Social pressures and long-term policies
ID: INTERACTIVE DIALOGUE
Recently I was fortunate enough to be invited by Douglas Orane to be one of his guests at the Latin Trade Symposium and 18th Bravo Business Awards in Miami, Florida where he was to be one of eight people from Latin America and the Caribbean to receive an award. He was recognised as Social Sustainability Leader of the year, an award all Jamaicans should be proud to see a Jamaican and a homegrown company receive.
The symposium included a presentation by Felipe Larraín, minister of finance for Chile, a country that I studied during one of my economics classes years ago at university because it is famous for the pension reform it undertook starting in 1981 but infamous for the influence of the 'Chicago Boys' and their fundamentalist free market policies which created wealth but also grew unemployment tenfold.
The minister used his time to speak to the importance of policymakers in the future of a country. He advised us that just the day before, Chile had placed US$750 million of 10-year bonds on the international market with an interest rate of 2.38 per cent, the lowest ever rate paid by any emerging country in history. He also proudly declared that the 30-year bond at 3.71 per cent was just 0.75 per cent more than the US, another amazing feat.
Chile's rates on bonds have been decreasing over the last few years and refinancing some debt at these new rates will save them at least US$18 million. Jamaica and many other countries look at those rates and long for a day when rates close to those are feasible. It does not come from wishing but instead from the work of policymakers.
Minister Larraín made it clear that the biggest problem faced by developing nations is that too many politicians allow populist policies that cannot be funded to get in the way of the tough choices that must be made to put a country on sound footing. There were examples about the hundreds of thousands of students in Chile that protested over the last 12 months clamouring for dramatic education reform. The Government has refused to address some of the issues such as free education because of the cost and the potential effect on the long-term competitiveness of the country.
Larraín said: "You don't do policy to appease people in the street. If you do, then you are in the wrong position." He went on to talk about the importance of taking the long-term view with any policy rather than the immediate short-term view which too often plagues politicians who are fixated on popularity or winning the next election.
Without passing judgement on whether Chile should undertake the education reforms students have called for, I admire any politician who is willing to think long-term rather than advocate policy to be created just because a group of people demand it.
Jamaica is a classic case of short-term policies leading to sub-par results. Our tax code is now ridiculous, along the lines of the USA, because of many proposals benefiting special interests or knee-jerk reactions to crowds of people, especially those of your own party.
Minister Larraín also pointed out to us that about 50 countries in the 1960s were on the road to developed status, based on GDP per capita growth. Today, only about 10 of them have actually succeeded. What happened in the years between then and now? His answer was that "increased social pressures come with the road to development. People start to think that they deserve to live like developed countries. Government must resist."
Few governments have ever resisted and pushed back against their citizens who want certain things even when they cannot yet afford them. Governments instead tend to borrow money and then keep borrowing in order to try and deliver, then prop up those unaffordable expectations.
Jamaica was one of the 50 on that path to development and clearly is one that deviated. Will we finally see policymakers in power who are willing to focus on implementing policies that are actually beneficial to the long-term growth of the country, or will we continue to see short-term policies focused on popularity and winning the next election?
David Mullings is Chairman and CEO of Keystone Augusta and was the first Future Leaders representative for the USA on the Jamaica Diaspora Advisory Board. He can be found on Twitter at twitter.com/davidmullings and Facebook at facebook.com/InteractiveDialogue