Editorial | Escaping Jamaica’s low-growth loop

When Jamaicans vote in the general election on September 3 the stakes will be high for the policies of the government they choose will carry generational consequences.

For half a century, the island’s economy has been stuck in low gear. Per capita income has inched forward, but not enough to lift living standards in a lasting way. Changing this trajectory will need more than mere slogans or demonising the other side. It will demand breaking the interconnected loops in which the country has been tangled.

At the centre containment is the debt–investment trap. Heavy borrowing in the 1970s and ’80s created a huge debt burden. This was compounded in the 1990s by the domestic financial crisis, when the government absorbed private banking and insurance losses through FINSAC, as well as by the chronic losses of poorly managed public enterprises (including the Bank of Jamaica) that required costly bailouts.

Servicing this debt crowded out requisite investment in infrastructure, skills and innovation. The upshot: stagnant productivity, weak growth, and low revenues – feeding the debt problem.

The fiscal reforms over the last decade, particularly the generation of high primary surpluses, have brought the ratio of debt to gross domestic product (GDP) ratio down to below 70 per cent. This is still above the pre-FINSAC level.

The high-cost competitiveness loop is another brake. Electricity and logistics costs are among the highest in Latin America and the Caribbean. This cripples exporters and deters the development of new industries. Without energy investment at scale, and in cheaper renewables, costs will remain high and the loop repeats.

EQUALLY CORROSIVE

The crime-trust loop is equally corrosive. High violence drives up business costs, scares off investors, and pushes skilled workers abroad. Indeed close to 80 per cent of Jamaica’s tertiary-educated citizens ultimately migrate. Weak trust in institutions undermines cooperation and compliance, which fuels more crime.

Other loops reinforce the stagnation: poor education and training outcomes weaken the efficiency efforts of firms; governance volatility and corruption raise investment risk; a narrow economic base leaves the island exposed to the shocks of hurricanes, pandemics, and commodity swings; and shallow finance limits long-term productive investment. Even Jamaica’s vast diaspora, so valuable in remittances, stays underleveraged as partners in innovation, capital, and market access.

In facing these challenges, Jamaica’s governments have often mistaken necessary conditions for sufficient ones. Macroeconomic stability, for instance, was essential. It will, however, never drive a sustainable growth surge without sustained investment in productivity, R&D, diversification, and resilience.

Especially in the current geopolitical environment, growth at the pace and levels needed to transform Jamaica requires a national industrial policy approach akin to the EU’s Green Industrial Policy, and explicit actions as those of the United States under both the Biden and Trump administrations.

Crime has long been treated mainly as a policing issue, not as a top-tier economic constraint. Energy reform is mostly discussed without confronting the uncompetitive cost structure that makes value-added manufacturing unviable. Human capital policy has focused on schooling without ensuring skills match industry needs. And perhaps most importantly, problems have been addressed in isolation, rather than as parts of an interconnected system, despite the rhetoric of joined-up government.

The next 25 years will be defined not only by how Jamaica cuts these loops, but by how it also responds to the artificial intelligence revolution. AI is already transforming finance, logistics, manufacturing, creative industries, and services.

THREAT AND OPPORTUNITY

For Jamaica, AI is both a threat and an opportunity. Ignore it and the island’s already eroding comparative advantage in labour-intensive services, like BPO, will accelerate as many mid-skill jobs are automated away. Embraced, AI can multiply productivity in agriculture, tourism, logistics, health, and the creative economy. It can also enable micro-firms to compete globally, transform education delivery, and modernise public administration.

Jamaica, therefore, needs the mindset, leadership, and human capital to successfully meet this challenge. The country must, therefore, commit to critical approaches for exploiting the new technologies.

These include embedding of data literacy, coding, and AI-assisted problem-solving from early secondary school.

Additionally, the government must utilise AI technologies in advancing the digitising of services to cut permitting times, detect fraud, and improve tax collection, and otherwise cut costs. It must also push AI-powered industries – from tourism personalisation to smart farming, fintech, and exportable digital products.

But as it promotes the use of AI for innovation and growth the government must ensure that there are appropriate ethical and regulatory frameworks and regulation around the emerging technology - to protect privacy, fairness and the norms of humanity.

The bottomline: breaking Jamaica’s the underperformance loops in the era of AI will demand that the new administration commits to:

• debt rules and the expansion/creation of a Resilience Fund that will protect capital spending even after shocks;

• an energy logistics price reset to bring costs down to at least the regional median;

• seeing crime as a hindrance to the economic infrastructure so as to match enforcement with jobs and skills in high-risk communities;

• a national productivity and quality mission to give firm-level support for technology upgrades, export standards, and management;

• aligning skills training and apprenticeship systems with AI and other emerging technologies;

• the provision of development financing for production and growth via long-term credit, export financing, and blended finance for tradables and tech;

• greater governance and permitting certainty with the use of digital system;

• The development of climate-resilient infrastructure; and

• the involvement of the diaspora as innovation partners by issuing the long-promised diaspora bonds, and driving co-innovation platforms, and global market links.

However articulated, voters should be able to perceive loop-untangling ideas and policy proposals in the manifestos, if they are serious about giving Jamaica and fighting chance over the next 25 years.