The politics of economics and Jamaica's Budget crisis

Robert Buddan, Contributor

The economy is slipping again just when some growth was reported for the first two quarters of the year. That growth followed 13 consecutive quarters without growth. Now, we hear that the next quarter might report flat performance, at best. Jamaica's team had secretly hurried off to the International Monetary Fund (IMF) in August.

The IMF chided the Government for not sticking to the agreed plan. The Government feels that the agreed plan only leads to stagnation. Yet, it came back home to say it will abide by the plan after all. What really is the problem and whose plan are we working with?

The IMF itself had said that the Government's proposed targets had been too ambitious. The Government had decided, I suppose, on shock therapy. Having unwisely delayed applying the appropriate measures while being in denial about the recession, with elections getting ever closer and the economy worsening, it then tried to turn things around in a few short years. The IMF warned that things would not turn around so quickly. Economies don't really work by election timetables.

In early August, the finance minister announced that there would be more big chops in the Budget. He has once again produced a supplementary budget for debate. The very idea of a Budget has become unhelpful if not redundant. The annual Budget was presented in April. It is now customary for that Budget to wear thin only a few months after. The failure of our annual budgets, within months, has over the past few years caused us to quickly turn to supplementary budgets, which hardly work either.

Government and Economy

Back in 2009, Mr Golding presented Supplementary Estimates to Parliament on September 30. He placed the reality of those numbers within a philosophy of Government and economy. Mr Golding said, "The economy is experiencing a severe downturn." He blamed this downturn on "the continuing adverse impact of the global recession". But the more fundamental problem, he said, was "chronic indebtedness". That indebtedness is caused by "the unaffordable cost of Government". This causes the people of Jamaica to be shafted because "they pay taxes but are never able to see a commensurate return in the delivery of government services". He further said, "Government operations constitute an impediment to growth." We need to change course. That change of course aimed to "trim the size of Government" and the entire public bureaucracy.

So, Mr Golding's analysis came down to what others call the neoliberal solution. It was an argument that must have warmed the hearts of the big private sector and the IMF. Mr Golding gave them the classical argument that "Government gobbles up the largest chunk of the money in the banking system that ought properly to be going toward financing investment."

Mr Golding was right on two counts. The numbers did show that our debts were growing fast. He was also right to say that Government's cost, relative to quality public service, was unsatisfactory. Many of the solutions he proposed were good ones. Many were not even new. Where I think he masked the problem, or at least a big part of it, was the way he used the word 'government'. Government, too, has to be governed. It must be governed justly and economically. But if the governors are not competent or are too consumed with the internal politics of party and Government, that politics is going to ruin the economy.

Political Economy

The study of political economy is one way of studying politics and economics, where they intersect, how they overlap, and the ways they influence each other. Some amount of politics is often behind economic decisions and the motives of political decision makers.

One popular consideration is, of course, elections. It was reckless of the Jamaica Labour Party (JLP) to have promised 100 per cent public-sector salary increases, 'free' tuition, 'free' public health care, and reduction of highway tolls in its last election bid. And, it was reckless of the private sector to have bankrolled that campaign. This is what leads us into chronic indebtedness. It is not government as such that is the problem. It is the politics of government. Government suffers for politics. That is what has shafted the taxpayers. Promises were made that could not have been kept.

Another important usual consideration is the internal politics of an administration. Whatever the political reasons, Audley Shaw became minister of finance. He must take responsibility for the IMF agreement that was negotiated, the delays in and secrecy surrounding those negotiations, the many changes in the negotiating team and in the financial team during the negotiations; the overly ambitious targets he agreed to; and the rapid increase by fully one-third of the country's debt in the first three years of the administration. This is not the fault of government as an institution. It is the fault of political-financial misgovernance.

The politics in, and towards, the Ministry of Energy has also caused the economy to suffer. It was critical that we have a working energy policy back in 2009. Yet, a National Energy Policy has been booted around, and ministers have been shuffled and reshuffled and eventually a second-choice minister was reinstalled. Liquefied natural gas, so vital, has been passed around to three ministers in the past six months and rumours circulate about corruption surrounding this project.

The internal politics of the JLP and of the commerce and industry sector might have been the real cause for Karl Samuda's failures.

Role of Government

Despite the mantra that small government is the best government, Golding's 2009 speech actually implied that government would be the driver of economic growth. Nothing was said about the role of the private sector. As for the role of Government, nothing sincere came out of the promises to change the pyramidal structure and the culture of Government (secrecy, elitism and patronage) inherited from the colonial era, fiscal responsibility, and consultation towards a Social Partnership by including trade unions and the Opposition.

It is not Government that has failed to deliver. It is the politics within party and Government that has undermined Golding's promise in 2009 of "strong leadership". We spent the following two years on a confessed criminal, Christopher 'Dudus' Coke, instead.

The question we are left with is whether this Government can make the solutions it will again propose work. Or, is the internal politics of the party and Government likely to continue to divide, distract and diminish the effectiveness of Government? Do the members share a common philosophy of the role of Government? Minister Tufton has said that the role of Government must be to stimulate growth and job creation. How is this to be balanced against the more neoliberal view enunciated by Mr Golding?

The state of the economy is really a test case for what the PNP calls its Progressive Agenda. Populist promises have failed the economy. The PNP says we must have evidence-based policies, not election-winning promises, and a true stakeholder democracy too. Probably this is the solution Mr Golding should sincerely pursue.

Robert Buddan lectures in the Department of Government, UWI, Mona. Email feedback to columns@gleanerjm.com and Robert.Buddan@uwimona.edu.jm.