Besides the outpouring of emotions, not much else may come of the Commission of Inquiry into the 1990s financial sector collapse and the operational role of the Financial Sector Adjustment Company, if commissioners ignore the important and historical antecedents that led to the “Humpty-Dumpty-ish” fall of the Jamaican financial sector.

In this regard, I agree with talk-show host Wilmot “Mutty” Perkins that the inquiry should focus on identifying the root causes that led to the collapse, with a view to staving off future collapses. And while I disapprove strongly of Mutty’s sardonic wit and seemingly malicious glee towards the embattled former finance minister, no one should dismiss his arguments in support of a fulsome inquiry, beyond the examination of Finsac’s debt management practices.

Consequently, the inquiry should include a historical overview of the fundamental causal factors and an analysis of the dynamics of the political economy that contributed to the demise of the financial sector, with the hope of influencing future economic policy decisions. Unquestionably, the financial sector collapse of the 1990s was long in the making and equally inevitable. To begin with, the Jamaican economy was neither managed nor structured to produce its own subsistence; it was never made to support the kind of entrepreneurial expansions and ambitions necessary for businesses to thrive to where they could achieve the highest levels of productive outputs – the environment has always been limiting and suffocating.

So, instead of crafting and implementing economic and social policies to achieve such, the emphasis has been on creating unsustainable paper wealth. And although the country experienced average GDP growth of six per cent for most of the 1960s, recorded high levels of productivity and prosperity seemingly abound, the majority did not benefit tangibly as wealth remained disproportionately with the ruling class. Little was done to change the composition and complexion of the old economy. Ours was a highly subsidised economy. It was and still is an extractive economy where profits are expatriated abroad, and with historically high crime rates, reinvestment prospects look even bleaker.

It is true that manufacturing and exports grew, but the growth occurred within an international environment where trade rules were largely relaxed and with preferential treatment given from Europe, no one bothered to pay attention to the other fundamentals of the economy. Foresight was lacking as owners of private capital failed to reinvest in science, technology and innovation, avoided strategic alliances and backward integration. Instead, they used profits for private consumption. This occurred while the government paid lip service to educating, equipping and empowering the most important resource – its people. There was no real focus on labour-market reforms, sustainable economic or on infrastructural development, all of which would have made the economy strong.

But, as the saying goes, “Chicken merry, hawk deh near”. Global trends started to shift towards a new economic paradigm. The shift places great premium on innovation and knowledge, the latter known as the “knowledge-based” economy and for a purpose. It is knowledge, not cars or cellular phones, that is the driver of productivity and economic growth. Perhaps it was this new economic philosophy that confused and motivated Michael Manley, on his return to office in 1989, to pursue economic and market liberalisation, albeit without due regard for either the transitional or incrementalist strategy requirements.

Alas, Jamaica then attempted to operate a modern economy on the axles of a 19th century economic framework – and it was bound to fail. It started with the hasty and unfocused decision to open up the economy without preparing for the consequences of trade liberalisation. The government acted globally, without thinking locally, and it backfired. The problem was then compounded by attempts to correct the scarcity dilemma without sufficient evaluation of the capacity of the economy to withstand the forces of open-market competition.

Obviously, very little strategic thinking went into the decision-making process, as the response to globalisation required far more than opening up the economy to imports. This became apparent when attempts to control inflation and consumption necessitated long periods of contractionary and adverse fiscal policies. Take the motor vehicle industry, for instance. It was opened up without thought of foreign-exchange limitations, energy consumption, inflation, balance-of-payment implications or currency devaluation. Just this one change shifted emphasis from goods-producing activities towards consumption of imported goods, and it not only reduced government revenues, it also forced it to borrow more to finance its insolvency. Government Paper then became the panacean revenue solution and an attractive investment alternative. Well, the protracted period of high interest rates and debt-based monetary system ensued, therein laying the groundwork for the demise of the financial sector and the mountain of debt that now confronts us.

None of this is meant to downplay the enormous hardship many Finsac victims are enduring, but it is worthwhile to place these happenings in the appropriate historical context, so we can learn from them. Some of the testimonies were heart-wrenching as victims related their experiences and told of their losses. To them, the inquiry brings closure and offers an opportunity to vent by giving the former finance minister a “tongue lashing”, since he oversaw the economic policies that ultimately led to the financial Chernobyl.

But as bitter as the pill has been for some victims, the truth is, over a million depositors representing an amalgam of bank account owners, 600,000 insurance policyholders, and thousands of pensioners were rescued and did not lose a penny during the financial calamity. Put simply, in circumstances such as these, not everyone or every institution will survive unscathed. At some point, leadership requires toughness and while emotional intelligence is paramount in understanding human plight, it cannot, by itself, answer the “value proposition” of how much to do, or not to do. And in fairness, it was never a question of how much more “blood” the vampirish economic policies wanted, but rather at what point on the cost-benefit grid cut-off should occur.

So, as understandable as the passions have been, Dr Davies did not by himself or through policy options create all of the causes that precipitated the economic disintegration. There were unscrupulous clients who took advantage of the absence of a central clearing house and credit bureau to advance their “ginnalship”. Now an entire country has to repay the $140 billion in debt. Lest we forget, several banks and near banks deviated from their core business. They invested depositors’ savings in risky ventures for which they had neither industry knowledge, foresight, nor the requisite experience, and their balance sheets were chock-full of “toxic assets” and tons of old receivables. The commission should summon former directors of these defunct financial entities to testify and explain the strategies behind their actions. And as in the biblical story of Lazarus, it should also call experts to “come forth” to testify to the strength and modernity of the regulatory framework (JDIC, for example) that now governs the banking and insurance sectors.

Burnscg@aol.com