Friday, December 30, 2011

What is necessary in 2012

AT the time of writing the polls have not opened as yet. But whoever forms the next Government will still be faced with the global and local economic challenges in 2012.

Globally we can look forward to the following:

* Much weaker Europe, and an overall weak global economy;

* Oil prices I expect to continue their upward trend;

* Inflationary pressures, as governments seek to avert economic downturn by expanding money supply; and

* Consumer spending to see some recovery but remain relatively weak when compared to pre-recession levels.

Locally, I expect that these global factors will have an impact, at least in terms of limiting our earnings potential. The truth, however, is that much of what happens to Jamaica in 2012 is going to depend on the policies we pursue.

One of the things that we must start to understand is what drives economies. In other words, as I said last week, the first question that should have been posed to the candidates in the recent debates was, what is your explanation of the problem? It is a simple question, but the truth is, unless we understand the problem then we can never find the appropriate solution, and I think that this is what has escaped us for years, if not decades.

I do not think that we have an understanding of what our real issues are. Our inability to define the real problem Jamaica faces has caused us not to grow this economy in any meaningful way since 1990.

I have long said that economies are nothing more than the behavioural interaction of people, as they go about their business of satisfying everyday needs and wants. It is important to understand the link between Mazlow's Hierarchy of Needs and economics.

As people satisfy more and more of their basic needs, they move towards economic activity that leads to self-actualisation. And the price of self-actualisation is higher than the price of basic needs. So it stands to reason that the more satisfied people are, the higher the value of expenditure, which will lead to greater economic expansion.

This is illustrated by countries like the US, where as more and more persons become wealthy they start demanding products that cost more. This means that manufacturers of goods and services can increase revenues, and also more business opportunities become available. The trick to this expansion is that it must be done from earnings and not from debt, as the US found out in 2008, and this is what contributed to our problem. Otherwise, the whole house of cards will come falling down.

It is this lack of focus on the consumer that has been at the heart of Jamaica's failure to achieve sustainable economic growth. An examination of our policies over the years will reveal that we have focused on the fiscal accounts or growth without earnings. In other words, the central focus of government policy has been either growing consumption with debt or taxing Jamaicans every year to stabilise the fiscal accounts.

The fact is that this approach will not work, and it is important that going into 2012, whoever forms the Government understands this. Moody's has indicated that the policies of the Government must continue in 2012 if we are to maintain their rating, and we could see improvement if we continue the policies. While Moody's is generally correct, there has been a missing ingredient in our policy that is working against greater economic success. This is what has always been missing from as early as independence.

We have failed to recognise the importance of the consumer to the economy and so have failed to realise the sustainable growth that we need. We have praised economies such as Singapore and the US, and have held them out as models that we need to emulate. But what we have failed to understand about what makes these countries great is that their primary development focus is centred on protecting the individual rights of citizens (from other citizens and the state) and ensuring that everyone has access to the same opportunities. This is, fundamentally, all we need to strive for, and the rest will follow.

If we ensure that (i) citizens' rights are protected, (ii) everyone has the best opportunity to succeed (which includes access to education and health), and (iii) discipline and structure are enforced, then I guarantee that the economy will see unprecedented growth and development, as persons move from the lower rung of Mazlow's Hierarchy to the top.

If this is done, then the market will drive greater innovation and value.

However, as I have long argued, in a stagnant environment just coming out of a long recession, the market needs a push. This is where Keynesian policies must be pursued, and is why the IMF agreement was pro-cyclical. This is why stimulus projects (whether you call it JDIP or JEEP) are important, and necessary. What we must ensure is that they have the necessary parliamentary oversight for transparency, but even more important, I think they must provide the maximum benefit to the economy. My preference is a focus on infrastructure and renewable energy projects, for the maximum benefit to be derived.

It is important that people have meaningful jobs. Jamaica's unemployment numbers from even in the 1960s reveal the lack of focus on full employment as a government policy.

So as we go into 2012, with a newly formed Government, we need to try a new approach. We need to put the individual rights and opportunities of the people at the centre of our policies. We must focus on employment opportunities as a part of that.

We will never achieve the development we want without this, because if people are always concerned with justice and red tape, then there is no room for innovation and they will remain at the bottom of Mazlow's Hierarchy, which is where underdeveloped economies find themselves.

After 50 years it is finally time for us to break away from the colonial structures that seek to protect state against subjects and truly make the citizen the primary focus of our democracy.


Robert said...

Again you are on the mark Dennis. We need the spark to begin the proverbial fire that Jamaica is hungry for. It is time to seek to get a glimpse of what is beyond our present situation as if we continue to limit our scope, things will not change. Countries in the macro sense do not change by themselves, people can be changed however, and through people, countries can be changed. Thanks for your insight.

Ingrid Riley said...

What stood out for me is that " make the citizen the primary focus of our democracy,"....putting the consumer at the focus, driver of our economic development. So important. This is a call for entrepreneurs to heed as listen, ask and see needs and fill them profitably also. The drive to develop entrepreneurship is also key I believe.

Additionally, as we now live in the Digital Age where the consumer has more power, has more choices is becoming more informed...they will reward the companies, the organisations that put them first.

Anonymous said...

I used to be able to find good info from your content.

my web site; bmi calculator men

Anonymous said...

What a information of un-ambiguity and preserveness of precious familiarity about
unpredicted feelings.

My site: Max Thermo Burn and Beta Force

Anonymous said...

Howdy! This post couldn't be written any better! Reading through this article reminds me of my previous roommate! He always kept preaching about this. I most certainly will forward this article to him. Pretty sure he's going to have a good read.
Many thanks for sharing!

Look into my web site ... Buy Xtrasize

Anonymous said...

Awesome issues here. I'm very glad to peer your post. Thank you so much and I'm
taking a look forward to touch you. Will you
please drop me a mail?

Also visit my website Male enhancement

Anonymous said...

hello!,I love your writing so so much! share we keep
in touch more about your article on AOL? I need an
expert on this house to unravel my problem.
May be that's you! Having a look ahead to look you.

Here is my web page; 365 day loan

Anonymous said...

Quality articles or reviews is the secret to interest the visitors to pay a quick visit
the site, that's what this website is providing.

Here is my web site; Apple stem cell serum reviews

Anonymous said...

My brother suggested I would possibly like this blog. He was totally right.
This submit truly made my day. You cann't believe simply how much time I had spent for this info! Thank you!

Also visit my blog post raspberry ketone reviews

Anonymous said...

Awesome issues here. I am very glad to peer your article.

Thank you a lot and I am taking a look ahead to touch you.
Will you please drop me a mail?

Here is my web-site: Xength X1 Reviews

Anonymous said...

Nice weblog here! Additionally your web site lots up very fast!
What host are you using? Can I am getting your associate link in your host?
I desire my website loaded up as quickly as yours lol

Here is my website; uy Le derme luxe

Anonymous said...

Whats up are using Wordpress for your site platform? I'm new to the blog world but I'm trying to get started
and set up my own. Do you need any coding knowledge to make your own blog?

Any help would be greatly appreciated!

Here is my site - Online Home Career

Anonymous said...

I think this is among the most significant info for me.
And i'm glad reading your article. But want to remark on some general things, The web site style is perfect, the articles is really nice : D. Good job, cheers

my web-site Saphire Electronic Cigarette

Anonymous said...

Hey! You some kind of professional? Nice message. Can you inform me the way to subscribe your blog?

Feel free to visit my web blog; having trouble getting pregnant at 40

Anonymous said...

Hello! I know this is kinda off topic however , I'd figured I'd ask.
Would you be interested in exchanging links or maybe guest authoring a blog
article or vice-versa? My blog addresses a
lot of the same topics as yours and I feel we could greatly benefit
from each other. If you're interested feel free to send me an email. I look forward to hearing from you! Excellent blog by the way!

My web-site ... Test Force Xtreme Review

Anonymous said...

Hi, I do think this is a great blog. I stumbledupon it ;) I
may return yet again since I book-marked it. Money and freedom is the best way to change,
may you be rich and continue to help other people.

my page :: GHD Hair Straightener