Friday, September 12, 2008

Impoverishment of a nation

Last week I received emails asking that I write on the issue of the American Airlines (AA) deal. Although there is something to be said, I believe it has been debated enough and there are so many more important issues to discuss. What I have heard being discussed, however, seems very limited, and the only person I have heard who has got the arguments right, in my view, is Wilmot Perkins who said that if we neglect our infrastructure, then both AA and Air Jamaica will be flying empty as no one will want to come to Jamaica. Anyway, enough said on that.

I believe that there is a more important issue that will really affect Jamaica's long-term future. While over the years we have been arguing about Air Jamaica and other issues, what we have been doing slowly is ensuring the impoverishment of the country. For while we are distracted by these arguments, we have been pursuing policies that have created illusions of prosperity while the fabric of the country has been rotting away.

Devastated infrastructure
Nowhere is this more apparent than the devastation caused to our infrastructure by Tropical Storm Gustav. Mayor McKenzie has been addressing this as he spoke of the fragile state of our country's infrastructure, which has been caused by decades of neglect. The pictures of devastation seen on the news indicate that over the years we have failed to properly maintain our capital infrastructure, while giving the impression that we are meeting targets and performing reasonably well.

Over the years, while debating the fiscal budget, I have been constantly making the points that (1) there is nothing wrong with debt as long as the marginal revenue is greater than the marginal cost, and (2) I was always very concerned that we have been trying to meet the fiscal targets by cutting back on capital expenditure. This myopic approach to managing the budget is one reason why we are in the situation today with a very vulnerable capital infrastructure. One example of the long- term cost caused by the lack of maintenance of our capital stock is the cost to productivity of the bridge at Hope River being washed away.

So what we have been witnessing over the years is the impoverishment of the country without understanding it. Instead we have tried to give the impression that all is well and prosperity abounds, by spending money on things such as Cricket World Cup and loss-making entities such as sugar and soaring to new heights as we do so. The management of our public funds was not based on any cost-benefit analysis and what would give us the greatest return on investments. But rather what would give us the greatest "votes on investments". One blatant example of this is the continuing MOU, which instead of helping our productivity and budget, is becoming a greater burden each year.

And so our leaders have presided over the process of impoverishing Jamaica. Let us understand that countries like Haiti did not reach their pitiful state overnight. Haiti got there by a continuous process of irresponsible and corrupt spending practices that eventually gave way to an underdeveloped infrastructure, where today they face disaster each time rain falls, and with each raindrop they plunge deeper and deeper into poverty.

But it is not only our leaders who have contributed to our demise; the population must take some of the blame. The fact is that politicians play to the tune of public opinion and votes, and will do anything that pleases the people to stay in power. So even though we say that we are concerned about the future of the country, make no bones about it, we will trade our votes for J$500 and a plate of curry goat, or a tax break, even if in the long run it means the policies pursued will destroy the country.

Wasted human capital
There is no doubt in my mind that the main impediment to Jamaica's development is the high illiteracy rate of our people. The fact is that over the decades we have neglected our most valuable resource, our human capital. The recent performance by our athletes at the Beijing Olympics and past contributions of others show how much value our people can add to this country. Nothing else has added as much value to Jamaica as our people, yet over the years we have abused their rights and kept them oppressed. And then we talk about development as if it can happen without the people being at the centre.When I look, for example, at the way in which the JPS has placed the burden of an inefficient billing system on Jamaicans, and there is no swift action from the OUR, then I have to ask if as a country we are serious about development. People should not have to be wasting productive time to demonstrate, when we have a regulatory agency in place. But then again, JPS seems to have joined ranks with some of the police who drive into communities and cause pain on the people. Only they have a more efficient way of doing it, as they don't even leave their offices.

But in all seriousness, what we have been witnessing in Jamaica over the last two decades or so is nothing more than the process of impoverishment of the country. The failure to maintain our national capital stock is similar to living in a community where the houses are not maintained. What happens eventually is that the houses are run down and eventually the community becomes a slum. Similarly, because of years of neglect, our capital infrastructure is in such a state that if not addressed all Jamaica will look like a slum. No doubt the government will have to find a lot of unbudgeted funds to address this, as the long-term cost of not doing so will be greater to the country.

There are some immediate actions that can be taken to ease the pain of the journey forward. At the heart of it, however, is the need to ensure that any money spent has a higher marginal return than cost. It is obvious that the planning at the parish level has also been lacking and the question must be asked, was there any planning being done, or any action being taken, at the level of the parish council before Mayor McKenzie? It seems as if everything was just left to be run down.

So as we move forward, while we discuss issues such as the AA deal, let us understand that there are bigger issues such as the fragile state of our capital infrastructure. In the long run if we neglect our infrastructure, then both AA and Air Jamaica will be flying empty as no one will want to come here, and merely having available seats or hotel rooms is not enough to entice people to visit Jamaica.

The government is faced with the unenviable task of maintaining the fiscal target, which is critical, and also assessing our capital infrastructure and other issues. It is going to be important, therefore, now more than ever, that the return on each dollar spent, and how best it is spent, ,is examined carefully. We cannot make the mistake, like we did in the past, of consistently sinking money into unprofitable entities, hosting two-week cricket festivals (where we don't perform well anyway), or wasting money in scandals or for political reasons.

It is going to seem like a long journey to place the country back on the path of development, and will require not only correct policies but restructuring of the whole public sector. It is something we must do if we are to save this country from the path of impoverishment we have been placed on.


Jean Lowrie-Chin said...

Hi Dennis - a sobering thought-provoking article. Thank you!


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