DECLARE WAR ON DEBT AND DEFICITS

Let’s begin with good news.  There’s been a marked improvement in control of government spending in 2013 over 2012.  Jamaica has also made gains in monetary and trade freedoms. 

So says the Index of Economic Freedom (IEF), an annual guide published by The Wall Street Journal and The Heritage Foundation, Washington’s No. 1 think tank.  The IEF now ranks Jamaica 52nd (of 185 countries) in the World in economic freedom.  According to this publication, Jamaica’s “Freedom Index” is currently 66.8 – an improvement of 1.7 points over 2012.

The publishers define “economic freedom” as “the fundamental right of every human to control his or her own labour and property. In an economically free society, individuals are free to work, produce, consume, and invest in any way they please…………… In economically free societies, governments allow labour, capital and goods to move freely, and refrain from coercion or constraint of liberty beyond the extent necessary to protect and maintain liberty itself.

The IEF is calculated based on an assessment of ten economic “rights” contained in four broad categories:

1.    Rule of Law (property rights, freedom from corruption);

2.    Limited Government (fiscal freedom, government spending);

3.    Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and

4.    Open Markets (trade freedom, investment freedom, financial freedom).

Rule of Law/Property Rights

I wonder if the assessors looked at Jamaican laws instead of Jamaican realities since we seem unable to obtain a conviction in the simplest of cases and our property rights are studiously ignored.  Recent high profile cases have been so ineptly prosecuted that the Office of the D.P.P. is being made to appear what horse racing punters would call a non-trier.

If the IEF’s definition “the fundamental right of every human to control his or her own labour and property” is to be taken seriously, how is it that squatting on private property is at an all time high and increasing exponentially?  It takes our courts months, sometimes years, at great expense to property owners, to evict any person unlawfully occupying property.  Governments’ response is to increase property taxes. 

On the labour front, we fail to recognize that one’s employment is as much one’s property (constitutionally protected as a fundamental human right) as is one’s land.  As a result, employees’ property rights are routinely abused by employers’ illegal imposition of arbitrary “policies” such as suspending from work accused citizens charged with non-violent crimes and admitted to bail by the court until they can “clear their name”.  These employers can’t grasp simple principle that not even the law of the land requires an accused citizen to “clear his name” but contrarily imposes on the State a burden of proving the citizen guilty beyond a reasonable doubt.  Until such time, all citizens are presumed innocent.

Elected Public officials, appointed under the Constitution as the Peoples’ Representatives, are different.  They owe us a fiduciary duty and, accordingly, must prove to us their innocence of alleged corruption.   As I’ve previously written (on the Richard Azan brouhaha), that standard is “above reproach”. 

Limited Government/Fiscal Freedom.

What “fiscal freedom” does Jamaica enjoy under this oppressive IMF regime?  Jamaica has little or no say in how its revenues are spent and “little” just left town.    Yet, despite rumoured IMF strictures and a reduced budget, Government still spends like a drunken sailor.  A plethora of unnecessary government agencies continue to bleed the public purse without pity or remorse.  In my favourite industry alone, the world’s only government-owned racetrack, operating live racing twice per week, is regulated by a Racing Commission with over 50 employees and a Betting Gaming and Lotteries Commission similarly staffed.  Recently, Government has added a Casino Commission.  That’s creating a mountain to regulate a molehill.

The public service is twice the size required to deliver essential government services and spends like Angelina Jolie at an Ethiopian orphanage.  How many government offices have you visited and seen staff wearing sweaters as protection from extra cold air conditioning?  How many public service drivers wait for hours on their VIP bosses in SUVs with engines and air conditioning running?

Regulatory Efficiency/Business Freedom.

This was the IEF’s own comment:

                   “Significantly burdensome government regulation and political                           favouritism are a drag on the Jamaican economy, and a cumbersome bureaucracy dissuades potential entrepreneurs.  Pervasive corruption continues unchecked by anti-corruption measures that lack enforcement capacity. Continuing fiscal                  deficits have pushed public debt to about 140 percent of GDP, trapping Jamaica in a vicious cycle of debt service and borrowing, and the new government has not yet demonstrated the political will to tackle the tough reforms needed to eliminate the deficit.

So, nothing was found to give us hope for deficit elimination but, despite this damning commentary, we’re 52nd in the World in economic freedom.  Yay!  God help those ranked 53rd to 185th.

Open Markets/Trade Freedom.

According to STATIN’s latest bulletin, Jamaica’s trade deficit for January/April 2013 exceeded US$1.5 billion.  Imports were valued at US$2.1 billion. Total exports were US$0.6 billion.  Looks like Jamaica’s markets were open but others were slammed shut.

During that same January/April 2013 period, Jamaica incurred a US$227.8 million trade deficit with her CARICOM partners.  Imports from CARICOM, valued at an astonishing US$248.8 million, accounted for 11.7 per cent of total imports.  Total exports to CARICOM for the period was valued at US$21.0 million, representing a decline over the same period last year of US$2.0 million or 8.8 per cent.

Are we mad?

Well, our indomitable BOJ Governor doesn’t seem perturbed.  Ever optimistic, he addressed the JEA Awards Banquet (June 11, 2013) as follows:

BOJ is committed to maintaining single digit inflation over the medium term with the long term objective of reducing inflation to the level of our major trading partners.  Bank of Jamaica is also committed to a flexible exchange rate regime consistent with enhancing the competitiveness of the Jamaican economy.  The combination of low inflation and exchange rate flexibility is a valuable tool in maintaining the competitiveness of our export sector.  In addition, the current historically low interest rates are conducive to stronger investment and growth than we have had in the past.”

Reducing Inflation to level of major trading partners

Jamaica’s year-to-date official inflation rate (remember, STATIN/BOJ’s cute calculations don’t include any fuel cost factor) was teetering just below the double-digit mark (over 9% in April to June) before recording 8.75% in July.  Jamaica’s major trading partner continues to be the U.S.A. whose inflation rate is 1.8%.  The U.K is at 2.8%.  Trinidad is at 6.8% in July (had been less than 6% all year).  Barbados is at 3%.  Exactly who are we kidding?

Low inflation/Exchange Rate flexibility maintains export competitiveness.

Sometimes I think The Gov likes to hear his own voice.  His “low” inflation/flexible exchange rate combo produced exports for January/April valued at US$604.6 million, down from US$611.2 million last year.  That’s a decrease of US$6.6 million.  Fix it, Gov, it’s broke.

Low Interest Rates for stronger growth and investment

The truth is that GDP contracted by 0.5% (negative growth) in January/April.  The last foreign direct investment numbers I saw were 1.64% of GDP in 2010 and 0.2% of GDP in 2011.

Graduates from the Ray Charles School of Economics can see fundamental change in the way we do business is urgently required.  Politicking must stop.  If it means we must suspend elections for 10 years, so be it.  Our talent pool is too small for us to be able to afford tribalism.  We need all hands on deck.  An immediate cabinet reshuffle could, for example, return Andrew Holness to the Education Ministry and put Peter Phillips and Audley Shaw together at Finance.  Either we ignore our tribal instincts and appoint a bipartisan cabinet or plan Jamaica’s funeral.

Government must be free to implement significant public service cuts without fear of knee-jerk Opposition hyperbolic resistance seeking political mileage.  Government must be free, without fear of electoral consequence, to implement real tax reform by eliminating an anachronistic, uncollectible and unfairly enforced income tax and instead introducing value added and consumer taxes as its revenue base.  If we don’t see the urgent need for a coalition government for the betterment of all citizens but especially the poor, then our hysterical blindness is incurable.

Sista P, we know you love the poor.  Andrew, you recently declared poverty your first priority so I know you too love the poor.  But do you love the poor more than you love your own Party or is the vice more versa?  Are you prepared to sacrifice self and/or party ambitions on the altar of a better Jamaica?  Do you see it’s the waste of available talent at the leadership level caused by tribal politics that’s preventing us from moving forward at this time?  Do you see it’s fear of electoral reprisal that prevents successive governments from implementing what it knows or ought to know is urgent and immediate?

Jamaica can’t afford any more political posturing.  We must save every cent we can; seek economic growth via fundamental policy shift; put Jamaica’s interest above any other; create and grow small businesses; incentivise agriculture; and radically reduce bureaucracy.

A ten year tribal war cease fire should do it.  If the U.S.A. can declare war on drugs and terrorism, we can declare war on debt and deficits permitting us to use wartime strategies such as a coalition government.  When debt is reduced to manageable levels; when trade imbalances are corrected by whatever means necessary; when BOTH interest rates and inflation are well below 5%; when the public service operates like a lean, mean efficiency machine, we can consider splurging on tribal politics again.  Hopefully, citizens will see the dangers inherent in that and insist it never returns.

In future, elections should be for Prime Minister and Member of Parliament separately.  The elected Prime Minister could then be constitutionally forced to appoint a 50/50 cabinet from each Party.  Cabinet either reduces deficits or is reshuffled every 2 years.   

It all reminds me of a naughty limerick from my dissolute youth:

                   “There was a young man named Dave                                                                               who kept a dead whore in his cave.                                                                                        He said ‘I must admit                                                                                                      I’m a bit of a twit’                                                                                                                       but think of the money I’ve saved”

Peace and Love

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