Friday, July 20, 2007

Growth versus development

Two sayings that apply to Jamaica are 'If you don't know where you are going then any road will take you there' and 'If you do the same thing every day then you will always get the same results'.

Quite frankly, if you do not have an objective in mind and just keep going with the wind, then you don't have to know which road to take, and if you are happy with the results you are getting then there is no need to change your actions. If, however, as in Jamaica's case, you want to get to developed country status in 25 to 30 years, then it is necessary that you 'change course'. No pun intended.

Another question the young people are asking though is who is going to change the course, as illustrated by their dissatisfaction with both political parties not focusing on issues, but carrying on the same politics we developed in the dark ages of the 1938 riots.

Same cry
Is it any wonder then that if we continue to practise the same politics that we have always done, we will get nothing more than the same political campaigns and promises that are never usually fulfilled? But as I said to someone recently 'a promise is a comfort to a fool', and no doubt we have been repeat fools for believing the same promises every five or so years. But such is the literacy level of Jamaicans that we continue to be impressed by whoever speaks or looks good and then bawl out about hard times for the ensuing five years until 'feel good' time comes around again, and like fish to bait we are sucked in once again.

The so-called intelligentsia amongst us are not excepted, as their strategies for Jamaica's success flutter like a weathervane with the direction of the wind. One day they profess that Strategy A will work and when it does not, 'no problem', we just shift to Strategy B. In the meantime, of course, Jamaicans have gone deeper into debt and the masses continue to be content with the illiteracy into which they have been from the days of slavery until now.

This sort of behaviour is to be expected from those who have not had the benefit of a proper education, but when I hear people continually professing economic growth as the messiah for the Jamaican economy, year after year, I wonder if we have really grasped the problem Jamaica faces. And even though economic growth should not be difficult to achieve, it continues to elude us.

My point though is that growth is not necessarily the same thing as development, which is what Jamaica needs. It logically follows, by definition, that if we are to achieve developed country status then what is needed is development. Economic development is not the same as economic growth, and it seems to me that one of the issues we have is that we have always been satisfied with growth, when growth can be destructive to the economy. Although, if targeted properly, it can lead to development.

I say this because GDP growth focuses not on development, but rather just measuring the value of the domestically produced services and goods in an economy and comparing it against a previous period. So if last year the constant value of all goods and services produced was $100 and this year it is $102, then we have 2 per cent growth. On the face of it, this looks fine until we dig into the numbers. When we look at the January to March 2007 quarter we see that GDP grew by two per cent. Construction and installation grew by a whopping 7 per cent, Electricity and Water by 4.7 per cent, and Real Estate and Business Services by 2.4 per cent. This sounds great, as it must mean that economic activity is taking place and things must be good. The truth is that we have always seen good growth in these areas.

Growth paradox
Why then, if we are showing growth, irrespective of how minute most of the times, are we still seeing a declining dollar, galloping debt, large fiscal deficits, inflation concerns sometimes, shortages in hospital inventories, frequent industrial unrest, and people not being able to afford hospital or school fees? Not to mention the frequent power cuts that disrupt our productive base. Isn't it supposed to be consistent with the concept of growth that instead of the challenges increasing each year, people should be seeing their lives improve?

The fact is that growth is not necessarily consistent with development. The areas of significant growth pointed out above are all areas of consumption that have a high import content. When you look at the same quarter numbers, you will see the sectors that have the best potential for exports - Agriculture grew at four per cent, but all the others had dismal performances - Mining and Quarrying at 0.8 pe rcent; Manufacturing at 0.2%; and Miscellaneous Service (includes Tourism) at -0.1 per cent. It is for this reason that while we have been boasting of increased exports, we are still seeing an increasing trade deficit, which is at the heart of wealth creation. In other words, this is the measure of how much Jamaica earns versus how much it spends and is the measure that affects devaluation.

So it seems that increasing exports is bad for us. The problem, of course, is that the infrastructural support for development is not there. If we want growth, we can easily achieve it by importing more than we did the year before and by borrowing money to increase salaries to increase spending power. We will not have development, but will have phenomenal growth.
It is apparent then that the emphasis must be on the things that lead to development, because if we put that infrastructure in place then development will happen. It is obvious that one of the reasons for our economic situation is because our focus has been wrong. Even after the 2.5 per cent growth we had last year, we still have a justice system that seems to wait until enough time has passed for the complainant to die or forget about the case before it comes to trial. We still have citizens complaining about police brutality with regularity. We still have a government bureaucracy that is hostile to businesses. We still have high levels of indiscipline on the roads. We still have high crime levels, including in schools. We still have roads that simulate earthquakes when one is driving.

If we are to achieve developed country status in 25 to 30 years then it is not only important that we grow at six or seven per cent, but we must address the institutions necessary for a developed society. We need an independent and corruption-free police force. We need an efficient justice system, including proper accommodations. We need to make quality education and health available to our citizens. We need to ensure that citizens' rights are protected. We need to grow local businesses instead of constantly looking for overseas investors. This is what development is about, not just increasing the value of goods or services, especially when the import content is so high.

These are the issues that persons want to hear about on the campaign trail. These issues are the ones to be discussed in the context of globalisation that will eventually leave us behind if we do not properly discuss and act. But if the objective is not about development, but just to increase the value of goods and services produced, then we are on the right track.


Jamaican Girl said...

DC, just saw your comment on a blog I totally forgot I had! I am sure by now you realise that I have my other blog at Wordpress that I work on daily, as you have "blogrolled" me. I encourage all well thinking Jamaicans to read your articles weekly. In fact I look forward to reading the blog more than the Gleaner (you write in the Gleaner right?) I will continue to blogroll you and post your article links. You always say the right things...the things I would like to say but too hot-tempered to be so calm and rational:) Take care and keep on blogging! I am actually a postgraduate student at UWI doing my MSc in Sociology of let me tell you off the bat...I don't beleive in the "trickle down" theory which basically posits that once the economy grows then all is well....

Anonymous said...

Good writing as always Dennis. In my opinion, until Jamaicans comes to grips on how public policies affect their personal lives, they will continue to be fooled by the same promises every five years. The fact is that what is free is not always good for them. I like your explanation on the differnce between economic growth and development....indeed it is very accurate. Keep up the good works. Recently I have been asking myself, which political party in Jamaica represents conservative economic policies as there is no clear ideological difference between the PNP and JLP.

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