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What little Jamaica can teach Europe

Sunday, July 01, 2012

The current economic and political problems in Europe (inclusive of Great Britain) and the policy responses to these challenges are of great relevance to Jamaica.

It is critical that we follow these developments because they directly affect economic conditions in Jamaica and have implications for policy space and the degree of freedom available for the formulation and implementation of policy options.

First of all, Europe is one of Jamaica's most important economic partners; and this is manifested in the actuality and potential of trade (more so for exports of goods and particularly services than for imports), development aid, foreign direct investment, remittances and tourist arrivals and expenditure.

The prolonged economic recession has had a deleterious impact on the Jamaican economy and the further deterioration does not augur well for us.

Second, in a broader sense, the economic difficulties of Europe are a pall on the possibilities for an economic recovery of the world economy; dampening growth prospects for some of our other economic partners, especially the critical United States economy. This is evident in the stop-go gyrations and a failure to sustain tangible economic growth despite repeated domestic pump-priming stimuli.

Third, the unsustainable debt and the acute fragility of the banking system in Europe have made the world aware that fiscal profligacy, inadequate regulation of financial markets, and political instability associated and incited by economic austerity are not endemic to developing countries.

Ironically, the best managed economies are China and Latin America. One is not fully capitalist and the others have been notorious in the past for hyper-inflation, serial currency devaluation and debt defaults.

This new reality has forced a new attitude among the industrialised countries and the International Monetary Fund (IMF) who enjoyed berating developing countries for their poor economic management.

Fourth, to the extent that new measures are developed to cope with further massive debt defaults by European governments and prevent the collapse of the banking system in Europe, they set precedents which can be followed by Jamaica. They have also produced an easement in the comprehension of the social and political limits of economic austerity. Even the Germans are facing reality and exhibiting flexibility.

Certainly there is a lesson here for the IMF, which should be learnt instead of egotistically and insensitively pontificating on issues affecting Caricom, which is neither the business of the IMF nor within its competence.

Fifth, the European model of regional economic inspiration was drawn on by the architects of Caricom. The economic and political problems which threaten the very survival of the much-vaunted European Union can also provide invaluable guidance. Caricom faces a similar dilemma to that of its intellectual mentor.

The lessons are: the need for an overweening conviction in the necessity of integration, the willingness to innovate for survival, the spirit of helping each other, collaborative political leadership, and co-operative economic management.

Interestingly, Europe might be able to learn something useful about economic management from Jamaica. After all, we have been in economic crisis far longer than they have.

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