Development is about people

Claude Clarke, Contributor

International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn's recent advice to national policymakers that in order to cope with the challenges of the new global economy they should make job creation the priority of their economic strategy accords with the pre-election mantra of the present Jamaica Labour Party (JLP) administration that "jobs, jobs, jobs" must be Jamaica's central economic priority.

But after three and a half years in office, the administration has given no indication that it either understands what is required to create these jobs, or that it is prepared to do what is necessary to generate them. This is borne out by respected Montego Bay businessman Mark Kerr-Jarrett's recent lament that the present economic policy environment and structural arrangements are obstacles to a prospective investment opportunity with the potential to create thousands of information and communication technology jobs in St James.

This is not surprising, as Government is yet to introduce a coherent and realistic set of policies and institutional arrangements capable of creating the conditions within which existing jobs can be protected and incremental jobs generated. To the contrary, its policies reflect no strategic direction or any clear connection with the objective of job creation.

The IMF chief is, of course, correct: economic development is best secured through job creation. He knows that people are a country's most valuable economic resource and that their productive employment leads inexorably to economic development. However, recent Jamaican governments have consistently failed to pursue policies capable of engaging the productive potential of our people.

Little employment

Instead, their policies have had the effect of attracting investments directed principally at our natural resources, with relatively little employment content, rather than high-employment investments attracted to the productive capacity of our people. This was not always the case. In the 1950s and 1960s, and again in the 1980s, although there were investments aimed at exploiting our natural resources, Jamaica's productivity and competitiveness were significant factors attracting investments to our shores.

However, in the 1990s and 2000s, largely as a result of Government's exchange rate and other monetary and fiscal policies, the cost of living, and consequently, the cost of labour, increased at rates that were not matched by gains in productivity, resulting in a dramatic decline in the competitiveness of Jamaicans as a whole. With uncompetitive people-cost, jobs emigrated from our economy. Thousands of Jamaicans retreated to the ranks of the unemployed and many more disappeared into the category of those with no hope of employment.

Factories built to engage the productive capacity of our people either closed or were converted to other purposes. More than 75 per cent of the Factories Corporation of Jamaica's inventory of factory space is now either unoccupied, unusable, or has been put to use for purposes other than production. It is, therefore, not surprising that since the 1980s, not a single square foot of factory space has been built by that body.

The economic policies that led to this dramatic fallout in productive activities in Jamaica are at the heart of the country's continued failure to create jobs and provide the means to bring health and vitality to the economy and enable the country to overcome the challenges presented by the new global economy.

A comparison between Jamaica and four regional economies with which we compete for investments and markets - Trinidad and Tobago, Barbados, Costa Rica, and the Dominican Republic - shows Jamaica to be the country with the lowest level of employment of its population. While 41 per cent of the Jamaican population is employed, the employment-to-population ratio in Barbados is 63 per cent. It is 59 per cent in Trinidad and Tobago, 52 per cent in Costa Rica, and 46 per cent in the Dominican Republic.

The customary focus on the unemployment rate has distracted us from the real tragedy of our economic situation: the colossal waste of the economic value of our people. It is inexcusable that Jamaica's employment of its people is 35 per cent lower than Barbados'.

To achieve the employment level of Barbados, Jamaica will need to bring almost 600,000 people who are currently idle into employment. But with the productivity and competitiveness of Jamaican labour having been undermined by Government's economic policies, the economy's capacity to create jobs has been severely weakened, and our ability to attract investments is now essentially limited to the appeal of our natural resources: our sand, sea and sun; and minerals and soil.

At the same time, Costa Rica, while also attracting investments to its natural resources, has been able to use the productivity of its people to secure investments in labour-intensive production. The most outstanding of these investments is the Intel Corporation's investment in a giant semiconductor assembly and test factory, which brought almost 3,000 relatively high-paying jobs to Costa Ricans, and indirectly, created employment for 2,000 others.

Little effect on growth

Intel's investment was made in the productivity of the Costa Rican people and added more than five per cent to the country's GDP in 1999. Jamaica has had very little such people-based investments since the 1980s, and the foreign investments we have seen have had relatively little effect on either employment or economic growth.

Although there is a clear need to train and educate our people to improve their productive capacity, the job of government is to design policies that will bring employment opportunity to them in spite of this limitation.

All successful economies passed through a stage where they had to create employment for people at relatively low skills and education levels. The economic value created by the output of those low-skilled workers contributed to the country's ability to train and educate the workforce and led to the subsequent productivity increases that propelled their economies to the prosperity they enjoy today.

If the Government is to make jobs the top priority of economic decision making, it will have to dramatically change course from the decidedly anti-production economic policies pursued over the last two decades. These policies were oblivious to production, and, therefore, were not focused on the productive value of people. As a result, little effort was made to bring production opportunities to them in or near the communities in which they live.

However, before these policies were introduced in the 1990s, production was treated as a priority and there was a clear strategy to bring employment opportunities to the people. Factories were built all over the country, bringing industrial employment opportunities to as wide a field as possible. But today, these factories are hardly used for productive purposes and offer little employment opportunity to rural and depressed urban communities.

The history of today's industrialised countries is characterised by the phenomenon of the 'factory town' or 'mill town': factories in or near small towns or neighbourhoods which provide relatively high-value employment for a large part of their populations. These industrial enterprises provide a powerful stimulus to the creation of small businesses and generate secondary employment that further enhances family and community stability through the proximity of work to home.

Impact of factories

Jamaica has also enjoyed some success with that strategy. Scores of small businesses in and around Bog Walk owe their existence to the presence of the Nestlé factory in that town. This was also the role played by the Goodyear factory in Yallahs and similar factories which operated in several rural towns across Jamaica during the 1950s and 1960s. These were among the principal reasons our economy was able to achieve the rapid growth it did during that period.

To get back to growth, the macroeconomic policies and structural deficiencies that undermined the economy's productivity and competitiveness after the 1980s will have to be corrected. But for the economy to create jobs in a socially harmonious way on the scale required, Government must introduce policies to induce industrial enterprises to locate in areas where people have been starved of job opportunities.

It is disappointing that after three and a half years in office, the present administration has not changed the anti-production, job-destroying economic course it inherited. If it had, the Kerr-Jarrett proposal for creating jobs in St James would not be floundering for lack of an enabling policy environment.

Government's preoccupation seems to be with balancing its fiscal books. While this is understandable, given the importance of clearing the quarterly IMF hurdles, it must realise that without a programme to engage more of our people in production, success with balancing the books can be only transient, and the fiscal problems with which it is so concerned will inevitably return in a compounded and perpetual form.

It is past time for the Government to give life and meaning to its campaign mantra of "jobs, jobs, jobs" and set its sights on a new course that will lead to the development of the people for the people.

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