Audley Shaw
Lloyd Goodleigh, Contributor
THE CURRENT impasse between Government and its employees is the precursor to Jamaica's re-engagement with the International Monetary Fund (IMF) and its historic conditionalities.
There are rumours that the IMF's uniformed model of structural adjustment is no longer the norm. Change might be envisioned, but it is a long way from reality; and as Britain and the United States of America (USA) muddle through this current recession, the reformation of the IMF is becoming more unlikely.
This is despite British Prime Minister Gordon Brown's statement that India, China and Brazil should be given a greater voice in Bretton Woods's policies. As stated by one observer, "The IMF/World Bank have long forgotten that they are inter-governmental public institutions and currently act more as a private club that is hostage to the macroeconomic objectives of certain governments."
Should be applicable to all
The observer also points out that "these governments share the view that the policies of the IMF/World Bank, which are clearly to their benefit, should be applicable to all of us".
Of course, one of those governments is Britain and the other is the USA - partners in the 90-year-old Anglo-American Alliance. They are proponents of the Anglo-American economic model that has propelled the world into its current social and economic recession.
The uninitiated, who might find it hard to believe that the alliance could be so crass, should take some time out and revisit the Cold War and its techniques. It might be useful to remember that both sides in the Cold War had used art, music, literature, social and natural science as propaganda tools for accomplishing what the Central Intelligence Agency (CIA) had termed "move a subject in a direction you desire, for reasons he believes to be his own". To accomplish this they had accepted George Kennan's 'messianic concept of the necessary lie' in pursuit of the national interest.
So, back to the IMF/World Bank. The US and the UK are major shareholders in the World Bank. No one can conceive of them not exercising their shareholder rights on policy matters. Furthermore, there is no evidence that Brazil, China and India are interested in increasing their shareholdings in the IMF/World Bank, a measure that would increase their influence on policy. So, ironically, we have the situation where those who have caused the current problem are also setting the policies in the only agencies that are supposed to assist the rest of us.
The dilemma
What about reformed conditionalities? In case you thought that this reform was manifest, look at the case of Latvia in June 2009 - a Baltic nation of 2.2 million people with GDP of US$34 billion. Its output has fallen by 17 per cent; the country is burdened by substantial budget and external financing gaps. The Government of Latvia is trying to reduce budget deficit of 9.2 per cent of GDP. It had originally projected a deficit of five per cent; the IMF had accepted seven per cent. To accomplish that goal, the IMF is insisting that public sector salaries must fall by 30 per cent and fall back to 2006 levels.
The government's dilemma? Balancing IMF demands with the knowledge that it will increase levels of poverty. The citizens of Latvia rioted in January 2009 and brought down the previous administration.
The fact is that of the last nine IMF country programmes all were of the uniform mode. The only new wrinkle is a 'Fast Track Emergency Lending Facility'. But the policy is still that of pro-cycilical fiscal and monetary tightening, designed to restore market confidence, combined with IMF intervention to bail out international creditors and investors.
Fiscal tightening, in essence, means reduced public sector wages and benefits, a reduction in overall levels of social expenditure and a curtailment on capital expenditures. We had better all be aware that all those approaches have profound implications for social policy, the real value of our pensions and other transfer payments and an erosion of the value of the national minimum wage.
Collective fault
But, we as a people have been there before. Jamaica had one of the longest-running IMF programmes in the history of the fund. We have the scars to prove it. But then our return to the IMF, the moneylender of last resort, is our collective fault. The fact is that over time we have failed to grow our economy, collect the taxes that are legally due and to deal with our crime problem. In economic life those unresolved issues have reinforced each other and have contributed to our decline. The fact is the IMF has not changed and will not do so in the foreseeable future.
According to Joseph Stiglitz, former chief economist of the World Bank and Nobel Prize winner: "The IMF provides funds to countries only on a condition that they engage in contractionary policies." This development is aggravated by the fact that the IMF insists that countries with large trade deficits cut them back. Contraction is the name of the game, and the lowering of demand the norm.
Projected results
In the 1970s, a combination of the views of University of Sussex's Bertie Hind - who argued that wages and salaries had too great a share of GDP - and the then government's need for balance of payment support led to Jamaica's entry into IMF programmes. What Jamaican trade unions were told at the time was that these policies would result in economic growth, increases in productivity, increased investment, the lessening of inequality in the society and, above all, that they would solve Jamaica's balance of payment problems.
None of those value-added goals was ever achieved - primarily because the objectives might have been value-added but the prescriptions were static efficiencies; contraction, curtailment, wage guidelines, layoffs, downsizing, allowing the deterioration of infrastructures, restrictions, and closing down training and educational facilities.
The Jamaica Confederation of Trades Unions (JCTU) has pointed out the fact that over time Jamaica has attempted or flirted with all the recommended policies that centered around economic stability and inflation management - fiscal discipline, redirection of public expenditure, tax reform, liberalisation of interest rates, trade liberalisation, competitive exchange rates, liberalisation of capital flows, privatisation, deregulation.These have all been disguised under various nomenclatures: Structural Adjustment Loan Programme, Enhanced Structural Adjustment and the most recent wrinkle, Poverty Reduction Strategy - Reduction and Growth Facility.
Jamaica has still failed to generate the rate of economic growth and the social stability that is required in a globalised world. The stark fact is that our situation is not good. Our reality in July of 2009 is grim.
Banking crises typically have long-lasting effects on employment. Earlier crises have indicated higher levels of employment from four to five years after economic recovery.
All these issues and others have broadsided a Jamaican economy that was shaky in the first place. Our economy has been stagnant for over 35 years. Real Gross Domestic Product for the period 1973-2009 grew by only 0.5 per cent per annum.
This, despite the rhetoric of both political parties and their adherents. The fact is the standard of living of the average Jamaican has remained stagnant. Real GDP per capita in 1972 was greater than it is in 2009.
Total factor productivity
Primarily because total factor productivity declined by 1.74 per cent per annum between 1973 and 2009. The fact is, productivity is the touchstone of economic growth. Simply stated, total factor productivity has been reducing GDP growth by 1.74 per cent annually. When this is coupled with the fact that crime robs Jamaica of five per cent GDP growth every year you start to understand the reasons for our current stagnation.
The IMF re-engagement will do nothing to meet the challenges in our economy. But then, labour market improvement has never been a concern of IMF. Internationally, the verdict on the IMF and our Jamaican experience coincide: "The evidence is now clear cut that the uniform model of structural adjustment imposed on developing countries during the 1980s and the 1990s destroyed more economies than it assisted. Significant reductions in spending on health and education were socially destabilising and economically detrimental by reducing countries' long-term human resource potential."
In essence, we will become poorer. The ramification for workers and their families is enormous. The ramification for the social fabric and stability is incalculable. Parliament faces its greatest challenge post-Independence. Despite our historic failings, despite the current world situation, despite conditionalities, as Jamaicans we need an 'In House' understanding - coherent strategic plans that at a minimum addresses 'three principles'
As the finance minister invites in the IMF/World Bank for assistance, the trade unions will insist that the International Labour Organisation be invited to help design and implement the appropriate actions to be undertaken, in defence of these principles.
Virgil should have been more explicit: deadly snakes lie in our grass.
Lloyd Goodleigh is president of the Jamaica Confederation of Trade Unions.