Friday, May 20, 2016

Safeguarding our growth agenda

The Government has placed growth at the front of its priorities. Since political independence, in 1962, we have only seen growth of any significance in the period 1962 to 1972, and then about three years in the 1980s. So the focus on growth is definitely what is needed if we are to truly see Jamaica develop relative to the rest of the world.

In order for growth to occur in any sustainable manner, however, there are some fundamental things that must first happen. The most important thing to consider is that “sustainable growth” can only occur in an environment that enables its occurrence. This is no different from the need to create an environment that encourages productivity in a single organisation, or even in a business sector.

So, as an example, if someone is learning how to swim they must have a body of water (such as a pool), proper swimwear and, very importantly, a teacher who is capable of teaching someone how to swim — and more importantly can themselves swim.

So growth can only happen in an environment that encourages capital investment, greater productivity, and where people feel incentivised to work. This is the challenge that we have and continue to have. I don’t think that most of our politicians see the long-term link between the need to improve productivity and work ethic, for example, and sustainable growth. For this reason our State has, over many years, encouraged welfare politics and income redistribution rather than productivity improvement and rewards based on productivity.

The result of this welfare politics is squatter settlements and falling labour productivity, because in order to “get ahead in life”, all you have to do is align yourself closely with a political party and ensure they get in power. This type of thinking has led us to develop labour laws that ensure that unproductive labour is rewarded, which results in the long term with many people being contracted without any permanent employment benefits. This in turn creates lower fiscal revenues for the Government and erodes workers benefits into the future.

When I started writing in newspapers in 2003, I thought to myself that surely Jamaica has the potential to be a high growth rate country and see significant development. This, I thought, was where we were destined to be because of our geographic location, language advantage, tourism competitiveness, music and sports competitiveness, etc.

One of my objectives was to see if I could assist to improve the conversation around development and by doing so help Jamaica to achieve economic success, within a 10- to 15-year time span.

One of my main motivations in 2003 was to see Jamaica become a place where my son would grow up and want to live in. At the time he was nine, and I thought that if as a country we did what was necessary, we could have seen Jamaica truly become the place of choice to live, raise families, and do business, as pronounced in Vision 2030. As a result, I also sat on one of the Vision 2030 sector committees.

This obviously didn’t work out as 16 years later we are still grappling with low growth, low productivity, and social issues. Although in the last two to three years we have made some progress in putting a framework in place to address our economic issues, our social and legislative challenges still remain an issue.

This came home to me even more when last weekend I attended my son’s graduation, where he did a bachelor’s degree in actuarial science, and he said to me that even though he would love to come back to Jamaica to live, he would not because it was too disorderly and had too much crime.

He also went on to say that, in his view, Jamaica would be the best place to live if we could control the crime and bring order to the society. I couldn’t argue with him when he said that, and I thought to myself that Jamaica has once again lost another mind that could help us to develop. And this scenario has played out many times over.

This conversation took place in Des Moines, Iowa, which is the same place the two US missionaries that were murdered in St Mary are from. Sitting down to dinner with two residents there, they brought up the matter and said that they were both very popular in Des Moines, and because of it Jamaica had developed a very bad reputation there and many missionaries who were thinking of coming decided not to.

Jamaica has always had the potential to develop into a First-World country, where our people would prosper and we would not be seen as persons of interest for security personnel in other countries. In other words, we could have easily avoided the label of being “extraordinarily violent”.

The problem we have is that we continue to cause our own demise by our failure to do what is necessary from a governance framework to provide an enabling environment for proper economic and social development, and safeguard the growth agenda we speak about so often but fail to realise.

What we must recognise, though, is that creating this environment is not going to come from the continuation of our welfare politics, or biasing our conversations depending on which political party forms Government. For example, I see on social media all the time where some people argue two different ways before and after the election, on the same point.

Safeguarding our growth agenda means that as a people we must change the conversation and we need to start looking at capital as positive for development, rather than with the suspicion we have always treated it and tax it before it starts working.

We have to create an environment of trust, which means that the security forces and government bureaucracy must respect the citizen and not make it hard for them to live and do business.

We have to bring order to the society, which means harsh penalties for those who dispose of waste illegally or who violate the Noise Abatement Act or who break the Road Code.

Until we bring this sort of order to our country, then someone else will lament the fact that their son or daughter chooses not to return to work and live.

Friday, May 06, 2016

A long-term solution to crime needed

According to the World Economic Forum’s 2015-16 Global Competitiveness Report, crime and theft are the second most problematic factors to doing business in Jamaica, accounting for 16 per cent of the challenges. This is only outdone by inefficient government bureaucracy at 16.4 per cent.

Recently we have seen an upsurge in horrific crimes, including multiple killings. These include the following murders: a three-year-old killed by her father, a policewoman shot at a bus stop, and two US missionaries killed by persons unknown. These incidents have renewed calls for severe punishment for the perpetrators. The case of the US missionaries has understandably caused international press coverage, which can result in a negative economic impact if not managed properly.

There have also been renewed calls for hanging by the Security Minister and others. All this comes at a time when we are fighting for the freer movement of Jamaicans within Caricom. The government has also placed responsibility for reducing the crime rate on the shoulders of Police Commissioner Carl Williams.

In my view, the fundamental issues that have created the crime monster will not be addressed by either the resumption of hanging or by saddling the Commissioner with the superhuman task of reducing the crime rate. Hanging can only be a deterrent if we are able to catch the criminals. Even then it is not a solution if a trial takes years to complete, and then through the lengthy appeal process hanging might be in breach of the Pratt and Morgan rules.

It is also impractical to place the responsibility for reducing crime at the feet of the police, as in most cases all they can do is react to the crime after it is committed. I say this because an assessment of the crime statistics reveals that many killings are domestic, with gang murders in second place. We have discussed many times that the real challenges with crime in general and murder in particular have less to do with policing and more to do with the environment.

In 2015, for example, I am told that the police solved 600 murders committed by more than 700 people, which is a significant number of murders to solve. This has been achieved despite being hampered by inadequate resources and operating in a challenging working environment, both in the office and on the streets.

How can the police prevent domestic crimes, if they are defined as mainly crimes of passion, and not premeditated – which means they occur in the heat of the moment? All the police can do is react.

How do the police eliminate gang murders when the society and communities are actually creating more and more people who are likely to fall into crime every day? As an example, one of the challenges with crime in St James is the number of squatter settlements that have mushroomed. So because the communities are not properly organised, they are very difficult to police, and the conditions the people live in do not encourage civil behaviour.

Although short-term fixes must be found to relieve the increasing crime situation, the fact is that a sustained reduction in crime needs a much more detailed assessment. In my view, the first thing we must do is understand what are the causes of crime, and many of these causal factors occur years before the crime actually occurs. For example, people who commit murder today may have been victims of child abuse who saw one or both parents murdered years earlier, or who grew up without any parental control over what movies or music they were exposed to.

The fact is that our crime situation today has resulted from policy missteps over the years. In short, we have continued to create an environment which encourages criminal activity. This is no different from children growing up in a household where there are no rules, and they can do and get away with anything they want. So if children have grown up in an unstructured environment, don’t expect that when they get to 18 they will adhere to the rules of society or their workplace.

Similarly, Jamaica continues to facilitate an environment of indiscipline on the roads (taxis and buses drive how they want); night noise from dances throughout the night (in contravention of the Noise Abatement Act); blaring music that promotes violence and abuse of women; illegal squatting and violation of the zoning laws; illegal vending; violation of environmental standards; and abuse of children and the elderly.

This undisciplined environment is supported by a very slow justice system and a grossly under-resourced police force that is fighting corruption within its own ranks. Add to that a less-than-adequate education system and a high incidence of children not attending school.

So in fact, crime is supported by the ways we have chosen to organise ourselves. We have had many spontaneous reactions to crime over the years – special police task forces such as ACID and Kingfish; curfews; Suppression of Crime Act; Gun Court; and in 2010 – the Tivoli incursion. All this has not resulted in reduced levels of crime, but rather an increasing distrust between the authorities and the Jamaican people, as evidenced by the LAPOP report over the years.

If we are serious about making Jamaica a safe place, then we must realise that crime can only be solved by creating a society of order and respect for the average citizen. We must stop fertilising the crime tree.

Until we choose to do so, we will continue to react to an ever-increasing problem (at best we might have a short-term reprieve). The security forces will find it more and more difficult to cope, and we as Jamaicans will continue to suffer.

We must create opportunities for all Jamaicans and ensure that our children are protected and not subject to conditions that breed criminal behaviour. We must use technology such as CCTV and properly resource the police force. We must ensure that legislation such as the new Road Traffic Act is enacted in short order, just as we do with tax legislation.

Only then can we say that Jamaica will be the choice of place to live, raise families, work, and do business.

Wednesday, May 04, 2016

That Caricom issue: Jamaica -Trinidad relationship

The recent impasse between Jamaica and Trinidad, arising out of the latest round of Jamaicans being not only denied entry to Trinidad but being detained in less than acceptable circumstances, has once again raised the question of the purpose of Caricom, and more specifically the CSME.

This is only the last of many incidents that have grabbed the attention of the region on this matter. The tension began in 1961, when Jamaica held a referendum which saw us withdrawing from the West Indies Federation. At that time the then Trinidad Prime Minster Dr Eric Williams appropriately said that “one from 10 leaves zero”, referring to the fact that without Jamaica the Federation would be virtually non-existent.

Since then we have been unable to see the free movement of goods and people within the region, and examples of these include:

(1) the challenges involved with exporting Jamaican products to Trinidad and Belize, especially patties;

(2) previous instances of Jamaicans being refused entry into Trinidad (I remember last year the Institute of Chartered Accountants of Jamaica sought reassurance from Trinidad that our delegates attending the Caribbean Conference would not have any difficulty with immigration because of a prior incident); and

(3) the landmark ruling coming out of the Shanique Myrie case.

In the case of the movement of goods in particular, my own view is that Caricom and the Council of Trade and Economic Development have proven to be very ineffective in addressing this issue. Countries have made commitments at the highest level that the non-tariff restrictions would be addressed, but years later the problems remain – in particular, the case of the restriction by Belize.

This recent impasse between Jamaica and Trinidad is the latest in a long line of events demonstrating the ineffectiveness of Caricom, and more specifically the failure of our governments to rectify this situation. It reflects a serious lack of leadership in the region. I am left to wonder why we are unable to resolve a matter as important as this, yet we find time to proffer solutions to problems affecting West Indies cricket; but such is the irony of our regional politics.

Once again, though, we need to question the relevance of Caricom. The recurrence of these situations creates divisiveness and drains our energy, because the failure of governments to find a sustainable solution always carries us back to the same unfortunate position.

Nonetheless, I am heartened by the stance taken by Prime Minister Andrew Holness and Foreign Minister Kamina Johnson Smith, and former Minister Anthony Hylton, as they have all stated a commitment to take firm action on this. Hylton at the time had in fact overseen rulings against Trinidadian petroleum products for rules of origin breaches under the Treaty of Chaguaramas.

Outside of these three, however, I think the other responsible people have proven to be ineffective and seem to always be seeking quiet diplomacy, while Jamaica and other countries of the region suffer. In fact, one could say that it is the failure of strong leadership on this matter that has seen the persistent failures of Caricom and our inability to move towards a true CSME.

On this recent impasse, however, I appeal to Jamaicans not to get emotional and respond like the former Trinidad National Security Minister, and also the “Donald Trump” surrogate Trinidadian talk show host. As a people we must remain above those types of responses, and understand that there are many Trinidadians who are decent people.

So we should continue to conduct business with Trinidad wherever possible, because it makes us better off financially. That is the only reason for market trade, so let us avoid emotional reactions.

I, for example, will not stop buying Trinidadian goods just because of this issue, but I have always looked for Jamaican goods over any other import, as long as they are equal in value (quality to price). This is because as a Jamaican my preference should always be for Jamaican goods, but certainly not at all costs to me personally. I therefore encourage Jamaicans to always purchase Jamaican goods over imports where they are available and of similar value.


However, while we consider the comparison of products and services, we must also be mindful of the policy restrictions that create unfair competition.

Trinidad (through its finance minister) has admitted to providing a subsidy on fuel. Based on our own research (at the PSOJ) this subsidy is more than just on petrol, and extends to manufacturers.

I won’t go into detail here, but suffice it to say that this is in contravention of several parts of the treaty. So while we have enforced a policy (CET under the Treaty) to promote the CSME, we must also recognise where policies are failing us because of contraventions, and must act decisively to address that.

This is where the Jamaican government has failed us, because much of this has been suspected for a while, and brought to their attention, and they have failed to protect the Jamaican people. In fact the PSOJ estimates that over the 10 years to 2014, we have paid out approximately US$700 million we wouldn’t have had to pay if there was no CET on fuel because of the premium charged by Trinidad on account of the CET.

This would be enough to fund the sugar industry every year, and hence create jobs in Jamaica as opposed to supporting the subsidy in Trinidad.

So my appeal to Jamaicans is this: Don’t let one or two wayward voices in Trinidad cause us to view everyone in Trinidad with disfavour. And don’t let the ineffectiveness of the current Trinidad Government to address this issue, or the past ineffectiveness of the Jamaican government, play a role in how we feel. What we must do is demand action by the governments to either solve this Caricom fa├žade, and make it a true CSME, or stop fooling ourselves about it. What we must do is act and stop “posing”.

Caricom has a role to play in our regional development. But it is our failure to treat Caricom properly that has resulted in the many breaches – and not only the failure of Caricom, but the poor economic performance of the region.

Friday, April 15, 2016

What should be the real purpose of growth and development?

Last year I had set a goal to ride 7,500 miles on the bicycle, which I achieved. Discussing it with another cyclist, I was asked if that was my ultimate objective and if I would be increasing it this year (2016), to which my response was no because the real purpose of the goal was not to just ride 7500 miles for the year, but rather that was an initiative to achieve the greater goal, which was good health and to perform better on the bicycle.

Also, just recently, I posted that the philosophy that was adopted by the previous NSWMA board was good customer service and good corporate governance. This in itself is not the ultimate objective of the NSWMA, but what it does is guide the development of the initiatives needed to achieve the ultimate goal.

These two examples show that in order to achieve any ultimate objective, we must have carefully designed initiatives and a guiding philosophy.

So even though the initiatives and philosophy have been identified and are both critical to attaining the objective, the fact is that if you were just told the initiatives and philosophy guiding the initiatives, they would both be meaningless unless we are aware of what the ultimate objective is.

However, if we were to know what the ultimate objective is, then we could easily identify a philosophical framework and the supporting initiatives without being told.

So if I told you the ultimate objective of the NSWMA (as defined by section 4 of the NSWMA Act) is responsibility for the proper management and disposal of waste, then you could say to me that in order to achieve that I would need to have a guiding philosophy of customer service and governance. At that point I could then say, well, if I want to achieve that then I must look at the major risks to achieving that and then create my initiatives by order of priority.

This is the approach that the previous NSWMA board took, as the first thing the board did was to go to the NSWMA Act and ask what is our ultimate responsibility. That was able to guide our philosophy and coming out of that analysis we were able to identify Riverton and garbage collection as main risk areas and tackle those early.

For the past 43 years, Jamaica has been trying to achieve growth and development. We have heard many people talk about the need to grow the economy, and identify specific sectors — need for macroeconomic stability; need to reduce the debt to GDP ratio and reduce the fiscal deficit; and how critical it is to pass the IMF tests inter alia.

Vision 2030

It wasn’t, however, until Vision 2030 was developed and launched in December 2013, that we sort of created a guiding philosophy for our development. It was then that we finally decided that what we wanted for our development was to become “the place of choice to live, work, raise families, and do business”.

Until then Jamaica had no guiding philosophy for our development. Sure we knew that we wanted economic growth. We knew that we wanted to develop the country’s infrastructure. We knew that we wanted to reduce crime and indiscipline. We knew that we wanted to eradicate poverty. But to what end? And the fact is that if you don’t know where you are going, then you can take any road and you will get there.

But even though this philosophy (which I think is an excellent one) was developed, the truth is that it really has not been taken seriously by successive administrations, and seems to have remained an academic task with no desire for implementation. So there are a few persons monitoring Vision 2030, but the needed initiatives have not been tied in to the action by the country’s “board of directors”, which is the Cabinet.

So imagine if the NSWMA management identified a philosophy for the organisation, but it was not accepted by the board. Could it be achieved?

Last Tuesday, I accepted an invitation to interview some young people from a low-income community, in an attempt to identify what their skill sets and needs are. I thought it was important, even though I had a really hectic day, because I believe our young people need serious nurturing and guidance. I was happy to see that several professionals were there, and it was more encouraging because it took place at 7:00 pm.


But while speaking to some of these young people, just out of school, I was very disheartened. These youngsters were very ambitious and creative, but had a poor family background, had been abused, had produced children early, or had to drop out of school because they had no financial support.

One young lady of 18 was trying to make life better for herself, and wanted to go back to school, but had to drop out at 13 when her mother died and her grandmother could not afford to send her and two younger siblings to school. So she had to start hustling to help them. Immediately I thought to myself, what type of future does she have? Fortunately, she had no children and I pleaded with her not to do so until she was financially independent.

There were many stories similar to this, and it was obvious that they were very willing to improve themselves and at a time when they should have been enjoying their childhood but could not do so. I will definitely participate again.

This led me to think that even though we are talking about passing IMF tests, and nice terms like macroeconomic stability, the fact is that there is a significant part of our population that is just concerned about what they will eat tomorrow. Hence the disengagement we saw in the election turnout.

The fact is that our governance and philosophy is totally disconnected from what the ultimate objective of development should be – to improve the general standard of living for Jamaicans and ensure that all Jamaicans have an equal opportunity at success.

That is what governance should be about. Instead we focus on initiatives, and because we have not been able to define anything but initiatives we have not been able to see any meaningful development.

In other words, our leaders need to go back to basics and understand that the real purpose of growth and development should be about enhancing the lives and opportunities for the people. This is why the US has been so successful as a country, because their ultimate objective is improving the lives of US citizens, guided by the philosophy of government by the people and for the people.

Friday, April 01, 2016

Why should we buy Jamaican?

As we pursue our eternal search for economic development, one focus has been on the need for us to purchase local goods and services in preference to imports. The reasoning behind this seems logical, as it should mean that the balance of payments should improve, and this should mean a stable exchange rate and employment for more Jamaicans.

As a result, there have been many calls for us to ‘Buy Jamaican’. Former senator Norman Grant has been at the helm of this initiative, which, in my view, has reaped much success. Even with this successful campaign, however, we have continued to see currency depreciation, high inflation and interest rates, and increased unemployment over the period. So the question is, why wouldn’t things improve if we had such a successful ‘Buy Jamaican’ campaign?

There are a few reasons for this, and it underlines the fact that simply saying we should ‘Buy Jamaican’ will not improve our economic fortunes.

So while the campaign was very good and necessary, the truth is that we never really supported it with policies that would sustain a move towards consuming more Jamaican-made products and services. In addition to lack of policy stimulus, many local producers have not improved the service and product quality to properly compete with imported products.

The first thing to note is that it is a futile exercise to be pushing a ‘Buy Jamaican’ campaign when we are unable to significantly increase the production of Jamaican goods and services. So what we have failed to do as a country is ensure that appropriate policies address this failing. To do so all we had to do was ask the question – what is it that prevents capital from making long-term investments in locally produced goods and services? In other words, does capital feel comfortable investing for the very long term in sustainable production, and – importantly – locating their facilities in Jamaica?

The answer to this is that government policy has never effectively addressed the issue of being more attractive to capital than our competitors. Sure we have done it by creating special incentives for industries such as tourism, bauxite, free zones, etc. But the fact is that government’s attitude to capital generally has been very wanting.

As an example, tax policy in Jamaica has always pinpointed increasing fiscal revenue as its primary purpose. Never mind that it ends up killing incentives for capital and businesses generally. In contrast, countries like Panama have a direct policy of focusing on attracting capital, and as a result they have consistently grown at 6.0 per cent to 8.0 per cent per annum.

Government policy in Jamaica has always created a hostile environment to capital, and then created special carve-outs for foreign direct investments. Small wonder then that local investors are reluctant to risk their savings and pensions in business ideas.

The fact is that if government policy was focused on addressing the four most problematic factors in the 2016 Doing Business Report: inefficient government bureaucracy, crime and theft, tax rates, and corruption — then not only would we solve 54 per cent of our business challenges, but we would also see increased capital inflows and employment. Instead we have struggled for years to implement a computerised tracking system for development approvals, and then we wonder why growth remains anaemic.

Secondly, many of the Jamaican products and services produced are not able to compete in terms of quality and price.

Price in many instances is again affected by government policy, which seeks to extract as much revenue as possible without much concern for the survival of businesses and their ability to compete. But there are also quality issues with some of the goods and services produced. As an example, last year I took my daughter to the Easter Funfest at Hope Gardens, and it was a great event for children. I got there very early and she was almost alone on the rides so it was good.

This year I went early with her, only to be greeted by blaring music, with speaker boxes lining the route to the rides. The music was so loud that my daughter started crying and wanted to leave, and it was equally unbearable for me and some of the staff. Later I got a video of them having a stage show there with children dancing on the stage to a large audience of cheering adults.

A significant deterioration over last year.

This is a similar story for many Jamaican products and services. They start out well and end up being uncompetitive. This is okay in a competitive market, but the problem is that this mediocrity is supported somewhat by government policy, which in many respects creates significant barriers to entry. The result is that the invisible hand of a competitive market does not get to work properly. For example, something as simple as not enforcing zoning laws allows some businesses protection by allowing them an unfair advantage from a cost point of view. The result is mediocrity.

Other inhibitors are lack of information and inability to move goods effectively. Just look at the deplorable state of most farm roads.

The point is that we should not ‘Buy Jamaican’ just because it is a Jamaican product or service. But rather we should ‘Buy Jamaican’ because it is just as good or better than the imported products.

It is only when we can produce competitively that we will see improved growth and employment. This is because buying an inferior product actually does have economic costs: (i) higher cost of living, (ii) lower productivity and hence lower wages, and (iii) decreased potential for foreign exchange earnings.

At best then, producing inferior products and services will produce a more closed economy which becomes more uncompetitive and produces lower income levels, as happens in Cuba.

If we are to grow the economy at acceptable levels, then we must increase the number of Jamaican products and services. This, however, must be done competitively if we are to benefit.

Friday, March 18, 2016

Jamaica’s road to prosperity — Part 2

In order to secure power (spillover from the colonial system), both political parties when they formed government set about creating institutional loyalties, using the state bodies and security forces to cement their hold on power and share spoils amongst supporters. This resulted in an inefficient bureaucracy (based on political loyalty, rather than ability, for board appointments, as an example) and dysfunctional state mechanisms that excluded those supporting the opposition, instead of including all citizens.

I could go on and develop this, but suffice it to say that Jamaica’s political arrangements have resulted in a state of affairs where most of the citizens have either been excluded from participating in any “prosperity” because (1) people were given special economic privileges based on party affiliation and not market opportunity; (2) the masses suffered from declining values and poor educational and health access because of inefficiency and poor governance; and (3) our political system created garrisons that focused on furthering political division.

Therefore if we are to move towards “prosperity” for all, we must find a way of firstly continuing the current fiscal and legislative reform programme, in order to create the foundation for development.

In other words, no development can happen with a debt-burdened society and poor legislative infrastructure. Secondly, we must create an environment that encourages capital to invest and by doing so provide employment and entrepreneurial activities. Thirdly, we must then create a policy and political environment which includes everyone (irrespective of political preferences) and which builds on the natural talent of all and not just some.

If we can achieve these three goals, then we can create prosperity for all, as we will then be able to create value at the individual level.

The problem with where we currently are in the ERP is that it has never seriously considered the third objective up to this time, and hence people were not feeling the improvements on the ground.

Of course, there are the usual policy actions that need to be taken, and these include a modern legislative framework, and other policies to enable a competitive and business-friendly environment. I have been emphasising that all we need to do is create policies that speak to the top four problematic factors in the World Bank’s Doing Business Report, which are Inefficient Government Bureaucracy, Tax Rates (uncompetitive tax environment), Crime and Theft (lack of law and order), and Corruption. These four account for 54 per cent of the challenges perceived to doing business in Jamaica. So if we were to just focus on these four areas alone, then we would have gone a far way in enhancing the business climate.

Fixing these alone, however, will only solve the layer of creating an enabling business environment and generating country-level growth. But to get to the desired levels of “prosperity” for all, what is needed is to create an environment of inclusion for all. Of course, this means breaking down the institutional barriers to inclusion. Very importantly, the existing political and economic structures will have to give up some power over their respective territories.

This, of course, will require strong, sincere, and forward-looking leadership.

To the credit of the politicians, and also business people, they have been giving up some of that power and this is why Jamaica is making some progress under the ERP.

This is very important to understand, because no reform programme can work sustainably if institutional arrangements continue to strangle any progress made, which is why we have had to go through so many IMF agreements and reform programmes without any success. The fact is that as soon as we start to see some progress and the squeeze starts to threaten the political process, then the institutions usually reverse any improvements and maintain the stranglehold, through debt, as an example.

Since I wrote the book in 2009, however, I think much of that institutional stranglehold has been released and there has been more citizenry inclusion in the political process. So things like the Charter of Rights, INDECOM, Fiscal Rule legislation, Political Ombudsman, Public Defender, etc. have all been incremental steps towards greater citizenry inclusion.

I am also reminded that the current Electoral Commission started out as the Electoral Advisory Board and is a shining example today of citizenry inclusion.

This progress has come as a result of our much regarded press freedom, which has encouraged more radio and television stations and with it a voice given to Jamaicans. It has also resulted in a very active civil society and private sector, all of which have forced the Parliament to bring about incremental changes that have resulted in greater participation.

The problem we have, though, is that while we have progressed significantly in terms of social inclusion, we have made little progress in terms of economic inclusion. This is evidenced by the fact that a significant number of Jamaicans still remain below the poverty line and more importantly, we have not seen any relative improvements in our middle-class structure when compared to other countries. Everyone knows that in order for countries to do well, and for shared prosperity, there must be a growing middle class. Because what it means is that there are greater opportunities for all.

The challenge for the new government in moving towards prosperity, therefore, will be how we achieve economic inclusion. One thing is certain: it can only be done by breaking down institutional barriers. So, for example, we must create educational and health opportunities but in a fiscally responsible way, as we cannot achieve individual prosperity without country growth, and that can only be done with a stable fiscal, legislative, and macroeconomic environment).

We must also find a way of breaking down the invisible, but divisive barriers of garrisons. We must find a way to create a safe environment for all, where the security forces are seen as protectors of the people.

We must find a way to make government service delivery efficient and focused on providing quality service.

We must find a way of creating a low tax environment where people see maximum returns from their efforts.

If these can be done, then we will truly be on the path to “prosperity” for all.

Friday, March 11, 2016

Jamaica's road to prosperity - part 1

The JLP’s slogan, “Poverty to Prosperity”, was very catchy and seemed to have been embraced by enough people for them to win the elections. Now that the election is over, we certainly as a country must turn our attention to moving towards prosperity.

The first thing we must clearly understand is what true prosperity is, as many people, even in their personal lives, do not truly understand the concept of prosperity and how to achieve it. And even at a national level you could say that we have never understood what prosperity is, as we have never been able to achieve it since independence in 1962.

Many people get confused and think that prosperity is borrowing money to buy the latest luxury car, when you don’t own a house or can’t afford to do things you want to do because you are hamstrung by a loan. Or even worse, cannot afford to miss one month’s salary or else all financial hell breaks loose.

Similarly Jamaica gives the impression of prosperity to many who visit and see the cars etc, and can’t believe that this is a country that is burdened by debt that has reached as high as 150 per cent of GDP in recent years and 212 per cent in 1984.

So maybe the first thing that we need to do is understand what prosperity means. Because prosperity is not driving the latest model car, while not being able to feed yourself properly. And it is not borrowing money to pay people more, or provide welfare, as Jamaica has done in the past.

Also the socialist experiments, which came to an end with Russia and China effectively accepting market economies, showed us that redistribution of income from one set of people to the next does not mean long-term prosperity if there is no increase in productivity. Our own social experiment in the 1970s demonstrated to us that a country cannot be prosperous without capital, when for example there was migration of capital from Jamaica.

The fact is that prosperity for a country only comes about when there is sustained economic and social development. And this can only happen when real GDP grows consistently at above average levels, and when there is social inclusion. And at the individual level, prosperity can only come when you are yourself more productive and can increase your earnings based on that productivity.

So a country’s prosperity comes when greater value is created either through increasing the capital investments in a country, or by improving the return on the current investments. In other words, producing more value through goods or services.

At the same time a country can be prosperous, but a large majority of the citizens are not. In other words, prosperity for a country does not automatically translate into prosperity for the population. If we look at countries such as those in the Middle East, for example, where the countries earn a lot of money from oil, there is still only a small set of persons who really experience prosperity. So the challenge that Jamaica’s government will have, to realise prosperity, is not only to grow the economy, but also to find a way to push that prosperity down to all Jamaicans.

And as indicated above, the only way for this to happen sustainably is to find a way for these people to improve their productivity and value creation. It certainly cannot be done by moving money from one place to another, by borrowing, by increasing taxes, or by ignoring capital spending in favour of recurrent expenditure. All these things we have consistently tried in the past, but they have not worked.

The recent economic reform programme (ERP) has also generated much debate, with some saying that it has not improved the lives of most citizens, and in fact has caused more pain. Although this is a very true statement, the ERP should not be blamed for this, as it has been constantly said, and is true, that the ERP is necessary but far from sufficient to bring about prosperity. What it does, however, is lay the foundation for prosperity. So, for example, you cannot eat dirt, but dirt is necessary for a tree to grow and bear fruit. If you get rid of the dirt then there will be no fruit, and similarly if you do not do the necessary fiscal and legislative adjustments there can be no sustained growth and prosperity.

The challenge is this: How do you first of all create sustained economic and social development, and then translate that country-level development into as much widespread individual development as possible? Because irrespective of what you do, there are going to be some people who will not benefit. The role of governance, however, should not be to see that everyone benefits, even if they don’t deserve to, but rather to create an environment where everyone has the opportunity to be the best they can be. This is true whether you run an organisation or a country.

This comes down of course to the problem of politics. In 2009, I wrote the book Charting Jamaica’s Economic and Social Development: a much needed paradigm shift. The book looked at our economic development since 1962, as I sought to answer why Jamaica has not done better economically and socially, and what needed to be done to get us to the elusive “prosperity” goal.

I concluded (which was not the intention) that the problem with our economics and society is our politics. Our political system, and the way we practise it, pulls the life out of our economy and society and does nothing more than create a welfare economy where the ruling party controls the resources to the exclusion of half of the country at any one time (remember the statement “[Jamaica’s] politics is about who gets what…). So at best we have half of our resources pulling in one direction and half in the other direction.

I recently began reading another book, which supports the conclusion I arrived at in my own book. The book is called Why Nations Fail and is a book I recommend to all politicians, and those interested in understanding the difference between rich and poor nations. In fact I was in Guyana recently and mentioned the book to their Minister of Energy (who was on a panel discussion) and he indicated that he was currently reading the same book.

What the book says is basically that our political systems, and how we practise our politics, is ultimately what determines why one country is rich and another is poor, which supports my own conclusion about Jamaica’s development since 1962.

The fact is that politics determines inclusion or exclusion (as said in Why Nations Fail), and pursuing a path of inclusion or exclusion determines whether or not we achieve long-term prosperity. Since 1962 (and before, but my concern is with our own governance) we have pursued a politics of exclusion by virtue of our political arrangements.

This politics of exclusion got even more aggressive in the 1970s, having its roots in the 1960s, when Jamaica and Jamaicans started to be divided along political lines, culminating in the democratic socialist ideals of the PNP in the 1970s, versus the market doctrine of the JLP.