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The missing plank in the great debate

The Point Is..

Danny ROBERTS

Sunday, April 27, 2014    

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The 2014/2015 budget debate is on in earnest, and in the midst of this is the battle for the minds of the Jamaican people, for them to take sides, to accept one argument and reject the other.

At stake is political power or the trappings of it, where the winner takes all, for as former US President Richard Nixon said: "Finishing second in the Olympics gets you silver. Finishing second in politics gets you oblivion."

In this debate, information is being 'thin sliced' and presented as 'facts' and 'fiction' when in many cases the information presented by both sides could in fact be right.

The power of reason and logical arguments has no place in the tribal nature of our political culture. In the present dispensation, die-hard People's National Party (PNP) supporters will defend the Government's policies at all costs, likewise die-hard Jamaica Labour Party (JLP) supporters will oppose the policies at all costs.

And since the policies over the years have generally remained consistent between PNP and JLP administrations, it is whichever party is in power that determines where roughly about two-thirds of the voting population -- representing the entrenched tribalists from both sides -- will anchor their arguments.

The budget debate has always therefore represented a flashpoint of this political divide. Darrel Huff in his book How to lie with statistics provides the evidential proof that we can simply truncate some data from our statistical analysis to make the outcome look either good or bad.

That is exactly what Finance and Planning Minister Dr Peter Phillips and Opposition spokesman on finance Audley Shaw did, and they were both right. Their combined presentations provided a true picture of the good and bad of the economy, in a word, their presentations complemented each other.

In this budget debate however, the real losers are the majority of the Jamaican people, for they have not seen anything in the presentations of the finance minister or opposition spokesman which gives them hope, although their cause is being 'trumpeted' and 'bellowed'.

Invariably, this is what it is, rhetoric and politicking, but from the people's perception, very little by way of policies or programmes that create an optimistic economic expectation about their future. Their opinions are seldom canvassed and more often than not largely ignored, unless, of course, the political stakes appear too high.

In opposition, their rights are vehemently defended and their plights fully highlighted, for the opposition must be seen as the guardians of the pawns, and not the protectors of the kings and queens in this game of political checkmate.

The present debate will remain true to that format since neither the construction of the budget nor the Opposition's response involved consultations with the people.

Beyond the histrionics and structure of our budget cycle, there are some points to highlight. For example, Dr Phillips had done a spectacular job in meeting the stated requirements under the IMF/GOJ Agreement. It matters not whether the position we are in is better or worse than four or two years ago, what matters is that the quantitative targets set out under the IMF agreement to make Jamaica a credible player in the international financial market are being met, and the assiduity with which Dr Phillips has approached this task is worthy of commendation.

We do realise, however, that the fulfilment of these requirements under the agreement comes at a cost -- human cost -- because where all factors remain equal, then to achieve the desired outcomes set out as conditionalities will inevitably mean pain and suffering for the vast majority of the Jamaican people.

Peter Phillips knows that, and Audley Shaw knows that. In fact, the Jamaican people know that, because their knowledge is rooted in what the social scientists call 'empiricism', that is, knowledge derived through our sensory experiences -- we lived under an IMF Agreement during the mid-1970s through to the 1980s.

It is the pain we are enduring which any Opposition worth its salt would seek to highlight, and this is exactly what Audley Shaw set out to do when he spoke of "the unemployment rate being at a 12-year high at 15.3 per cent for 2013", and in particular, the unemployment rate among the 20 - 24 age cohort; when he pointed out that "the cost of living has sharply increased due to a 27 per cent devaluation of the Jamaican dollar against the United States dollar"; about the rising price of chicken back and basic foods; the increase in the household poverty rate and the number of persons living below the poverty line being in excess of one million Jamaicans, as pointed out by one of our social scientists.

Dr Phillips, as would be expected, focused on the economic indicators that are improving -- the two or three quarters of positive growth, the improvements in the Net International Reserves, the decline in the debt-to-GDP ratio and the raft of legislative and administrative changes designed to consolidate the Fiscal Responsibility Framework.

He spoke of tax reform, public sector reform, changes to facilitate the ease of doing business and legislative changes, including amendments to the Revenue Administration Act, the Financial Administration and Audit Act, the Public Bodies Management Act and the Securities Act and new legislation like the Fiscal Incentive Legislation, the implementation of a Central Treasury Management System and the setting up of a Strategic Human Resource Management Unit in the Ministry of Finance and the Public Service.

The Government's priority treatment in spending on social programmes to protect the most vulnerable is important as Dr Phillips highlighted; but if a government has to spend more on poverty alleviation programmes it simply means the situation is getting worse. It would mean, as well, the need to review one's overall macroeconomic strategy to ensure that it is creating the conditions which will allow people to lift themselves out of poverty.

But if the enabling conditions are worsening, then more persons are likely to be falling into poverty. More monies would therefore have to be found, not only to maintain the budget year after year in real terms, but to help balance the lives of those persons who have fallen below the poverty line in recent times.

So that, in the context of the Government's macroeconomic objectives and the commitment to the poor and vulnerable, the Government would have to take a second look at the prioritising of its spending. For example, the country is to spend in this financial year another $1 billion on the Fiscal Administration and Modernisation Programme, but before doing so should assess and evaluate the millions, if not billions of dollars, spent so far to achieve the stated objectives, and to see if in fact we have been getting value for money.

For it cannot be that after all that spending on fiscal administration and modernisation and with the emphasis on creating a friendly business environment our ranking on the ease of doing business slipped from 85 out of 182 countries in the 2012 report, to 94 out of 189 in the 2014 report.

In the Global Competitive Index (GCI) overall we still remain in the bottom half, and when we are assessed on the effects of taxation on incentive to work, we are ranking at 118 out of 182 countries, 100 in our capacity to retain talents, and 99 in our capacity to attract talents.

If our poverty situation is worsening because of the IMF measures, then we must re-examine the budget allocation of $327 million to improve the lives of rural Jamaicans, $350 million on rural economic development programmes and $93 million on poverty reduction programmes, in total less than the $1 billion on a programme on which we have so far not got value for money.

Are poverty, wage stagnation, unemployment and a widening social gap conditions precedent for achieving fiscal responsibility and debt reduction? That is the real issue, for it is certainly one of the points on which the presentations of Dr Peter Phillips and Audley Shaw converged.

Dr Phillips was correct in saying that in the past the real issue regarding our growth strategy is that we have always left behind "the majority of our people outside of the ambit of economic growth". And Mr Shaw, in acknowledging the imperatives for growth, said that "the real job creators are consumers, whose rising wages generate jobs and growth. If average people don't have decent wages there can be no real recovery and no sustainable growth".

But the centrepiece of their growth strategies does not reflect the central importance of the wage earners. The emphases of both are primarily on the business environment, and this is important, but by itself cannot achieve sustainable growth.

To be fair, Dr Phillips mentioned the flexi-work arrangements and the productivity initiatives, and Mr Shaw spoke about ramping up education and training, but this is not good enough, not sufficient.

Again, there is a convergence which betrays similar policy orientation of the Government and Opposition, because in neither Dr Phillips' nor Mr Shaw's presentation is a clearly defined set of policies to create a working-class environment to complement the business environment and create the labour market conditions to guarantee sustainable growth outlined.

The truth is, economic growth without social equity would be a throwback to the 1960s when we boasted impressive growth figures against the backdrop of rising poverty, increasing unemployment and social exclusion. If, as both the Government and Opposition agree, the people should be at the centre of the growth process, then public policies and programmes must begin to reflect similar social policy framework and legislative changes allowing for the critical structural reform, not only on the fiscal side but the social side, for the long-term survival of the nation.

The reaction to the announced tax on bank withdrawal transactions tells the real story. There are highly correlative but quite distinguishable factors that relate to the objective and subjective indicators in our economy. People do, in fact, make subjective judgements about both the economic conditions in Jamaica and their personal economic situation. But in the formulation of government policies these are clearly not conjoined.

The absence of any relationship between public policy and popular opinion; between objective and subjective economic considerations, creates a whole set of issues about equity and social cohesion. That is why opposition to the bank withdrawal tax is growing and why "pocketbook" considerations, that is, one's personal financial situation, is taking precedence over what the economists call "sociotropic" considerations, which reflect people's assessment of the state of the economy.

The simple truth is that people's personal economic consideration becomes far more important to them than the collective consideration when there is a widening of the social gaps, employment insecurity and declining real wage.

In the final analysis, the medium- to long-term efforts of Dr Phillips could but all be in vain if the Government does not seriously consider incorporating social and perception indicators in the formulation and evaluation of public policies. This is what many Latin American countries are now doing, learning from the experience of the last 10 years about social gaps, perceptions of inequality and social conflict.

It has to begin with a comprehensive development of a growth strategy that incorporates labour market reform as a centrepiece of the growth strategy. We must make sustainable economic growth a win-win situation for businesses, the workers and the general populace. If we do that we shift the debate from economic growth to economic development, terms with overlapping but distinct meaning, but not included in the language of both the Government and the Opposition.

Gary Fields, professor of economics at Cornell University, speaking at the seventh annual Sir Arthur Lewis Institute of Social and Economic Studies Conference at the UWI Cave Hill Campus in 2006 said that "economic growth appears to be necessary for improvements in standards of living, but it is not sufficient. Also needed are mechanisms to assure that economic growth reaches the people either as workers or as citizens".

To do so requires an emphasis on labour demand policies, labour supply policies and labour market functioning policies. The availability of a high quality of human resource capital appears to be diminishing, according to the GCI. Where are the policies to address that?

Employment-friendly labour market policies and a sound business environment go hand-in-hand, which is where the Government and the Opposition should have focused their attention in this great debate.

Danny Roberts is the head of the Hugh Lawson Shearer Trade Union Education Institute at the Open Campus, UWI. He can be reached at strebord01@yahoo.com

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