Better must come (Pt 1)

Claude Clarke

This is a lightly edited presentation by Claude Clarke to the Jamaica Manufacturers' Association Annual Awards Banquet 2013.

It seems I have spent my entire life in manufacturing. I remember when I was just a little boy, my mother took me to a trade show at the St Joseph's Elementary School. There was one thing I saw there that riveted me to the spot and held me spellbound. It was a demonstration model of the production process for making what I then thought was the greatest thing in all the world: condensed milk; the thing I so enjoyed pouring in my hand and licking with great delight.

As I watched the process that turned cow's milk, which I disliked, into the thing I loved more than anything else, I excitedly said to my mother, "Mama, it's just like when Jesus turned water into wine. It is a miracle!" Smiling lovingly at me, my mother said, "No, son, it's not a miracle, it's called manufacturing."

Since then, I have been absolutely fascinated with this phenomenon of turning things that are not particularly useful or appealing into products that people need and want, and are prepared to pay good money for.

I am pretty sure that, had I questioned my mother further, she would have told me that was how value is created. And as I grew older, and presumably a little wiser, it became clear to me that it is also how the wealth of a country is built.

Building value to satisfy the needs and desires of consumers is at the heart of the activity we call manufacturing. It is the foundation on which economic development stands. It is the miracle that turns raw cotton into fine garments, that turns rough wood into beautiful furniture and, yes, it is the process that turns bitter cocoa beans into delicious chocolate. A dollar's worth of raw cocoa beans entering a factory can leave with a value of more than $10 - 900 per cent greater value added to a material by the process of manufacturing.

And that is why, in all but the tiniest micro states like Monaco and Bermuda, and the most advanced post-industrial economies like the United States, it is this kind of activity, manufacturing, that provides the most reliable means of building real economic value: more than services, more than mining, more than agriculture and certainly much more than government.

And because of the high value it creates, it employs more labour at higher wages than any other sector. It establishes more links to other sectors: backward links, forward links, and sideways links. Manufacturing sets off a chain of economic activities that run throughout an economy and is the most effective way for a country to develop and to lift its people out of poverty and into prosperity.

Manufacturing decline

And it is because this is so logical and so obvious that it is so strange that so many Jamaican governments have, for so long, overlooked the central importance of manufacturing to national development.

In the 50 years since our Independence, manufacturing, as a share of our national economy, has been allowed to decline to less than half of its original size. And while this high-value creating activity was declining, the financial sector, whose purpose is to serve the productive economy, was registering record growth. And we have all seen the result: an economy that has been stuck in stagnation for almost a quarter-century. Yet no one in government has been prepared to recognise the obvious connection between the shrinking of manufacturing and the failure of the economy to grow.

When we entered Independence in 1962, Jamaica was only just starting on the road to industrialisation. And we had a very promising start. Jamaica's economy registered vigorous growth in the immediate pre-Independence and post-Independence periods. Manufacturing grew impressively. Factories were springing up everywhere.

Unfortunately, since then, manufacturing has been in retreat. And so has the economy. In 1960, the International Monetary Fund listed only 33 countries with a higher per-capita GDP than Jamaica's. Last year, the same IMF showed 93 countries ahead of Jamaica.

As the economy contracts and we celebrate what remains of our declining manufacturing sector, we ought to take a moment to contemplate our future. Are we prepared to see manufacturing sink even further and the economy with it? Or are we going to stand and fight to restore the sector to the health and the vitality that it once enjoyed? In short, are we going to fight for Jamaica?

Well, there is an old friend of mine, an outstanding manufacturer, who gives me hope. His commitment to, and optimism for, Jamaica's manufacturing is so deeply engrained that he never ends a conversation with me without saying, "Claude, I believe Jamaica's best days are ahead of us."

His faith has given me hope that what a former prime minister was famous for saying may yet be true: "Better must come." But that former prime minister would be the first to tell you that better won't come by itself. We have to make it come. And it won't come unless we deal with the truth.

AVOIDING PAST MISTAKES

The Bible says "the truth will set you free". I believe we need to free ourselves, so we will never repeat the great economic mistakes we made in the past. When, unlike Barbados and Trinidad, we failed to correct our economic uncompetitiveness, but compounded it with high interest rates in order to protect an overpriced currency that was already a major cause of our uncompetitiveness, Jamaican production was priced out of the market: even our own market. And half our factories were driven out of business. The growth of manufacturing, which had previously been the country's best performing sector, was reversed.

With such a critical asset for creating economic value and jobs so severely damaged, Government turned to borrowing to fill the economic gap. And we sit here sinking in an ocean of debt: a debt one and a half times the size of our shrinking economy: an economy that has not seen growth for more than one and a half years.

But while we must learn from our past mistakes, we should not allow ourselves to be daunted by them. We must draw on our inner strength as manufacturers and producers and commit ourselves to do whatever is necessary to persuade our Government to shape economic policies that will enable the Jamaican economy to create the value we need for success.

That is why I was happy when I learnt that last year, the prime minister was here; and gave you her assurance that the Government will give its support to the manufacturing sector. I have no doubt about her sincerity. But I can't help but wonder, how it is that one year later, after a national Budget has been approved and after an IMF economic programme has been agreed, there is no sign of any policy or any action that could possibly promote the growth of manufacturing in Jamaica.

And I cannot help but think an opportunity has been missed for the Government to begin the process of realising the prime minister's most passionately held goals: creating jobs and reducing poverty.

And I cannot help but wonder whether that is so because manufacturers have failed to convince the Government of the central role that manufacturing must play in creating the economic value that will make the attainment of the prime minister's goals possible.

See Part Two next week.

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