Letters to the Editor

Is economic growth an act of God?

Friday, December 08, 2017

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Dear Editor,

Sustained economic growth has remained an ever-elusive goal for Jamaica in the modern era.

For non-economists, the definition which holds that economic growth is how much more the economy produces than it did in the prior period seems straightforward. The basic idea is that if the economy is producing more then it's an indication that businesses are more profitable, stock prices are rising, and companies have more capital to invest and employ people. As consumption goes up, so should economic growth, thereby creating a virtual cycle.

This, however, does not reflect a reality — at least not in Jamaica.

Jamaican companies have been experiencing phenomenal growth and profitability. The stock market was ranked as the best performing in the world two years ago. The macroeconomic fundamentals are stable. Firms are hiring and expanding; consumption of goods and services are at a high; consumer and business confidence have reached record highs; firms are listing on the stock exchange in droves; but, yet Jamaica's GDP doesn't seem to be moving at the same pace. Something is not adding up.

Some in political and financial quarters have speculated that the models used to calculate growth are outdated or that the calculations are just incorrect. This is a concern which the Statistical Institute of Jamaica and Planning Institute of Jamaica (PIOJ) need to address with urgency.

Economists, sometimes in academic and professional arrogance, have often given set prescriptions for economic growth to be achieved but they tend to forget that theirs is a normative science subject to a whole host of behavioural and psycho-social factors, and if we are to follow the soundings it is also at the mercy of weather patterns.

In the update on economic performance given by the PIOJ, over the last two quarters we were led to believe that the performance of the economy was affected by drought in one quarter and excessive rainfall in the other. These explanations for the growth numbers begs the question of what really drives economic growth. But the analysis of its economic division over the last two quarters causes one to wonder if economic growth is an act of God.

Chris Grant





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