After the Budget Debate, what?

Ian Boyne, Contributor

The Budget Debate has come and gone. How has the discourse advanced us? How have our options been clarified and elucidated? How better informed are we about our prospects for growth?

The prime minister's speech reflected the reality of the times. There weren't as many goodies for as many persons as is traditional for a prime minister's presentation. Public-sector workers will benefit and the National Housing Trust has again been called upon to produce the milk, but there weren't many other areas to milk this year. Austerity is the new play in town, and while it is not a crowd-puller, it's the only one in the political theatre.

In closing the debate last Wednesday, Finance Minister Peter Phillips was buoyed by news that the long-awaited deal with the International Monetary Fund (IMF) had finally been signed off by its board, giving us approximately US$1 billion over a four-year period, with a drawdown of US$200 million in a few days. Desperately needed money. Phillips was particularly happy to announce that in addition to the early drawdown, $90 million will be given as direct budgetary support for the Government - not just balance-of-payment support. This is unusual and is probably being given for good behaviour on the part of the Government, which has pushed through some heavy austerity measures without any negative fallout.

Phillips had a strong opening and closing, directly tackling the issues and engaging his critics frontally and plausibly.

Far way to go

Phillips complained in his closing presentation that: "No one can deny that an objective assessment of the Budget Debate over the last two weeks reveals that we still have a far way to go in adopting a more meaningful and sincere approach to our political discourse. Rather than clarifying the realistic options facing the country in the midst of the crisis, we were often treated to a repertoire of petty political point-scoring and gimmickry from the Opposition." He did acknowledge, however, that there were "a few serious ideas coming from them".

And, indeed, it was commendable that both Opposition Leader Andrew Holness and Opposition Spokesman on Finance Audley Shaw gave concrete, practical recommendations, which they didn't have to do. It is a positive thing that the Opposition is making this kind of contribution. This is something the Opposition should con-tinue. It is important in providing critique to government policies that the Opposition demonstrates how, practically, the ruling administration can do things differently, considering its limited policy and fiscal space.

I was heartened to hear Audley Shaw say on 'Direct' last Wednesday night that he intended to raise the calibre of the discourse and will continue to make recommendations to the Government. This I must encourage and hope that he will not be sidetracked by the temptation to pander to the base. Our issues are much too serious to be trifled with.

And, in my view, both political parties are not giving enough attention to some of the policy approaches which have been proven empirically to contribute to growth. Both parties, for example, downplay the role of the State in economic development. This was abundantly clear in this Budget Debate.

Solidarity

Andrew Holness was explicit. He laid out the 10 functions of government in a section of his speech titled 'Role of Government'. In Holness' view, the State must look after education, health, justice, the environment, public infrastructural services, diplomatic services; provide an efficient public service and an appropriate policy environment and regulatory mechanisms, as well as an enabling environment "that serves as a springboard to stimulate ideas, innovation markets and industry". But it must not be a State that is interventionist.

Nothing said by Prime Minister Portia Simpson Miller or Finance Minister Peter Phillips showed that they fundamentally disagreed with Holness' Big 10 ticket items for the State. In fact, they share considerable agreement on the need for an efficient, well-functioning and facilitatory public sector. For economic growth, both parties believe it's just the market we must look to. Now it has been proven globally that those countries which grow do so through strong private markets. Utilising the market is crucial for growth. And growth is crucial for development.

Perhaps the leading neoliberal economic scholar in the world today, Jagdish Bhagwati, has just published, along with Arvin Panagariya, the book Why Growth Matters: How Economic Growth in India Reduced Poverty and the Lessons for Other Developing Countries (2013). It's a rich source of information showing why growth is critical to reducing poverty and improving living standards. I have no doubt about the role of markets and no one who is au fait with the actual experience of growing countries can doubt the importance of markets.

But what is often overlooked, and our parties here are way behind in the intellectual discourse, is the role of the State in economic development. We don't seem to be on the cutting edge of information where economic growth is concerned.

Phenomenal rise

A good place to start is with the latest Human Development Report (2013) titled The Rise of the South: Human Progress in a Diverse World. This report looks at the countries in the South which are growing, countries such as China, India, Brazil, South Africa, Malaysia, Indonesia and Thailand.

China alone has pulled more than 510 million people out of poverty, reducing its poverty rate from 60.2 per cent in 1990 to 13.1 per cent in 2008. In 1950, China, India and Brazil accounted for only 10 per cent of the world economy. Today, the combined GDP of eight major developing countries equals the GDP of the richest country in the world, the United States; and the South, as a whole, produces nearly half of world economic output. Its rise has been phenomenal. How has it done so?

In a chapter titled 'Drivers of Development Transformation', the authors ask in reference to fast-growing developing countries, "What accounts for their superior generation of growth and its conversion into human development? What are the policy lessons from diverse human development experiences of their countries?"

The first thing listed is 'A proactive developmental state'. The other two keys are "tapping of global markets and determined social policy innovation". The People's National Party (PNP) and the Jamaica Labour Party (JLP) are decisively on to the last two, but have given short shrift to the first.

"Transformation cannot be left to markets alone," advises the United Nations Development Programme (UNDP) in its authoritative Human Development Report 2013. Instead, the State must "mobilise society through policies and institutions that advance economic and social development".

The Human Development Report continues with its lessons: "In many high-performing developing countries, the State operates differently from the conventional welfare state, which aims to correct market failures and build social safety nets while promoting market-led growth. Instead, developmental states have been proactive in initiating and monitoring transformation in people's lives".

The prime minister has a developmentalist state frame or mind, but it is hard to use that framework under a neoliberal IMF programme. She has been fond of talking about both balancing the books while balancing people's lives. She has seen the connection between social development and economic development that many miss.

The Human Development Report makes it absolutely clear that social development fuels economic development, and that economic growth alone is not enough. (A phrase which Portia herself used in her Budget presentation).

"Countries cannot rely on growth alone .... The link between growth and human development is not automatic. It needs to be forged through pro-poor policies by concurrently investing in health and education, expanding decent jobs". The report decries both jobless growth and ruthless growth, "which is accompanied by rising inequality" and also "rootless growth which uses inappropriate models transplanted from elsewhere".

Growth Poles

The report shows that an activist State is one that creates policy mechanisms to engender growth and job creation, where private investors might not normally be interested. That's how Japan, Korea, Taiwan, Singapore and, to a lesser extent, Hong King grew. Korea had an Economic Planning Board. Picking winners and using the industrial policy planning approach has been a strategy that worked for Korea and other Asian Tigers, contrary to what my friend Claude Clarke has written.

Interestingly, Claude cites Seaga's leadership as an example of economic transformation and points to growth under his stewardship. But Seaga is nothing if not a pragmatic statist who has used heterodox policies to advance development. Seaga is not a classical laissez-faire capitalist.

Seaga believed in using the State for development. He was not just waiting on foreign investors to drop mega projects in his lap. That is why he was such an accomplished prime minister and has so many concrete successes under his belt. So many institutions were built by him. He never just waited on the invisible hand of the market.

And he openly clashed with the IMF while in power, rejecting their simplistic and dogmatic ideas, calling for a "fresh look" approach. If Seaga were in power today, the IMF would have a hard time with him. Neoliberal policies do not work. The countries which are growing rapidly - China, India, Brazil, Chile, etc - are not neoliberal states, even though they strongly use the market. But they have activist States.

Says the Human Development Report: "Development progress cannot be left to markets alone. Some markets not only fail to function but may not exist at all at early stages of development. Most successful development states have introduced industrial and related policies that enhance the private sector's potential to contribute to human development." Turkey did that, Tunisia did that. Others did it, too.

The problem is that some of the things an activist State needs to do are not facilitated under an IMF programme. So the question beyond the Budget Debate is, even if we achieve macroeconomic stability and modest growth, will that lead to development?

Ian Boyne is a veteran journalist. Email feedback to columns@gleanerjm.com and ianboyne1@yahoo.com.