From the exchange rate to economic growth - Part IV

David Wong, Contributor

A fundamental precondition for sustained economic growth in a capitalist society is that a modern class of capitalists should come to power whose very reproduction and development requires capital accumulation and economic growth.

Jamaica has never had a bourgeois revolution, and so a modern class of capitalists has never developed. As a result, Jamaica has never developed a modern capitalist state that could spearhead the development of its productive forces, including its workforce.

Historically, Jamaican capitalists grew up after slavery. They were primarily engaged in plantation agriculture, using backward labour production techniques, and in export-import commerce and domestic wholesale-retail distribution of imported commodities.

This class of capitalists gained its manufacturing experience in the post-colonial period in an economy that was sheltered from competition by domestic monopoly at home and by protective tariff walls and imperial preferences abroad. Thus, the question has to be raised of whether this capitalist class is capable of restructuring and integrating the Jamaican economy into the present global capitalist economy on competitive terms, and managing the necessary contradictions that such a growth strategy entails.

Can these capitalists transform themselves into modern capitalists who can constantly innovate to survive in the present competitive global economy? If not, there is little real hope of significant capitalist development in Jamaica, and members of the working class and the various professional strata will continue to emigrate to more advanced sectors of the global economy. There they can become more productive and enhance the value of their labour power.

Management consultant

A similar point was made recently by a Jamaican management consultant, Francis Wade, in 'Why Jamaicans have to migrate to become productive' (Jamaican.com, December 13, 2010). Wade formerly resided in the United States where he became a management consultant. Drawing on the experience of other Jamaicans and himself while in the US, Wade observed that: "We (Jamaicans) have a bad habit, you and I. We accept low standards from ourselves and each other in a thousand small ways, while complaining when major problems crop up that are a direct result of years of accumulated blighs."

He further blames Jamaican management for not rigorously enforcing high standards of work by setting high expectations of work quality and not providing "frequent, quality feedback" to workers, as is done in the US. On this point of extracting productivity from Jamaican workers, Wade says: "There might be many reasons why this is so, ranging from a management style inherited from the British to our history of giving harsh feedback via the slave whip."

Fortunately, there is some evidence that a group of modern capitalists is emerging in Jamaica in areas such as electronic commerce, agriculture, food-processing, tourism, and investment banking. How significant these developments are at present is not yet clear. However, there are prospects that the old capitalist class can be transformed into a modern capitalist class.

These prospects are enhanced by the growing number of business school-trained managers and the return of some professional, technical, and managerial workers with deep experience in modern industries. These prospects will be especially enhanced if local capitalists work in alliance with more developed capitalists abroad.

Clearly, nobody can hope to go it alone these days. The increasingly competitive modern global economy is constantly integrating commodity production across countries, and capitalists (wherever they are geographically located) are being compelled to keep up with the steady changes in production technology, organisation, management, etc, that are required to survive and prosper in the modern global economy.

The Jamaican state originated as part of the colonial bureaucracy for ministering to the affairs of the plantation owners and their pre-modern capitalist allies. As such, the colonial state not only never sought to promote the development of capitalist manufacturers who could compete with manufacturers in the rest of the British Empire, but actively opposed such developments in normal times.

The colonial ideal and policy was that Jamaica should produce mainly agricultural raw materials to be processed into consumer goods in Britain and import its requirements for consumer goods, machines, small tools, and other industrial products from elsewhere in the British Empire.

Colonial administration

The colonial administration, therefore, paid little attention to the sea of petty production and trade that complemented and supplemented the rest of the export-import economy and helped to sustain the ordinary people in their daily reproduction. When Independence came in 1962, the new Jamaican state was little transformed from the old colonial one for catering to capitalist development.

Since the late 1930s, political parties in Jamaica have been based on a class alliance of the planter-merchants, professionals, petty bourgeois elements, and workers in agriculture, transportation, and cargo handling on the docks. A modern bourgeois ideology could not develop out of the class alliance that was the basis of the two political parties. At best, the ideology that formed was that of a national capitalism in which local manufacturing would be developed to complement and support the export-import economy which would be expanded to include tourism and mining of local mineral deposits for export.

The two political parties differed only in the class proportions of their predominant elements. The Jamaica Labour Party (JLP) had more of an orientation to the planters and big merchants while the People's National Party (PNP) was more oriented to the smaller merchants and manufacturers and the professionals and nationalist intellectuals.

Neither of the two parties was oriented to the development of modern capitalism, and neither of them sought to transform the old colonial state into an instrument for developing modern capitalism. At best, the class composition of both Jamaican political parties inclined them towards a petty bourgeois ideology of right populism (JLP) and left populism (PNP), as programmatic guides for formulating public policies to reconcile the class contradictions within national capitalist development.

The imperatives of modern global capitalist development today demand a modern bourgeois state to facilitate the integration of the Jamaican economy into the global economy, since the strategy of national capitalist development has reached its upper limit, and this is one aspect of the present crisis in Jamaica's political economy. In 'Globalization and the Crisis of the Caribbean Intelligentsia' (2003), Trevor A. Campbell and Reginald K. Nugent observed:

"The fundamental challenge is for economic and social thought in the Caribbean to break free from the outmoded and misguided notion that the mission of the political leadership in the region is to develop national capitalisms - whatever that means. This conceptual breakthrough would clear the way for the assimilation of the most advanced developments in science and technology and the organisation of industry on the basis of global standards. This would then provide the basis for sections of the entrepreneurial class to be integrated into the more dynamic global centres of research and development, innovation and production."

It is possible that we may see a more bourgeois orientation in the political parties and the state in the near future, as younger leaders who have grown up under globalisation come to the fore and rise to the historical task of cleaning up corruption and bureaucratic inefficiency in competitive party politics and state administration.

However, the old petty bourgeois nationalist ideology persists and is pervasive. Witness Arnold Bertram in The Sunday Gleaner on October 31. He claims that higglers are "the most enterprising and resourceful group of entrepreneurs in the country". According to Mr Bertram, higglers and other petty traders could lead the redevelopment of Kingston as a 21st century city because of the historical role they played in developing Jamaica's internal marketing system. Mr Bertram's comments raise the issue of what role the informal economy can play in promoting economic growth and what type of policies government should adopt towards the informal economy and, for that matter, the Jamaican overseas community.

Informal sector

According to a 2006 Inter-American Development Bank report, Jamaica's informal sector made up about 43 per cent of GDP in 2001, a very substantial proportion of the economy. However, most producers and traders in this sector are essentially engaged in non-capitalist activities with the objective of eking out a living. They are simply not capitalists who can accumulate capital and develop the productive forces, since their objective is not profit-maximisation.

Objectively, the role of this sector is as a reservoir of labour power and other mostly marginal resources. These resources can be better used to promote economic growth. However, this requires government policies to help those petty producers and traders - who have the potential to become capitalists - to do so by providing them with small business loans, technical assistance, and other resources and to educate and train others to become productive workers.

Policies are also needed to attract the net savings of this sector into the banking system so as to enlarge the pool of investible funds. The movement to develop mobile banking in Jamaica ('Shaw mulls best mobile-banking mode for Jamaica', Gleaner, December 11, 2010) is a step in this direction.

Finally, Jamaica's large overseas community constitutes a pool of vital scarce resources and ideas that are available for improving the competitiveness of its industries and helping to integrate them into the global economy. Jamaica must seek to benefit as fully as possible from tapping into the rich resources of its overseas community.

In conclusion, this series - 'From the Exchange Rate to Economic Growth' - has sought to argue that the economic policy debate in Jamaica should shift its focus from discussing expedient policies for stabilising the exchange rate to examining the process of capital accumulation and growth, and identifying policies that will contribute to faster growth in the country's per capita GDP so as to raise the living standards of Jamaicans.

Some of the more important policies suggested by the present analysis of Jamaica's political economy were presented in Part I of the series.

David Wong (dwong@fullerton.edu) is a professor of economics at California State University, Fullerton. Feedback may be sent to columns@gleanerjm/com.