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.

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