The paradox of infrastructure

Lavern Clarke, Business Editor

Jamaica's bailout partner is not enamoured of the Golding administration's inherited love affair with infrastructure and its new infatuation with pretty buses.

Cutting travel time by minutes to an hour when the kitty is dry is not seen - not right now - as important as, say, creating economic opportunity for income generation in crime-ridden areas and rebalancing the socio-economic dynamics that drain the public purse either way.

The new mantra for the framers of policy is growth and jobs. Jamaica has never been especially good at either, but now it is being prodded to deliver on both by the International Monetary Fund (IMF).

It is hard to disagree that the embrace of new buses, patriotically decorated or not, does not address the exigency of jobs.

Not so public infrastructure projects, which mainly employ private firms, accounts for tens of thousands of jobs in good times, and have been a mainstay of construction gross domestic product.

That the IMF frowns on the costs involved may not be enough to sway the political directorate, especially inside a culture where the providers of good roads tend to be rewarded at the ballot box.

Back in the day, the old IMF of the 1970s was all about austerity which, as every Jamaican came to know, was code for eliminating any spending initiative that seemed customised for their well-being.

But in last week's visit, and under the 2010 rescue programme crafted for Jamaica, the IMF mission made a point of preaching adherence to a socially enhanced fiscal agenda - one as focused on jobs or employment inside low-income violence-prone enclaves as it is on macroeconomic stability.

What a difference four decades - and west Kingston - make.

Jamaica is broke, and on a spending diet. So its social agenda would have to be funded through redistribution of resources away from, say, road projects. IMF is okay with that.

Crime is a multibillion-dollar drain on the economy, whether linked to forced lockdown of business as hordes rampage in protection of their 'protectors'; or lost productivity as workers stay off the job to avoid the makers of mayhem; or companies shifting resources to non-income generating security costs away from compensation packages, which are the incubators of disposable income.

The Private Sector Organisation of Jamaica again highlighted the issue in its new position paperon security.

To its shame, and in really poor service to its members, which includes the richest local companies, Jamaica's largest corporate lobby chose not to deliver a current picture of what that cost is to business; instead, it reached back to decade-old data analysed by the University of the West Indies academic Professor Al Francis of what the costs were in 2001.

Then Francis estimated the problem at J$12.4 billion on the public purse, plus spend equivalent to two per cent of revenues of private enterprise.

Today, stock market companies alone earn revenue of half-trillion dollars and that is just about 40 companies of thousands.

Two per cent, assuming it holds currently, is equivalent to about J$10 billion of listed-company revenue.

A new study seems to be a whole lot cheaper investment.

More recently, October 2010, the Planning Institute of Jamaica estimated the outcome of one event, west Kingston-state of emergency, at J$13-18 billion in economic losses.

Still there is no data, no known study done, on whether a job-creating dollar spent in a violent community brings greater or less economic returns than a dollar spent to create a highway job. That surely is information that technocrats and lawmakers would need to craft sound job-growth policies.

Right now, we are left to guess at the benefits, though some are prone to believe that investing in social problems may have a greater pass-through effect in the long term, in the form of social peace.

Both job types by their nature are apt to be temporary, and were inner-city employment to be sustained it will take political commitment to long- term investment in a turnaround.

The World Bank has argued in the past that big road programmes can serve as a developmental tool.

Indeed, Jamaica is a convert of the highway doctrine, which counts travel time saved from an efficient road network that links producers to their markets, as a net benefit in the costing of logistics and the ultimate pricing of products.

In a pothole-free world, a modern, efficient road system is a function of advancement. But good living standards at all societal levels also carry great weight in the measurement of progress.

The dilemma for the Golding administration is that it has to do a lot of guesswork in deciding which investment will bring the bigger payoff on the journey to developed status by 2030, without blowing through its balanced-budget target by 2016.

The plus for the 'infrastructure as foundation for growth' proponents is that selection of candidates for construction jobs is not limited by neighbourhood.

At some point, Jamaica has to end the unending cycle of pothole patching, and produce roads in its towns, cities and highways that are not equivalent to bumpy roller-coaster rides.

It's called progress.

lavern.clarke gleanerjm.com