THE concept of austerity as the essential character of stabilisation and adjustment policy pursued by the International Monetary Fund (IMF) has been questioned recently because of its lack of effectiveness in prompting economic recovery.

For this reason, our editorials since 2012 have been calling for a switch from austerity to economic growth programmes. We are not suggesting fiscal imprudence or a resort to our addiction to borrowing. Rather, there needs to be a redesign of the economic programme to make it a genuine vehicle for growth.

Many countries have endured IMF austerity but have failed to realise the goals of growth and macroeconomic stability because of political and economic reasons. The IMF austerity, because of the pace and extent of the deflation, has proven too difficult politically for most governments that end up being voted out of office, whether they implemented the entire course of the IMF or failed the quarterly tests.

That’s because austerity cuts back on demand, increases taxation, reduces government expenditure on infrastructure, education and health, increases the cost of living through devaluation of the exchange rate and restrains the supply of credit — all of which deprive an economy of the resources, capacity, the incentives and the will necessary for economic growth.

The mounting evidence reached the point where it could no longer be dismissed nor could it be explained as poor management or inconsistent implementation. The IMF Managing Director Ms Christine Lagarde in June last year was forced to admit that it had failed to anticipate the damage austerity would do to Greece, after a report that catalogued policy mistakes made during the bailout.

A new round of heated debate among policymakers about the merit of raising taxes and cutting public spending as the core of economic stabilisation has been sparked by three new books in the last year, all questioning the efficacy of austerity.

The first concludes that austerity is a dangerous idea, the second says austerity kills, and the third speaks of austerity as the great failure. Economists are now recognising that austerity is neither necessary nor sufficient for economic recovery.

Here in Jamaica taxation has been increased and government expenditure has been restrained in real terms, and together they make it difficult for the economy to grow. Some of this would have had to be done with or without the IMF. But the question is how this has been done.

In its preoccupation with reducing the budget deficit as quickly as possible and reducing the enormous debt, the IMF has achieved a triumph of accounting over economics.

It is economics that must inform the Government of Jamaica’s economic programme. A new tax, for example, must be based on what is its impact on the promotion of economic growth. Will it increase or discourage investment? Will it stimulate production, enhance competitiveness, encourage demand for local versus foreign goods? Will it be an incentive or disincentive to private enterprise, increase the cost of living or cause inflation, etc?

After all, Jamaicans have shown remarkable forbearance, sacrifice and patriotism, especially civil servants who have agreed to minimal wage increases. But we want to know that it has been for the betterment of the country.