Jamaica is on the verge of signing another IMF agreement. Write a post suggesting a sustainable alternative to this deal. Suggest how young people might contribute to solving the nation’s economic crisis.
Better late than never. I have a penchant for clichés so I beg your pardon, but in this case I believe the phrase to be right on the money (sorry). Fun and jokes aside I believe this #BlogBoutDat idea is a good one as the only way for any society to truly progress is with CONSTRUCTIVE dialogue among its people that fosters action. Kudos to the persons who had this brainchild.
Now as you can see from above I have chosen the grand task of offering an alternative to what most have called in some way shape or form a “necessary evil” i.e. signing an agreement with the IMF for Jamaica to receive an Extended Fund Facility. Now as a self-proclaimed academic and teacher of sorts I feel this is an opportunity to not only preach but teach as well. This is so as many people “bun a fire” on the IMF without even knowing really what purpose it serves.
The International Monetary Fund is one of three powerful international organizations founded in the liberal economic philosophy of the free market and had their roots in the aftermath of World War II where the victors of the war created the institutional framework that would govern the world economy moving forward. Together these institutions have been labeled the Bretton Woods Institutions as a result of the international conference that spawned them that was held in Bretton Woods New Hampshire, USA.
The IMF does 3 principal things:
1) Surveillance – pays attentions to the functioning of the International financial system
2) Technical Assistance – provides nations with technical expertise where it is deemed desirable and/or requested
3) Lending – the IMF is a lender of last resort where states can get “cheap money” in light of balance of payments (relationship between money coming in and out of the country) problems.
In and of itself this doesn’t seem so bad so why are we even writing on this topic? Why are we feverishly seeking alternatives to the lovely help being bestowed upon us from a benevolent international partner?
TWO ANSWERS 1) Conditionalities and 2) Underlying philosophy
Conditionalities are in a nutshell certain actions that a state must do to qualify for the money being loaned. At their core these conditionalities are aimed at ensuring the viability of the IMF by ensuring loans are repaid so it continues to carry out its function.
Again in and of itself this seems quite ok so why the big hullabaloo about seeking an alternative to the IMF. That brings us to the underlying philosophy. The conditionalities are based on what has pejoratively become known as “The Washington Consensus” i.e. a raft of liberal economic policy prescriptions which among other things put forward:
• Currency devaluation
• Free trade
• Liberalised capital markets
• Austerity – increased taxation and/or reduced government spending
as the way out of economic difficulties faced by the borrower. I could right an entire blog on the negatives about the IMF but that is for another day . suffice it to say this Washington consensus and the conditionalities it births is what has led to many calling the IMF a “Bitter Medicine.”
So what’s the alternative?
This might be anti-climactic but in the short term I see no viable alternative to the IMF. I think the belt tightening it promotes has become necessary and its better we tighten our belts and get some well needed foreign currency into our reserves at the same time. Now let us be clear the IMF is no grand saviour and if we the people of Jamaica and our leaders operate under the status quo then we will be right back at square one. So rather than propose a grand alternative I think there are several common sense actions that must be taken if we are going to reach a point where we don’t need the IMF. And these actions are not confined to government but focus on we the people including young people as we barely even recognise the important role we have to play.
1) Adjust our consumer tastes. – “Buy Jamaican” is a buzz phrase but how many people truly take it seriously. This is a fundamental way that at the grass roots level we can affect our economic reality. For every good or service that has to be imported to satisfy our “foreign minded” tastes that is valuable foreign exchange departing our shores. So as best as possible we need to consume our local goods to reduce the strain on our foreign reserves. Many people bawl about the exchange rate but ignore the roll of their consumerism on the demand for US dollars hence the exchange rate.
2) Deal with our energy issues – Anyone who has ever looked at a JPS bill knows that it is ridiculously expensive to consume electricity in Jamaica. This is magnified for mass users of electricity i.e. our productive sectors. Businesses cannot grow and regular people cannot pay their bills. Diversification of energy sources particularly going into renewables have been mooted as the solution. Whatever the solution is at the level of policy something needs to be done yesterday. The biggest draw on our foreign currency reserves is the money we spend importing oil. We need to reduce this amount spent on oil at a policy level as well as on a micro level. We at our personal level need to get into energy conservation. Turn off the lights, don’t let the TV watch you at night the more power we use the more money we spend importing oil the more we need loans to shore up our currency reserves.
3) Live within our means. – Again this applies to both the government as well as we the people. The government must find a way to stop wanton borrowing as well as become more efficient and cut waste. A lot of resources could be saved if at the government level waste in cut. Less job duplication, less friends in positions where they aren’t really working, less expensive desks and cars etc. Not saying one should live in “squalor” as was famously said but at the same time acknowledging where we are we must live within our means. The same principle must apply to us as people in our personal lives. Spending as if there is no tomorrow, cannot be sustained.
4) Unite around common goals – again another cliché but this is our only hope. The status quo of playing politics with every single issue. Or changing major policy decisions every five years based on the political flavour of the month cannot work. We need to forge a consensus around where we want to go, how we plan to get there and all persons green, orange purple or yellow get behind this and work towards this common goal. Until we get here or close to here we might remain in a position where we need to be dictated to by the IMF and his friends out there in the world.
I’m sure there are more complicated and intelligent responses to our economic plight that have been and can be offered but this is my two cents. So here we go on our IMF path. Let us hope that everyone plays there part so that in another 10 years persons are not writing about these same issues that we have been writing about for 50 years and continue to write.
Shalom
Reasoning with The Cunning One 