In an economy such as ours with a weak productive base, one which operates on a high percentage of imports, it is ineffective and suicidal to try to use the monetarist strategy of increased interest rates to curb demand. It has never worked and never will. Because this method of curbing demand tends to strangle the economy, it should never be used when stimulating production is desired.

If it is assumed that the gap between our earning and our expenditure is due to over-consumption rather than under-production, then this wrong diagnosis will cause the wrong medicine to be prescribed, resulting in the predictable result of a deterioration rather than improvement in the economy.

High interest rate

If we start from the premise that 'capital will go where it gets the best return at the least risk', it should be very clear that high interest rates on 'no risk' investments such as government paper will serve as a disincentive for investment in production. What our economy requires now is 'production stimulation', not 'demand curbing'.

For us, a high interest rate policy is inflationary and increases the debt burden. Because the demand for energy and food results in a very high percentage of imports and is inelastic in nature, higher prices have little impact on demand. They, however, make the life of the poor more miserable.

Capital investment

We should endeavour to learn from our experience. Years of high interest rates hampered our econo-mic growth and have us drowning in debt. To attempt to revisit that policy of high-interest rates again shows that we have learnt nothing over the last 30 years. We need to invest in production not paper. We will get no increase in production if no-risk paper investments are yielding as much as or more than investment in production.

The effect of this flawed policy is manifested in the lack of capital investment in all areas of our production and the fact that foreigners find our productive enterprises attractive while Jamaican capital is used to oversubscribe government paper instruments.

If we are to work our way out of the current debt trap and this current international-economic crisis, we must significantly increase our production and productivity; resist the temptation to try and use high-interest rates as a control to dampen demand; by education and persuasion produce and eat more local food.

None of the foregoing will happen by accident. They require deliberate policy initiatives. There are opportunities in agriculture and agri-processing that we should be pursuing, but it is wishful thinking that leads nowhere to believe capital will be flowing into productive investment when the opportunity to get high returns at no risk is made available by our government.

I am, etc.,

LUCIUS C. WHITE

1 Tankerville Avenue

Kingston 6