Cedric Wilson, Guest Columnist
Wilson
THE LANGUAGE may be different and the track records of democracy not quite the same, yet there is a remarkable resemblance between the English-speaking Caribbean and the economies of Latin American. Both regions share a history of European colonialism and live in the vast geopolitical shadow of the United States. Indeed, this may very well explain the economic parallels that exist the crippling debt, woefully inadequate infrastructure, pervasive poverty, and the challenges of macro-economic stability. Karl Marx was terribly wrong when he tried to predict the economic destiny of humanity, but he may have been on to something when he posited that economics obey some kind of historic law of motion.
In this context, the Portia Simpson Miller victory in the election for the president of the ruling People's National Party is not an isolated event. It belongs in the same category as the rise to power of Hugo Chavez in Venezuela, the emergence of Lula da Silva in Brazil and more recently, the electoral triumph of Evo Morales in Bolivia. Simpson Miller's elevation to the top of the political pyramid mirrors a new development in Latin America. It is an incipient rebellion by the masses against neo-liberal economics.
After the collapse of colonialism, developing economies in the 1950s and 1960s embraced Keynesian economics as it was viewed as the ideal model to bring about development and rapid modernisation.
At the heart of Keynesian economics is the notion of state activism, and as such, governments are assigned a central role in promoting economic growth and creating employment. While this model continued to influence macro-economic policies in Latin America and the Caribbean in the 1970s, the widening gap between rich and poor countries resulted in a fundamental shift in the region's orientation towards trade. The asymmetric nature of the terms of trade between emerging economies and their developed counterparts that caused the price of imports to be high, relative to the price that developing countries get for their export, was seen as the fundamental source of underdevelopment.
Unlike the economies of South-east Asia that sought to address the adverse terms-of-trade situation through increased productivity, strategic industrialisation and export expansion, many Latin American and Caribbean countries, including Jamaica, did the opposite. Inward-looking strategies were pursued, consequently import substitution, quantitative restrictions on imports and significant increases in import tariff were introduced.
By the early 1980s, after the shock of two oil crises, it was obvious that the combination of Keynesian state activism and inward-looking strategies was a gargantuan mistake. The region as a whole faced a crushing debt problem, staggering balance of payment challenges, paralysing inflation, massive unemployment and economic stagnation.
It was at this stage that the region reluctantly renounced state activism and accepted a paradigm shift towards neo-liberal economic polices. The neo-liberal approach which was sponsored by IMF and World Bank, emphasised trade liberalisation financial liberalisation, flexible exchange rate regimes, and the privatisation of government assets. Behind the neo-liberal approach is the ideology that state expansionary strategies, more often than not, lead to inflation, the crowding-out of the private sector, economic stagnation and the creation of conditions under which corruption flourish.
Above and beyond all other mechanisms, it is free market that allows an economy to achieve its greatest potential. As such, a minimalist state that focuses on the classical role of government such as the provision of security and protection of people and property leads to the greatest good for the greatest number of people.
The introduction of neo-liberal policies has resulted in greater fiscal discipline in Latin America and the Caribbean. Budget deficits have been slashed; inflation levels are lower; net international reserves have improved. However, economic growth for the most part has been sluggish, unemployment levels although lower, still remain high, and the reduction of poverty less than impressive.
It is this reality that people at the lower strata of the society in Brazil, Venezuela, Bolivia and Jamaica have rebelled against in their choice of a political leader. Undoubtedly, this is the basis for the revolt against the neo-liberal outlook.
In all of these cases, the leader chosen is seen as a genuine representative of the people. Chavez is the general that has consistently given a voice to the disinherited masses of Venezuela. Lula is a son of Brazil's poverty-stricken north-east who worked his way up through the trade union to the centre of power. Morales, the first elected president from Bolivia's indigenous population, was once a coca farmer like many of his poor supporters. And now in Jamaica there is Simpson Miller, a woman from the bowels of the working class.
Last year, Latinobarametro, a non-profit organisation based in Chile, conducted surveys in 18 Latin American countries and the results are interesting. The three most important problems identified in order of priority were unemployment, poverty and crime. In The Gleaner poll, last Sunday, in which respondents were asked "What should be the most important priorities of Prime Minister Portia Simpson Miller and the PNP over the next three to four months?", 58 per cent cited unemployment; 42 per cent identified crime and violence; and, 13 per cent education. Here again the similarities are striking.
Certainly, for Simpson Miller, the cry of the poor cannot be ignored but the expectations are great. Grappling with the issues of unemployment, poverty and crime, is by no means an easy job. However, it would be catastrophic to abandon the neo-liberal paradigm. Not even Lulu in an economy of 186 million, roughly half of South America, could afford to do that. In fact, some of the strategies were surprisingly more 'neo-liberal' than his detractors would have imagined. In fact, after being in office for three years, he has been able to turn the current account deficit into a surplus and put the economy in a position to pay off the debt owed to the IMF.
The answer: The rebellion lies in finding a creative balance between stability and growth and it is also important that Simpson Miller avoid what Lulu himself has failed to escape the accusation of corruption.
Cedric Wilson is an economics consultant who specialises in market regulations. Send your comments to: conoswil@hotmail.com.
