Teachers are angry with Education Minister Ronald Thwaites for suspending a long-cherished benefit of paid study leave; vendors in the Brown’s Town market protest against a steep increase in market fees; Sergeant Raymond Wilson vows that the Police Federation will continue to press for a pay rise, wage freeze notwithstanding.

These news stories are linked by a common thread: The consequences of the spending restraints embedded in the agreement with the International Monetary Fund (IMF) have begun to take shape; the full formation is yet to emerge.

In plain language, the Government cannot achieve the 7.5 per cent primary surplus in the current 2013/2014 financial year without significant cutback in expenditures, and this means they simply cannot provide the range and quality of goods and services expected or even needed. Those most directly affected will push back in their different ways.

Under a four-year Extended Fund Facility, Jamaica is eligible for nearly US$1 billion in loans and at least another US$1 billion in funding from the World Bank and the Inter-American Development Bank (IDB).

In return, the Government is committed to tough measures to bring expenditure and revenue closer into alignment; reduce the country’s debt burden which stood at $1.7 trillion or 142 per cent of GDP at the end of fiscal 2012. The debt is widely acknowledged to be a major handicap for the economy; and the Government must undertake major tax and public sector reforms. That’s only a partial list.

These measures, along with a range of efforts to promote economic activity and strategic investments in major infrastructure are projected to achieve a modest growth of “at least” two per cent by 2016/2017; positive, but not a big pay day in the short to medium term.

News coming out of last week’s consultations between IMF and Jamaican officials at the Ministry of Finance was that both sides remained optimistic that the primary surplus and other targets outlined in Jamaica’s current economic reform programme, being supported by the IMF, are achievable.

At a media briefing May 21 following the consultations, Finance Minister Dr Peter Phillips acknowledged that the programme was “strenuous” but “doable”. He said, “There is no doubt that the programme’s implementation will involve a lot of effort and sacrifice, collectively.”

The minister was buoyed by the spirit of co-operation already demonstrated by stakeholders such as public sector workers who have signed on to a wage freeze; bond holders who saw significant cuts in interest payments (for the second time since 2010), and steps towards increasing public sector efficiency.

And, as Dr Phillips pointed out, several mechanisms have been instituted in recognition of the need for “constant, continuous vigilance” of the programme’s implementation. These, he pointed out, include: establishment of the Economic Programme Oversight Committee, and an Office for Implementation and Co-ordination in the Ministry.

Thinking about these issues last week, I read an interesting book, Turnaround: Third World Lessons for First World Growth, by Jamaican-born economist Peter Blair Henry, dean of the prestigious Stern Business School at New York University. Indeed, one chapter inspired the headline for this column.

An advocate of “market-friendly policies” for both developed and emerging economies to deliver “ongoing improvements to the material well-being of their people,” Henry asserts that the path to prosperity lies in “discipline” in implementing these policies.

He defines discipline as a “sustained commitment to a pragmatic growth strategy, executed with a combination of temperance, vigilance, and flexibility that values the long-term prosperity of the entire population over the short-term enrichment of any particular group of individuals.

A Tale of Two Islands

“The optimal blend of policies that make up the growth strategy differs from place to place, but the various roads to riches — all of them long — are paved with a mix of free markets, judicious regulation, and Government provision of goods like education, infrastructure and health.”

Henry cites well-known examples of countries like China and Brazil that have transitioned out of underperformance and poverty to economic power houses by making different policy choices and staying the course.

He compares the policy choices of Jamaica and Barbados in response to oil shocks of the 1970s and 1990s respectively. He argues that the different responses of two countries with similar colonial origins and public institutions explain why Barbados is a lot richer than Jamaica.

Henry discusses the well-known and much-needed social justice programmes launched by Michael Manley after his election in 1972. These included job creation, housing schemes and subsidies on basic foods in the context of self-reliance and diversification of the economy.

These cost money and, as Manley’s press secretary at the time, I recall that private sector support shifted. As Henry put it, the (stock) market was “expressing a clear view that Manley’s programmes — however well-intentioned — would ultimately destroy value rather than create it.”

The domestic situation was compounded by the 1973 oil shock which precipitated the global recession of 1974-75. The main problem, as we now know, was that we did not cut back on social spending as demanded by the times.

By contrast, in July 1991 when then Barbados Prime Minster Erskine Sandiford refused the IMF prescription of devaluation, new taxes to raise revenue and a reduction in Government expenditures on health care, education and subsidies, he called in the trade unions and the private sector to develop and implement their own austerity programme.

Getting a deal was not easy, especially as the unions flatly rejected the prime minister’s plan for a wage give-back and staff cuts. Strikes and protests for Sandiford’s political head followed.

But as Henry reminded, “In spite of tensions, the need for collective sacrifice prevailed as the leaders of Government, the trade unions and the private sector reached a three-way “protocol on prices and wages” in August 1993, including an eight per cent wage cut while employers agreed to mitigate price increases and lower profit margins.

“Leadership’s sustained commitment to the future paid dividends for the Barbadian society; but discipline sometimes carries a great personal cost.” Sandiford’s Democratic Labour Party would lose the 1994 elections and he would never again be prime minister as his party remained in the political wilderness for 14 years, though he never regretted his choice.

Although not going the IMF route, they nevertheless took the tough decisions. The key was the national dialogue about productivity, wages and industrial relations. Without these, “the fundamental long-term determinants of Barbados’s prosperity would not have happened”.

The story of growth in the developing world is one of “sustained commitment to creating a better life for current and future generations.

“Judiciously applied, reforms increase the sustainable level of goods and services that a country can produce with its resources.” But the process “can be wrenching because increasing productive efficiency generates losers as well as winners”, though the overall income gains to society “will be large enough to make it possible to negotiate sufficient compensation for losers to overcome their objections to reforms.”

Fast-forward to today’s crisis. Will the Portia Simpson Miller Administration retain “the high level of resolve and discipline” that Phillips pledged at the briefing, or will they be tempted by the politically expedient when the reality of contraction sinks in?

Equally, can the Administration find the political communication skills and strategies to bring enough Jamaicans into a national consensus that will fundamentally change the way governments have run things for the last four decades?

This time, will we achieve the turnaround that has been promised by several previous agreements and growth agendas, but not delivered?

kcr@cwjamaica.com