One of the great “economic wonders” that have been debated in Jamaica over many years is why we have been unable to grow at more than an average of one per cent for so many years. In fact, the last time Jamaica saw any sustained growth to talk about was in the mid-to-late 1980s, when much of that growth was driven by debt and low-cost jobs.

Even in recent years, since the 2012 IMF agreement, we have started to see some stabilisation in our macro economy and significant highs in our confidence indicators. One can certainly argue that even with the low levels of growth, Jamaica has seen much confidence expressed by international investors, and we have always had not only relatively high levels of Foreign Direct Investment, but also, despite or crime statistics, we have always seen a steady flow of tourists.

The burning question therefore is what Jamaica must do to not only improve our growth numbers, to at least three per cent sustainably, and in the process achieve the real effect we want from high growth levels, which is the development of our human capacity and significantly increased standards of living for our people.

I say this because this is what the ultimate objective of governance and development must be about.

Because if we are growing and people are not enjoying higher standards of living and feeling as if Jamaica is the place to “work, live and raise families”, then the truth is that the growth would not have been successful.

I have recently travelled to two countries, which have very distinct development outcomes, even though both have had recent economic downturns and are both seeing improvement.

The first one — a regional country — has significant natural reserves, and given this should have seen significant development and greater opportunities for the people. Despite that the people generally have relatively low living standards and you are warned of opportunistic crimes. In fact, you can see the lack of development over the years, despite the significant natural reserves.

This of course is not unlike Jamaica, which has been blessed with bauxite, tourism, music, world domination in athletics, and highly demanded agricultural products. Yet, despite all of this, we have always struggled to find any sustainable growth and development for our people.

The other country I visited was Greece, which does not have the natural resources we do, and I don’t think has the strong tourist attractiveness that we do, and went through a very significant economic recession.

Despite this the country seems to be buzzing with tourists all over and the residents obviously enjoy a high living standard, which I don’t determine by income level but the fact that people seem safe walking around at any time, children are playing unattended, no prevalence of peddlers, the roads are spotless (despite it being obvious that infrastructure maintenance has been neglected — no doubt because of the economic recession), there is well developed public transportation (so traffic is bearable), and very importantly, there is a high level of order, so people can walk peacefully on the roads without having to go in and out of illegal vending.

From the above comparisons it would seem therefore that the optimal path to development is not so much about how much resources you have, but how much you can maximise the returns from those resources. Optimising the returns from your resources has to do with your strategic selection of your options and your approach.

It reminds me of people who think that progress is about acquiring “badges of wealth” (many times supported by debt) to appear successful, versus people who acquire assets and investments continuously, and live within their means, not very concerned about outward appearances, even though they may be earning much more than the former group of people.

But it is also much more than acquiring assets and investing, as your professionalism, ethics, and contribution to society also define success.

So if Jamaica is really serious about optimising our development potential (which is much more than growth), then it means that we must strategically look at our approach to development.

The first thing we must of course do is look at the risks to economic development, as social development is very difficult without economic development. So I would expect that when the Cabinet sits down at its retreat, with other sector leaders, perhaps the approach is to examine what are the best ways to maximise our growth rates, and to do so while minimising our risks to economic growth, so that it can be sustainable.

In other words, we don’t want to grow at three per cent, or more, in any one year, only to fall back to one per cent, or less, for a number of years, as has happened too often to us. It is better to grow at two per cent every year for 10 years, than to grow at three per cent, twice in 10 years, and fall back to less than one per cent in between.

SWOT ANALYSIS

The first question I would ask therefore is, what are the main risks to growth and how can we neutralise them. In other words, what are the threats from any SWOT analysis of Jamaica’s economy?

There are, to me, some obvious ones, such as the threat of high oil prices, crime and indiscipline, low labour and capital productivity, and acts of God (hurricanes, flooding, and earthquakes).

The next step is to look at how one can mitigate the risks associated with these obvious risk areas, as if we are able to minimise these risks to growth, then it is logical that we can get the economic growth we need. So one would want to rank these in terms of impact and probability, which will require some forecasting and quantitative analysis on the effect of each.

One of the immediate effects we face as a country today is the foreign exchange impact from rising oil prices. The obvious long-term solution for this is to reduce our dependence on imports and increase our export earnings (including tourism).

OIL HEDGE

However, one would want to look at how probable it is to achieve the ultimate solution and what can be done in the meantime. So one of the initiatives that were supported by the PSOJ a few years ago, which had also called publicly for its continuation, was the oil hedge.

This is like health insurance, that is, when you are not in need of it it seems like a waste of money but when you really need it you can understand how important it is.

The problem is that you can’t buy insurance when you need it and cannot predict with any great certainty when you will need it. What it does though is give you peace of mind and the ability to plan. This single item could cause significant declines in our balance of payments.

One other way that we can sustainably reduce the impact of oil prices, and also address the productivity challenge in a significant way, is to provide a safe and very reliable public transportation system. In other words, a very good public transportation system would reduce significantly the almost $200 billion in lost productive time caused by traffic congestion annually, reduce the amount of imports for oil, cars, and car parts, and very importantly, improve the living standards of all Jamaicans, as it means much lower commuting costs.

I need not go into the risks associated with crime (which costs us $80 billion annually), indiscipline and acts of God. But suffice to say that all these factors not only rob us of much-needed economic growth, but again importantly reduce the living standard and comfort of all Jamaicans, as they not only feel the discomfort of the effects of these factors but spend money to avoid them for example, security cost etc.

So the first step of identifying and implementing initiatives to reduce the major risks to economic growth can have a real significant impact on our growth capacity and the lives of all Jamaicans.

Dennis Chung is the author of Charting Jamaica’s Economic and Social Development AND Achieving Life’s Equilibrium. His blog is dcjottings.blogspot.com.

Email: drachung@gmail.com