Omar Davies | Minister Clarke’s new job: A different perspective

The announcement that Minister Nigel Clarke will shortly depart our shores to assume one of the four deputy managing director positions at the IMF has dominated the news over the past few days. The prime minister has been more than ecstatic in hailing the appointment; other prominent citizens, although somewhat less vociferous, have joined in welcoming Minister Clarke’s imminent move.

I wish to state at the outset that I congratulate Minister Clarke on the appointment. Within the context of his job description, I have no doubt that he will do well, given his excellent academic background, as well as his experience as Jamaica’s finance minister.

However, I have reflected on the matter and feel obliged to raise certain issues about the institution of which he will soon be a major figure. These questions seemed to have been overlooked in the initial euphoria which has greeted the news. That is strange, given Jamaica’s long history of interaction with the IMF.

My first observation is that the IMF is not just “another institution”. It is the most powerful financial multilateral, the policies of which are dominated by the major market economies, in furtherance of their “worldview”. Furthermore, over time, the IMF has been at the forefront in developing the policies and programmes of the “Washington Consensus”. The “Washington Consensus” describes the close cooperation and coordination between the IMF, the World Bank and the US Treasury.

Although these are the principal members, their positions are immediately adopted by the various regional banks, such as the IDB and the CDB. The coordination between the members of the Washington Consensus, apart from promoting “efficiency”, is also used to coerce borrowers to agree to all elements of the policies laid down by individual members of the Washington Consensus, following a formula called “cross conditionalities”. In practical terms, it was almost impossible to negotiate changes to a specific clause of an agreement as the lending agency could immediately call on the support of the other lenders.

FOLLOW THE DICTATES

While, in theory, the World Bank and the IDB were responsible for designing and implementing the structural adjustment policies for various sectors of an economy, by use of cross conditionalities, the members of the Washington Consensus would ensure that a borrowing nation had no option but to follow the dictates of lead organisation, the IMF. It is critical that there is a full understanding of how these institutions collaborated in imposing their view of the correct path to economic development on borrowing countries. It is primarily for this reason that the Patterson administration of the ‘90s worked to improve the country’s macroeconomic situation to the point where Jamaica could end its borrowing relationship with the fund in 2005.

While the sharpness of the divisions between Jamaica and the IMF were at its highest during the Manley regimes of the 1970s, all Jamaican administrations, with the possible exception of the present one, has had reason to take issue with many of the policy dictates of the multilaterals, in general, and the IMF, in particular.

In an earlier period, the main division arose concerning the IMF’s rigid, inflexible, position on devaluation as a non-negotiable instrument to “get the prices right”. More broadly, there was the fundamental objection to an administration “picking winners” by establishing differential interest rates which would provide access to lower-cost financing for areas such as small farming activities. It was particularly difficult to comprehend and accept these inflexible positions which everyone knew would not be politically accepted in the domestic markets of the richer countries.

Over time the multilaterals have been forced to change positions on some of these issues, the impact on the economies and social sectors of borrowing nations of the conditionalities and cross-conditionalities, contained in various loan agreements, has been detrimental. The consequences of the policy dictates were often not properly thought through and negatively impacted not only economic subsectors of the borrowing countries but also the social services such as health, education and transport.

MISGUIDED POLICY

In Jamaica’s case, specific examples can be provided of misguided policy dictates which have damaged development objectives for an extended period. The abandonment of a structured public transportation system, the closure of critically needed heath and training centres represent but a few examples of such misguided policy dictates imposed on Jamaican administrations, as part of loan conditionalities.

As Minister Clarke heads off to Washington, the following question must be posed. Is it that those who hail his appointment believe that he will be able to intervene, on behalf of countries like Jamaica, to ensure more rational and equitable treatment, when they seek assistance from the fund or the other members of the Washington Consensus? Even if the expectation is of a more limited form, is it that he would be expected to wield influence on Jamaica’s behalf to obtain special treatment if we seek to access some form of support from the fund?

If there are indeed persons who are of that view, let me disabuse their minds of any such misplaced hope. Institutions, such as the IMF, do not operate like that. No one individual, particularly one from a minor economic player, can have such influence.

I have no doubt that there will be persons who will view the thoughts expressed herein as an example of “bad mind”. To them I simply repeat: I wish Nigel nothing but the best. This appointment represents an important addition to his resume. My real regret is that the power and influence of those who “run the world” become even more entrenched when they can “buy” our “brightest and best”. This is not the first, and unfortunately, it won’t be the last, time that this approach is successfully employed.

Omar Davies is a member of the People’s National Party (PNP), he was the Minister of Finance of Jamaica from 1993 to 2007. Send feedback to columns@gleanerjm.com