment and operation. It ranks high in international comparisons of its regulatory framework". The Bank says we are doing better in this area than Chile, the economic miracle of neo-liberal Latin America.
Many in Jamaica might have forgotten this, but the World Bank
reminds that "in the early 1990s Jamaica made considerable progress in its fiscal
affairs. Tight fiscal policy was part of the overall macroeconomic strategy
to stabilise the economy and stimulate economic growth. From 1990/1991 to 1995/1996,
the Government ran a fiscal surplus and a significant primary surplus, the debt
to G.D.P. ratio declined from 138.3 per cent in 1990/1991 to 85.9 per cent in
1995/1996". It was, reminds the World Bank, not some genetic
defect of the PNP or the incompetence of Omar Davies, but "the
financial crisis of the mid 1990s,together with the rising
Government wage bill and falling revenue over 1996/1997 to 1997/1998, which
worsened the fiscal and debt position dramatically".
TAKING RESPONSIBILITY
The workers of this country had better understand, that unless they are prepared to own part of the reasons for the present crisis and accept the view that they are overpaid in relation to their productivity, they should be very careful in ascribing blame. Wages have run ahead of inflation over the last number of years. That is an indisputable fact. If, as Mr. Seaga maintains, the gravamen of our crisis lies with premature liberalisation and the rush to apply the recommendation of the I.M.F./World Bank, then the PNP's problem is too much zeal for capitalism, not too little, and the PNP managed fairly well for some years, disproving the thesis that the party has no capacity to run a market economy.
Because the World Bank highlights the "rising Government wage bill" as contributing to the economic crisis, the signing of the MOU, which will save the Government $5-6 billion in wages for the next fiscal year, is a very significant agreement, not for the Government, but for the country, including Labourites.
I have to single out Dwight Nelson, vice president of the Bustamante Industrial Trade Union(B.I.T.U.) for special and particular commendation. Dwight Nelson has shown the calibre of leadership, courage and psychological security which are sorely needed in Jamaica. In the face of public criticisms of the 'Partnership for Progress' talks and the cold shouldering of the talks between the Government and the unions by his party leader and party chairman. Dwight Nelson, a rockstone labourite, went full steam with the talks with the PNP government. He was upfront in the media, defending the talks and marketing the MOU to the Jamaican people. He gave an excellent speech which lashed critics at the signing of the MOU. It is a pity he has no interest in the leadership of the JLP, for the country desperately needs people with this kind of character and determination to be in political leadership. People who put country before partisan interests.
Our trade unions leaders have seen clearly that the old style adversarial, tear down, sabotage mentality is outmoded and counter-productive in 21st Century Jamaica. The MOU is being greeted with cynicism, derision and baseless propaganda, but the unions should not be deterred. This is Jamaica, these are some of the attitudes which have contributed to our being at this crisis today, and of course, people have justifiable reasons not to trust our politicians.
The unions have taken a lot of beating for this MOU. The Government has an obligation not to squander the trust which has been reposed in it by the unions. If this trust is broken, it might never be repaired. For those of us who cannot postpone our lives until the JLP returns to power, and who do not believe in the manifest destiny of any political party, we had better hope a way is found to bring the Government, private sector, civil society together to work toward solutions.
__________________________________________________________________________
Ian Boyne is a veteran journalist. You can send your comments to ianboyne1@yahoo.com
