Jamaica and economic growth


Wednesday, December 11, 2013    

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For decades Jamaica has desired and pined for economic growth but not attained it -- except for a brief period in the 80s when Edward Seaga was in power. Sadly, not only has it not achieved economic growth, it has also steadily declined while other nations around it have experienced increasing growth.

The Bahamas, Barbados and Jamaica's former dependency, The Cayman Islands, were on par with Jamaica or just behind it in economic growth in the 60s. Now, they far ahead, nearing First World status, leaving Jamaica in the dust.


It seems to me that, despite all the talk about wanting and pursuing economic growth, successive governments of Jamaica have either not understood what economic growth is, or how to attain it; or understanding what it is, they have been unable or unprepared to do what is required to attain it.

In the 70s Michael Manley and his Government came to office in a landslide, promising "better must come" under what they called Democratic Socialism. Implicit in this promise was that the economy would grow -- only so would better come. But, if anything, that was a mistake or a deception. For instead of trying to grow the economy, Michael Manley embarked on the most massive redistribution of wealth and nationalisation of private entities in Jamaica, reversing the robust growth of the 50s and 60s. The economy was left in a shambles. Some of the wreckage is still around today.

In a study, Caribbean Islands: A County Study, for the Library of Congress in 1987, it was said of Jamaica: "Economic growth was sporadic and weak from 1972 to 1986, however. Indeed, the Jamaican economy did not register two consecutive years of significant growth during that period. Between 1973 and 1980, the island experienced seven consecutive years of negative growth. The economic downturn in the 1970s demonstrated the highly mobile nature of both labour and capital in Jamaica, as skilled labour and investment capital left the island. The democratic socialist government of Michael Manley, from 1972 to 1980, was popularly blamed for the poor performance during the 1970s."

When Seaga took the reins in 1980 he tried to reverse this growth but didn't achieve much. The same study said: "Nevertheless, Manley's successor and conservative political opponent, Edward Seaga, was also unable to turn the economy around during his first six years in office. The economy experienced sporadic and unsustained growth in the early 1980s. GDP declined by 4.5 per cent in 1985 but rose again in 1986 by more than 2 per cent. In the mid 1980s, the Jamaican economy was about where it was in 1980 in terms of real GDP. Negative growth in the 1980s was generally attributed to the acute decline in the world bauxite market." (Sandra W Meditz and Dennis M Hanratty, editors. Caribbean Islands: A Country Study, Washington: GPO for the Library of Congress, 1987).

Now, into the 21st century, Jamaica is back to 'square one', with the Government and people hoping that the latest International Monetary Fund (IMF) agreement will bring relief, though similar agreements in the past brought nothing. The IMF lends money; it doesn't create growth.

For Jamaica to achieve economic growth, its leaders and people must understand what economic growth is, the obstacles to it, and must be prepared remove the obstacles. For, until the obstacles are identified and removed, Jamaica will continue to go around in circles.

Here is one example.

First Jamaica must attract and retain foreign investment. For with its size and resources it can't provide all it needs without outside investment. But ask yourselves, is Jamaica attractive to foreign investment? Ask this another way: If you were a foreign investor wanting to do business in the Caribbean, would you pass over countries such as Barbados, Cayman, The Bahamas, and come set up shop in Jamaica?

Why would you choose to invest in a place with prohibitively high taxes. Jamaica has one of the highest, most burdensome tax regimes in the Caribbean. It's Corporate Tax rate is between 25 and 33 per cent. Barbados has a rate of 25 per cent that can be reduced to 1.75 per cent. The Bahamas and Cayman Islands each has zero corporate tax rates.

Then there is the perennial corruption in government and the ordinary citizen; from the corruption at the wharf, when you import goods, to the corruption doing business with the man in the street

And there are the trade unions that are prepared to hold business and the country to ransom until their demands for their workers are met; not understanding that, in the long run, all will suffer if unions get what they want for their workers at the expense of business and the economy.

Above all is the increasing scourge of crime. A potential outside investor only has to go on the Internet and read one of the Jamaican papers to see that if he to sets up shop in Jamaica he will be putting his life and those of his workers at risk. Millions of dollars are lost to theft every year, both from workers and outsiders, and business people refuse to expand so as not to loose more to thieves.

When I was worked with the government as a revenue officer in York Town, Clarendon, in the 80s I used to pass a shop that was in disrepair. There were a few items scattered on the shelves, but with a pleasant woman selling in it. I soon learned from one of the most upstanding citizens of the community that he owned the shop and the woman was his wife. He refused to refurbish it and stock; as he told me "I would only be doing so for the thieves." And the community was the loser.

Also, the opportunity to make millions of dollars are lost when businesses in downtown Kingston have to close early in the day due to crime. Actual dollars are lost in the high cost of security or are passed to consumers in high prices. And the city and nation suffer. Thus the cycle of suffering will never end.

And which Government since the 60s has shown any real determination to reverse the obstacles to foreign investment and root out crime so that the economy can grow? What is this Portia Simpson Miller Government doing to reduce taxes and crime and to attract investors? It imply increases taxes every year and leaves crime to its own devices.

Ewin James is a freelance journalist living in Florida.





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