Wilberne Persaud, Financial Gleaner Columnist
"Long run is a misleading guide to current affairs. In the long run, we are all dead." So says Maynard Keynes in his 'A Tract on Monetary Reform'.
Keynes also wrote perhaps the most insightful view of the true impact and objective of inflation created by governments as a matter of policy.
He argued that a government "can live for a long time … by printing paper money. That is to say, it can by this means secure the command over real resources - resources just as real as those obtained by taxation. The method is condemned, but its efficacy, up to a point, must be admitted. A Government can live by this means when it can live by no other. It is the form of taxation which the public finds hardest to evade and even the weakest Government can enforce, when it can enforce nothing else."
Economy could stutter
Considering the ills of fluctuating monetary value, he says an economy will stutter if money is not a stable measuring rod or is undependable.
Unemployment, the precarious life of the worker, the disappointment of expectation, the sudden loss of savings, the excessive windfalls to individuals, the speculator, the profiteer all proceed, in large measure, from the instability of what Keynes calls the standard of value - read here 'money' for what Keynes calls 'the standard of value'.
He goes on to argue that production costs are viewed as threefold: labour, enterprise, and accumulation.
But the fourth cost, risk and the reward of risk-bearing, is one of the heaviest, and perhaps the most avoidable, burdens on production.
He saw risk as one of, if not the most wasteful element in the effort to accumulate through economic production.
Keynes' tract was published in 1923 in the aftermath of the First World War, before what is normally viewed as his masterwork - the General Theory.
I refer to these insights on monetary reform not with the objective of looking at printing money and inflation, but to look at Jamaica's prospects in the long run - even though in that long run we truly will all be dead!
In economic doldrums
Why? Our country has been in the economic doldrums for considerable periods of time - we call it negative growth. I've always mused over how we use language. Do we see a tree growing negatively, shrinking in size?
Our budget process is under way.
Efforts are made to find funding for all the things a modern government ought properly to provide for sustenance of its people, to provide the short run framework within which our enterprising people, in their private efforts to make a living, can function effectively.
I am in no way suggesting by reference to Keynes' tract that our government proposes inflationary policies. Indeed it does not.
Fact is, however, inflation is upon Jamaica.
A series of events partly attendant upon globalisation, policy decisions of the only super power, the rise of China and India, climate change and drought and a host of other factors dictate that Jamaica shall face inflationary pressures it shall be unable to avoid, unable to truly mitigate.
Filling fuel tanks
Oil prices of over US$100 per barrel, 30 per cent of US corn production is geared to fill the fuel tank rather than the stomach, partial meltdown in the financial capitals of the world - all these and more developments dictate this.
The question for Jamaica is, what should guide policy with respect to the long run? Our budget guides us for merely one year.
It seems to me there is need for policy that targets the long run regardless of Keynes' oft quoted maxim.
So fuel prices increase, so too fertiliser and food. Need we go further?
Added stress
Perhaps we do because the Cash Plus collapse means added stress on people and the economy. The dilemma is that many of the policy ideas which hold promise also hold short-run difficulties. We can explore just a few to give flavour to this mix of ingredients.
Every hour in Kingston and increasingly rural parts of the island, is rush hour. The congestion of roads breeds havoc of many kinds. Yet Government relies, in some measure, on duties imported motor vehicles provide.
These vehicles use fuel. If a proper public transportation system is to be created, Government coffers will experience severe stress. Import duties will fall while infrastructure and other expenditure will climb. So can it be done? It appears to me the question is not whether it can be done, but when must it be done? And if so, how is it to be funded and how can voters be persuaded to embrace it?
Then there is the matter of food imports and farm production. Should we have to honour trade agreements which insist we do not assist our farmers in creating a bountiful harvest?
Severe disadvantage
Europe does it and so too does America - they do so for all their protestations of anti-protectionism and free enterprise. Yet we do come to this table at severe disadvantage, but is there no one willing to face the reality that the global economy cannot continue in this mode without major upheavals?
Then to our crime problem, and education, and health and so many others - many believe these problems might be more readily subject to mitigation if people were housed better, if the employable youth were able to have jobs.
The National Housing Trust presides over significant financial assets. Can these be used more effectively? Is there a more integrated approach to solution of multiple problems that present as economic, social, perhaps even cultural ones? Perhaps these issues are the centre of focus for government or strategic groups in the society. If they are, then perhaps it would help that they be shared with the rest of us.
wilbe65@yahoo.com
