Fix government, spur economy

Claude Clarke GUEST COLUMNIST

The Government's recent announcement of its decision to set up a hotline in the Ministry of Industry and Commerce to cut bureaucracy, in an attempt to achieve "radical improvements in the business environment and make Jamaica a more attractive place to invest", as the minister put it, more than anything else reflects the unpreparedness of our political leadership to confront the problems that beset our economy and how ad hoc the approach to development can be.

One cannot deny the need to minimise the negative effects of bureaucracy on business. But in the absence of any other economic initiative to meaningfully address the chronic uncompetitiveness of the Jamaican economic environment, one must ask whether the new Government has undertaken any analysis to identify and understand the reasons for the country's stubborn failure to attract significant investment, increase production and create jobs, and whether it really has the capacity to solve our problems.

Bureaucratic roadblocks to investments are, perhaps, the most frequently cited reason for Jamaica's failure to attract productive investments, create jobs, and increase economic output. Administration after administration has introduced initiatives to address factors named as impediments, on an ad hoc basis. None of these initiatives has changed our poor economic performance; and for a very simple reason. The principal roadblock to productive investments is not bureaucracy; it is the unattractive and uncompetitive economic environment that our governments have created.

Countries like Costa Rica and the Dominican Republic, which rank behind Jamaica on the World Bank's Ease of Doing Business index, but whose basic elements of economic competitiveness are better, have achieved average annual economic growth of more than five per cent for the last 20 years, while ours has crawled along at less than one per cent.

Bureaucratic hurdles

An attractive and competitive economic environment exerts a pulling force to capital more powerful than the force of gravity. Bureaucratic hurdles are a great nuisance, but rarely enough to prevent determined entrepreneurship from breaking through. Unnecessary bureaucratic processes should be removed and the procedures for investments streamlined, but if proper conceptual analysis were applied to the problem of our weak investment and economic performance, it would reveal that the real barrier is the uncompetitiveness of operating productive business in Jamaica.

Our energy cost is outrageously high; and our taxation, monetary, interest rate and trade policies all favour consumption over production. Until these anti-production features of our economy are corrected, hotlines to speed up investments will capture more headlines than capital.

In a recent essay titled 'Leading transformation in the 21st century', former British Prime Minister Tony Blair posited the view that "only systemic change, as opposed to incremental reform, will allow Government to keep pace in a rapidly changing world". Mr Blair based his very cogent analysis on his experience at the helm of one of Britain's most successful governments.

Britain's longest-serving prime minister further argued that to be able to achieve beneficial systemic change, Government must begin with a conceptual analysis that informs policy direction. This I found particularly interesting, as from the time I entered Government in 1989 to this day, I have not seen any evidence of conceptual analysis in the activities of any Jamaican Government. Recent administrations have appeared bereft of direction, seeming to serve no better purpose than to satisfy a desire to be in office.

the result of the failure

It is difficult to escape the conclusion that Jamaica's deepening social and economic crisis is the result of the failure of our governments to develop clear conceptual positions on which to base coherent policies to govern.

A meaningful conceptual analysis begins with identifying and understanding the components of the challenges a country faces and developing, in a systemic way, the changes needed to achieve the coherent and cohesive solutions needed to overcome them. But nothing we have seen during the continuum of governments in recent times suggests that any conceptual analysis to address our economic and social challenges was ever carried out.

This is the clearest explanation of the paralysis of our economy over the last two decades. Governments have lurched from crisis to crisis applying Band-Aid solutions to malignant economic and social disorders without proper diagnoses to guide treatment.

Successful modern societies are characterised by political leadership with clear ideas as to how to address the problems facing a country and strategies needed to address them. But recent Jamaican leaders seem to have come to us without the commitment to change that comes from clear ideas or analysis. As a result, we have had two administrations in succession, Bruce Golding's/Andrew Holness' and the present administration, coming to office ill equipped to provide the systemic changes needed to move the country forward.

It is difficult to discover the basis on which our leaders justify their desire for political power. Judging by the absence of strategic direction in their performance in office, it is unlikely it goes further than the base satisfaction of holding office.

Policy without the benefit of the intellectual rigour of conceptual analysis becomes reflexive, with political advantage its only guiding principle. It is this instinct towards political advantage that led to the deep debt crisis that now hobbles our economy.

For years we followed a one-dimensional economic strategy of borrowing to finance the cost of bad economic but politically beneficial policy. The strategic policies needed to move the country forward were nowhere to be seen. The national economy floundered and the social fabric unravelled.

The economic assets available to us are substantially wasted. Our people, our most important asset, are increasingly underskilled and underutilised. Our not inconsiderable domestic capital is substantially engaged in producing paper wealth rather than real economic value (goods and tradable services). A disproportionate share of economic output is squandered, feeding a profligate and unproductive Government whose incoherent policies and weak institutional framework have created one of the most uncompetitive macroeconomic environments in the world.

A new Government has come to office after two decades of directionless economic policies, and its first 10 months have given us no hope that it has a properly thought-out plan to engage the productive potential of our people, our capital and our natural assets.

There is a desperate need for the economy to be shifted from a consumption focus to production; from import activities to exports; from a fractured social framework to a more cohesive orderly society that builds social capital and creates economic value. The new administration should have come to office prepared to challenge the 'givens' of old economic policies that have failed and left us in the dust of our regional and international competitors; and our people bereft of economic opportunity, suffocating in a tattered social environment.

production-focused approach

Such a production-focused approach might have been able to persuade the International Monetary Fund (IMF) to agree to a programme that would emphasise economic development over unbearable fiscal austerity as the means to repay our debt.

A focused pro-development approach would have included a production-oriented tax-reform package; a realistic, competitiveness-based monetary and interest rate policy, a plan to reform government to make it more facilitating of production and less costly; and a plan to reshape our industrial infrastructure for more efficient movement of the inputs to production.

The current Opposition, too, would do well to heed Tony Blair's advice and use its present time in opposition to develop the conceptual framework within which it will be able to successfully put the country on a development path. The opposition leader should, by now, be formulating a conceptual framework to inform his party's approach to governance, should it be called upon to lead.

However, much of Jamaica's economic failure is attributable to how easily our people can be satisfied with piecemeal reform rather than systemic change. Small, incremental actions that change nothing are preferred to major tax reform that could significantly favour production over consumption, encourage investment in production over paper wealth, and overhaul monetary policy to incentivise production and exports over consumption and imports.

We are afraid to change an economic order that we acknowledge is strangling the economy because we have conditioned ourselves to believe that improvement is possible without change. We prefer to remain blissfully removed from the truth that only change can better our future.

These are circumstances that call for political leadership motivated by a national mission rather than the satisfaction of power: a leadership willing to convince the people to believe in the value of change. No government in recent times has even attempted to accomplish that mission.

My concern about the agreement now being negotiated with the IMF is not whether there will be one, but whether the agreement will bring about the change that will grow the economy and take our people to a better future.

Claude Clarke is a businessman and former minister of trade. Email feedback to columns@gleanerjm.com.