A look at Jamaica's historical economic challenges and what is required for economic and social development to occur
Charting Jamaica's economic and Social Development
Charting Jamaica' Economic and Social Development is a look at Jamaica's underlying economic challenges using the discipline of financial analysis, mixed with economic theory. This is referred to by the book as Accountonomics.
The book looks at the macroeconomic numbers and applies financial analaysis to it to interpret objectively what are the fundamental issues with the economy. The book looks at various data to corroborate inferences.
Policy options are recommended that will solve the current vicious circle Jamaica has found itself in since the start of the 1970s.
I. Defining a need: Since the high levels of economic growth during the 1960s Jamaica has failed to achieve any sustained period of growth. In fact over the 36 years between 1972 and 2007 Jamaica’s growth has averaged only around two percent per annum. What is even more important is that Jamaica has failed to achieve relative economic and social development, even during the 1960s high growth period. A review of the GDP growth numbers over the years could support the position that Jamaica was on the way to economic and social development but that the intervening social and political changes of the 1970s lay the foundation for Jamaica’s continued struggle to achieve development that kept pace with similar countries. This argument has been posited by many; with others saying that the social changes were necessary. Whatever the outcome of this continuing discussion, one thing is certain, and that is that the period of the 1970s saw significant declines in GDP following on the record growth levels of the 1960s.
There is no arguing that in absolute terms Jamaica has seen some form of development, especially on a social level, but when compared to the economic development of similar countries , especially within CARICOM, Jamaica has fallen short.
I, like many Jamaicans, have never known what it is like to understand the meaning of hope in Jamaica, as captured in the quote below.
“Like maybe about three or four generations of Jamaicans, I was born after independence and grew up in Jamaica during the 1970s to 1990s. So excuse my cynicism and urgency for a better Jamaica. I have never known what it is like to be in a Jamaica that is prosperous and is looking towards a brighter future. So while you all reminisce about the hope in 1962 and the good times of the 1960s, remember that all I know about Jamaica is the state of emergency in the 1970s, the 1980 election, the black market and foreign exchange restrictions in the 1980s, the financial crisis and high crime rate of the 1990s, and the anaemic growth and fiscal deficits continuing into the new century of the 2000s.”
This is a message shared by many Jamaicans who have often wondered why we are unable to get out of this downward spiral of economic and social stagnation. In fact one leading private sector figure mentioned to me that even though Jamaica has not made any progress we still seem to shower those responsible for our problems with national honours.
This spurred me to think about the much needed solution for Jamaica to achieve the desirable economic and social development. For as said by the present Prime Minister, the Honourable Bruce Golding, given the natural resources and achievements there is no reason for Jamaica to be poor.
During the 1980s and 1990s, on becoming aware of Jamaica’s economic environment, I listened to commentaries from many economists as they prescribed solutions but to no avail as Jamaica’s economy has worsened over the years. These proposals sounded solid, and many were, but have not resulted in Jamaica’s improvement.
In the 1980s various exchange rate regimes were being debated, including the merits and demerits of a fixed or managed floating rate. This was a time when the economy was highly protected. The restrictions included licenses to import to import motor vehicles and foreign currency restrictions such as an US$50 allowed per trip that could be taken out of the country.
By the 1990s foreign exchange controls were no longer a problem and motor vehicles were in abundance. No longer could you buy a car and sell it back three years later for twice the amount of money purchased for. In the early 1990s many purchased United States dollars and put it under their mattress, or bought any stock on the Jamaica Stock Exchange, as both the United States dollar and stocks were guaranteed to go up, given the high levels of inflation. By the mid 1990s that changed however, as with a new finance minister, Dr. Omar Davies, the focus was on stabilizing the macro economy by controlling inflation and the exchange rate. Although the macroeconomic stability was necessary and welcome, the change was too sudden for a low productivity and uncompetitive private sector to survive the global onslaught. Asset prices fell through the floor and interest rates shot up, while businesses tried to grapple with the new environment. The financial crisis was upon Jamaica by 1996.
This obvious conclusion is that there is something fundamentally wrong with the structure of Jamaica’s economic foundation in its continued quest for economic growth, a fiscal surplus, and the pursuit of macroeconomic stability.
In October 2008 I discussed this concern and idea for a paper with a leading business personality who like many seemed frustrated that Jamaica has not been able to make any sustainable progress. My own view is that what Jamaica needed was not more aid or grants, in the form of money, from the multilaterals but assistance in helping to chart the course for Jamaica’s development. Even with much aid, grant funding, and debt, this has got Jamaica into nothing but more debt and economic stagnation. This raises the thought that if Jamaica did not have any of those types of funding then it may have been better off, not having the money to squander.
This publication came out of the quest for the answer implied by Prime Minister Golding of why is Jamaica so poor if we have so much. The fact is that despite independence, the efforts of governments since independence, and its natural resources Jamaica has not been to achieve any long term sustainable economic development since the end of the 1960s. If this is to be achieved then it is necessary to understand what went wrong and what is needed to put the country on the track to long term sustainable economic and social development.
II. Accountonomics: My own professional discipline is in accounting, having been a chartered accountant since 1993, achieving the M.Sc. Accounting in 1989, from the UWI, the Certified Public Accountant examinations in 1990 from the state of California, and membership of the Institute of Chartered Accountants of Jamaica in 1993, eventually becoming a fellow, where today I sit on the council. My only flirtation with formal economic education was my economic classes at the Cambridge Advanced Level Exams – sixth form – and my first degree at the UWI. So my venture in economics can be seen as nothing more than a regular accountant with an interest in understanding why Jamaica, unlike other Caribbean countries with fewer resources, has failed to see any economic development.
My own analysis and assessment of what is needed to propel Jamaica forward is not based on pure economics but is a mix between economic theory and accounting type analysis, in particular the discipline of financial statement analysis. I couldn’t give a purely economic perspective, as I know more about accounting than economics and after listening to the economists over the years I am not sure that I would want to offer an economic analysis and solution only, as it has always seemed to fail.
This approach of blending accounting analysis and economic theory I will refer to as Accountonomics, as I can only claim this to be a hybrid of both.