Let's not waste this chance to generate real growth

Let's not waste this chance to generate real growth

Friday, February 28, 2020

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For decades this country had been caught in a low growth-high debt trap and this week the Planning Institute of Jamaica (PIOJ) delivered the bad news that we are still in the crippling grasp of low growth.

The PIOJ announced that between October and December 2019 growth was only 0.1 per cent higher than a year earlier. Basically, the message is that we are not growing — at least not at a rate that will make a significant change to the economy, despite all the positive policies implemented by the Government.

Growth estimates are clumsy, but are still very important for all Jamaicans — rich and poor. This is because they are useful for measuring the success or failure of our efforts to improve productivity. Improved productivity is the only way to finally achieve our dream of eventually becoming a developed country by 2030. Everyone knows that it is already too late to hit that target, but we have a unique opportunity to start the long journey to get there.

Jamaica is no different to all the other countries in the world. The same rules apply when it comes to growth. Rich countries have high rates of productivity and poor countries do not. Simply put, rich countries use a lot less time and effort to produce things than we do. For example, Japan has practically no natural resources, but it transformed itself into a rich country by investing massive amounts in the capacity of its workforce, modernising its infrastructure, and making financing easily available. And it did all this while keeping economic policies predictable so that businesses could plan investments and the purchasing power of consumers was protected by low inflation.

Jamaica could follow this example. After many decades, we have finally pulled one of our legs out of the debt trap and are well on our way to pulling the other one out. But the price has been very high.

The International Monetary Fund's (IMF) programme required crippling taxes and dramatic cuts in public expenditure. As a result, investment and consumption were constrained and the Government delayed investing in its workforce and infrastructure.

Productivity remained flat. However, the pain created a unique opportunity to start improving productivity. As it now stands, our debt has been cut in half, we have achieved macroeconomic stability and ushered in monetary and fiscal policies that are transparent and predictable. All indicators are the best they have been in 40 years.

Our job now is to focus the ever-increasing fiscal space on the long-delayed improvement of our human and physical capital. This effort should be treated with the same discipline and relentless drive that characterised the implementation of the IMF programme.

Jamaica has missed every international growth spurt for the last 40 years. The result has been prolonged poverty, high emigration, and heavy doubt about our capacity to pull ourself from the pit into which the country was plunged by reckless economic polices of the past.

We have paid a very high price to create the space to build our productivity. This kind of opportunity comes along only once in a century. Let's not waste it.

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