Politicians must dish out the cold, hard facts

Dennis Morrison, Contributor

Last week, we saw the fall of governments in Greece and Italy pushed by the loss of public confidence and turmoil in financial markets, as the debt and financial crisis engulfing the Eurozone intensified. This completed the demise of incumbent regimes in every country of the so-called PIIGS group [Portugal, Ireland, Italy, Greece, Spain]. The PIIGS have fallen!

Deteriorating economic conditions and the austerity measures being imposed have provoked anger and fear and undermined the credibility and effectiveness of political leaders. In Greece and Italy, where governments survive for only short periods, the political parties have responded by turning to technocrats to preside over unity governments to tackle the economic crisis. The similarities with our own worsening debt problems and sputtering economy should concentrate the minds of the Jamaican people.

First, every Jamaican should understand that the problems in Europe are already creating instability in the world's financial system, which, in turn, is disrupting global economic activity with effects reverberating in every country. Were the crisis to deepen, the world would certainly be hit by another recession, with devastating consequences for trade, on which countries like Jamaica are heavily dependent.

Given the fragility of the Jamaican economy, we cannot afford for our leaders to be caught off guard and be slow to respond, as was the case in the last recession, where the consequences have been serious.

No different from Greece

Second, it is cause for real concern that many Jamaicans are still unaware that our current economic situation is as precarious as that of the debt-ridden countries of Europe. If there is any lesson we can learn from the Greek situation, it is that management of our economic crisis will require a high degree of cooperation, sacrifice and tolerance by the populace. That cooperation and social solidarity can only be secured if there is forthrightness in explaining the depth of the problems and wide public understanding of the issues.

It is the responsibility of the country's political leadership to facilitate this public discussion. And this is more so the case if the Government that emerges after the upcoming election is to have a mandate and the credibility to make the difficult decisions that lie ahead. Jamaica risks serious social unrest should this task be neglected. An election campaign based on sugar-coated promises will only deepen public cynicism and further damage the credibility of the political class.

Outstanding IMF issues

More specifically, we have been told that there are critical outstanding issues with the IMF regarding certain conditions of the economic programme upon which the loan agreement was based. Information about the state of play of negotiations and the policy issues and options being considered is vital to public understanding and trust. We need not look to Greece or Italy to gain insight on this matter; our own experience with the 1976 general election and the subsequent dealings with the IMF [Is Manley Fault] should have taught us a lot.

In those elections that the PNP won by a landslide, the electorate was told in general terms about hardships to come, but was led to believe that Jamaica would not seek IMF financing. Harsh IMF conditionalities such as devaluation of the exchange rate, which was at the heart of the orthodoxy in that era, were ruled out. But even as the election was being fought on this premise, preparations were already under way for exploratory talks with the Fund.

With the economy faltering and a balance-of-payment crisis unfolding, the Manley government had to face the reality of limited options. It eventually turned to the IMF and was dealt the bitter medicine of devaluation of the currency and savage budget cuts. The fallout among the PNP rank and file was disastrous, while there was a sense of betrayal in the wider public. Disillusionment spread quickly and the credibility of the administration dissipated.

With our debt problems, depressed investment levels and weak growth prospects, Jamaicans are going to have to cope with painful adjustments in public spending, wage restraint and higher contributions for social services. This adjustment must begin in the coming year and will demand honest, bold and inclusive leadership if social discontent is to be avoided.

The process of preparing our people to meet the challenges ahead must begin in this election campaign, but to ensure this, civil society and the press will have to be assertive and vigilant. Our democracy works best when the citizens participate actively and are not prepared to be mere followers.

Dennis Morrison is an economist. Email feedback to columns@gleanerjm.com.