While driving to work this week I ran into an unusually slow line of traffic on Waterloo Road at around 6:50 am. On nearing the traffic lights at the Trafalgar-Hope Road intersection, I noticed they were not working. It was utter chaos as no traffic cop was present and every motorist seemed to have his own self-interest at heart, creating gridlock. The result was that no one was able to move.

Eventually, motorists who were stuck got out of their vehicles and began to direct traffic, but the problem was that with multiple directors an accident could easily have occurred. A minority of motorists diverted to other routes.

This reminded me of the operation of a market economy like Jamaica and what is happening to us currently. The fact is that in a market economy each person will seek to achieve his own objectives, and this is what makes markets efficient.

One of the major problems we face, however, is that there is a lack of direction (leadership) to achieve the diverse objectives of the various sectors. The result is that without structure everyone seeks to achieve selfish objectives, and eventually the whole collapses, and it is at that time we try to work together, but always seeking to achieve our own outcomes all the time.

Those who cannot deal with the disorder eventually become frustrated and migrate, and usually are the ones intelligent enough to seek another way out.

International reports

Over the past few weeks, we have seen a few international reports that have been less than complimentary about Jamaica's fiscal management. These include (1) Moody's; (2) IDB; (3) COHA; and (4) IMF. The conspiracy theorists might say that these organisations are controlled by the same persons, the reports written by the same persons, and the Opposition JLP influenced these reports.

These reports identified a single significant problem, the debt stranglehold, as restricting Jamaica's growth potential. The reports also recommend various measures such as: (1) focus on setting an environment for private sector-led growth; and (2) reduction in government expenditure and increased efficiency through public sector reform.

I hope government takes these reports seriously, as local commentators have been speaking about these very issues for years, with no acknowledgement. But then again, we have a culture of listening more keenly to the outsider than to our own.

One problem with these reports is that they come out of organisations that may have objectives not in Jamaica's long-term development needs. The fact that the reports seem to coincide with what local commentators have been saying for a while, - and there seems to be general consensus on topics such as productivity and value - may be as a result of everyone realising that we need to speak the same language to achieve our objectives, as with the motorists mentioned earlier. The question, of course, is how genuine are all these stakeholders, and when the gridlock eases will we go back to batting for our own objectives?

The study of financial statements, in accounting theory, teaches that there are various users. These include shareholders, creditors, employees, debtors, regulators and the public. The problem with this, of course, is that each user has different objectives, and accountants have always grappled with what is the best way to present financial statements, bearing in mind these various users.

Because investors provide risk capital, and usually have the say, then the presentation of financial statements usually leans towards the satisfaction of their needs. In some circumstances, however, if a company is highly indebted to creditors, then demands will be made for information.

Stakeholder objectives

Similarly, the government presents the annual budget based on stakeholders that have the greatest influence over them at the time. For a while now we have seen the presentation of the budget focusing on interest and loan amortisation.

This is because the primary stakeholders in our fiscal accounts have been the creditors for a very long time. Consequently, the government is more preoccupied with setting objectives (such as macro-economic indicators) that satisfy creditors to the detriment of the other stakeholders (the public sector workers and Jamaicans).

The fact is that if holders of government paper become dissatisfied with government's handling of the fiscal accounts, then they will place the government under pressure by not taking up further debt instruments. This, of course, is to the detriment of Jamaicans who are concerned with the long-term development of Jamaica, and so are more concerned with the micro measurements, which are influenced by spending decisions surrounding capital expenditure, education, security and social programmes.

This is at the heart of decisions to cut capital and social spending when there is a need to reduce the deficit. This is the corner that we have painted ourselves into, and is why the wishes of our creditors are more important than those of Jamaicans. This is why the reports out of these overseas agencies carry so much weight. If we were to go to the other extreme where the government had no debt, then what would be the need to listen to the ramblings from the creditor agencies?

The question now, is how do we get to a point where all the stakeholders realise that it is in the best interest of everyone to work together, just as the motorists realised that they had to all pitch in and help direct the traffic? There is no doubt that this will happen, as all stakeholders realise that it is in no one's interest to have instability.

This is the reason why creditors give a moratorium on payments, and in some cases even forgive debt, as instability in the economic and social environment will only mean the debt is in trouble and they could end up with nothing.

When all of this is happening we must ensure that it is orderly, so that all stakeholders are satisfied and not just the ones who shout the loudest. It is therefore incumbent on the government to take the lead in this area and determine, with the involvement of everyone, what is the best path to ensure that all stakeholders are satisfied.
We must also develop a strategic plan to ensure that we reduce the dependence on debt so that Jamaican citizens can become the primary focus of government policy rather than debt management.

This debt dependency and focus created the economic and social problems we have today and is a reason why real GDP per capita, between 1993 and 2005, grew by a mere 1.86 per cent, even though we satisfy our creditors by managing the macro indicators. This contradiction between the improvement in the debt-equity ratio and the dismal performance in GDP per capita is indicative of the need to satisfy short-term creditor objectives rather than the long-term interest of Jamaicans.

There is, of course, one time when Jamaicans are more important than creditors - general election season. At this time there is no shortage of funds being spent on social programmes. But even so, this is still not within the country's interest, as the only value that is achieved is the carnival-like atmosphere and the triumph of one political party over the next.

If we are to change this, then electorate influence must surpass that of other stakeholders. While commentators can help to do so, it can only be achieved via a more intelligent citizenry.

E-mail: dra_chung@hotmail.com

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