It’s whose fault? The IMF’s MD tells us what we know already

Once upon a time, the acronym IMF stood for ‘It’s Manley’s fault’, in Jamaica. The IMF as an institution was for nothing but vilification in the eyes of many, if not most, Jamaicans. I do not think that has changed drastically, but time and repeated experiences have led many, if not most, Jamaicans to understand that the IMF and Jamaica will be locked at the hip for many years because Jamaica likes too much to be a naughty boy and cannot be trusted to do what he’s told. He also hag an annoying tendency to start something, make out that he was doing it, and then drift off to watch some cricket match and leave the task unfinished. By the time the match was over, all the work had been wasted. The child was a royal pain. But, children do grow up and change with age. So, with Jamaica, it seems.

The IMF’s Managing Director (MD), Christine Lagarde, made her first official visit to the Caribbean, starting with Jamaica. She met the principal policy makers: ‘the Most Hon. Prime Minister Portia Miller-Simpson, Hon. Minister Peter Phillips and Bank of Jamaica Governor Brian Wynter’. christinelagardeJ20140627GTShe laid on the words of praise and some spoonfuls of feel goodness. Based on the IMF’s press release:

  • commended … commitment to reform;
  • economic outlook is improving…growth has picked up, unemployment has declined, inflation has been brought under control;
  • Debt-to- GDP has firmly been put on a downward trajectory.

But, more needs to be done:

  • Other major reforms that are still pending, including improving the collection of taxes, modernizing the public sector, and improving the business climate, and a prudent fiscal stance needs to be sustained.

The MD also met with representatives from the private sector, labour unions and opposition.

She also met with an interesting peer group: “Women leaders and I also discussed critical gender and economic challenges.”

Finally, she acknowledged what many, if not most, Jamaicans feel: “Economic adjustment is painful in the short run. Many Jamaicans have experienced wage freezes, and are facing higher prices for food and other essentials.”

So, she was pleased with the student, and wanted to see him to continue the good work.

The statement does not cover every word the MD uttered. Some seem to be excited that she mentioned that some US politicians urged the IMF to help Jamaica.  That’s no great shakes. Lobbying is part of the American political scene. Jamaica has its supporters and I would be surprised if they had not put in a word. That’s one of the reasons why we have an Ambassador in Washington, DC, to help steer some politicians into supporting us and making some noise for our causes. But, there are plenty more US politicians who don’t give a tinker’s cuss about Jamaica, whether because they have little truck with the IMF and its bailing out, or they thing that domestic needs trump any foreign concerns, or because they have their own preferred overseas area to support. So, let’s not thinking that Jamaica has suddenly hit the jackpot with American political sentiment.

But, what did the MD say that was new in any substantive sense? Nothing, that I can see. We knew that Jamaica had done some things well: the IMF performance criteria had been met and disbursements came as scheduled. We knew that more needed to be done: the programme is not near completion, so that must imply that way is left to go. We can reason, right? We know that the road is painful: the levels of unemployment have stayed high; inflation has eased slightly; the exchange rate has been on a water ride of a slide, which has touched everyone, even those well-protected with foreign exchange assets, or income streams. So, why the glee about the obvious? MD’s do not make country visits to lay into their hosts about how badly they have done things. The MD is not briefed to leave a bad taste behind after  the trip: visits like these are not about pushing countries off the gang-plank, but to keep them walking and believing that they wont fall off and drown in shark-infested  waters.

The MD also made a visit to UWI Mona, where she spoke about ‘The Caribbean and the IMF—Building a Partnership for the Future’. She talked touchingly about Jamaica, including about its cultural and sporting prowess worldwide. She also talked about the most touchy of subjects, the exchange rate: “In Jamaica, letting the exchange rate depreciate, although painful, has helped restore a good deal of lost competitiveness, and will support investment and job creation.”

It so happened that the day after that remark, I found myself in the company of two businessmen, trying to coax a little white ball around a grassy area. I had returned the night before from Europe, so was jet lagged. I had never met them before, and in getting to know them I mentioned that I used to work at the IMF. We talked about the exchange rate. “What do we have to export?” one of the men asked me. I began talking about bauxite, tourism, and agricultural produce. We agreed that most of that set was not really sensitive to the exchange rate, either because prices were negotiated, or tourism depended more on conditions in the home country. Tourists also like spending as little as possible above the cost of the holiday, especially in places that they don’t know too well. So, the depreciation wouldn’t help much in making us more competitive for the bulk of our exports.

We talked about the fact that Jamaica had good agricultural markets, but these were no longer there. Did the depreciation really help us regain those markets, e.g. bananas to Europe. It did not seem so.

The businessmen thought most of the impact of the depreciation was on domestic costs, and imports, rather than on generating exports. In other words, much pain for Jamaicans, and little to show by way of a much improved balance of payments.

I mentioned one of our best exports: labour skills. We talked about the well-trained labour force that the country (and region) had in the 1950s/60s, much of which was shipped off to Britain, and in later decades many were shipped off to the USA and Canada, as well. We also reaped the benefit of a later and strong trend of graduates leaving Jamaica (some 80 percent). Both helped by remitting to Jamaica, but also they could offer eyes that had seen more and could offer new ways to Jamaica. We are still reaping the benefits of ‘exporting’ those skills–we get about US$150 million a month, or US$1780 million a year (according to the Bank of Jamaica’s Remittance Report for February 2014). Those figures almost match what we earn from tourism, and exceed what we earn from exporting goods by about 30 percent, and is many multiples what we gain from foreign direct investment. Jamaicans get about US$760 a head. Remittances continue on an upward trend. But, the country has no plan to develop and export its people skills: that happens because job opportunities in Jamaica are so poor. Now, we can argue about whether or not those remittances mainly bolster an excessive demand for foreign goods and services. They sustain the economy to a degree that means we would have been dead, buried, and up in smoke years ago, without them.

The MD had to be delicate about the nation’s treasured flower, though. The Jamaican dollar has been wilting and showing the need for water. Many, if not most, Jamaicans, see the exchange movement without realising what it really represents. Because, the country has opted to let the market determine the external value of the currency, it is allowed to show that the exchange rate has been significantly overvalued. The IMF has said this for some time, and markets agree, and keep selling it more than buying it. But, the slide is also the ‘reward’ for faking it all these years. The fact that no one came and hung a sign saying ‘Beware! Naughty boy lives here’, does not mean that the world did not know what was behind our national gate. Sure, the world loved Jamaica when it saw its sprinters lapping others and bolting to the finish line first. They also adored the way they were captivated by musical rhythms that forced any living person to dance. But, they were not fooled into thinking that Jamaica was the best in any wider sense. The exchange rate reflects what they think: the Jamaican economy stinks. That’s what the MD means when saying that more depreciation has to happen. The stench was so high that the J$ has to go lower to compensate: it’s an inverse odour meter.

Where will the fall stop?

Easier for Jamaicans to see the J$ as a potential victim
Easier for Jamaicans to see the J$ as a potential victim

The market does not tell you when the bottom has arrived. It may continue falling to 115, or 120, or 125 to the US dollar. People hate not knowing, but that’s going to be the way for a few years to come. No point thinking that it will find a level and stay there for ever. Countries that have fixed exchange rates make us feel worse because they do not suffer this visible vote of no-confidence. But, they are supposed to be having more pain in other joints of the economy. We know that’s not the case, but that can’t last either, so The Bahamian and Barbadian economies have yet to experience some nasty shocks–but, let’s not dwell on our neighbours’ problems. Ours are bad enough.

My business persons, saw the problem simply. Too many public servants. Too little productivity. We do not know how to work hard. I could agree easily with the latter two points. We have anecdotes to support those views, even if data are slight. Just the same morning, I had stopped to pick up some staff of the golf course, who were waiting for taxis to get up there. They were 45 minutes late for work when I got to them. That’s a double mark for low productivity and how not to work hard. But, I would find it hard to blame them, totally. We have poor public transport, even though we have a lot of public transport. Working people without cars suffer a type of hardship that is really heavy. By contrast, I had just been in London and France for two weeks, and knew that getting around by public transport can be much easier. But, both countries have been into that for centuries; they both have some of the oldest public transport systems, that run around the place like strands of spaghetti.

I had trouble with the public servants argument. People say the same in almost every country, and the drain they supposedly impose has not dragged all countries down to where Jamaica is. My French hosts talked about how they public servants were just idlers, but someone was responsible for the country looking neat and clean enough to almost eat off very street. Sure, there may be too many public servants, but I would argue that many private firms are also bloated. We just prefer to sack public servants because we hate taxes, but we pay higher prices with less of a snarl. In France, they are a hated species also because they often want to exercise their rights to withdraw labour for better working conditions. We don’t see that much in Jamaica.

Yes, cut some government workers and lessen the public spending. How much better would Jamaica be in producing things? Not much, I hazard, because our poor work culture is not just a problem where the public purse is concerned. We have some amazingly dedicated people. Anecdotes again. Check out the service provided by Knutsford Express bus services: punctual, clean, tidy, good value for money. But, also check out any range of private companies that offer services and goods, with a ‘it soon come’ attitude. The Jamaican patty shops are not a great example of how to run a streamlined ship. But, we still go there and line up for patties. Jamaicans are probably no different at this moment than some of the world’s so-called efficient countries. We are locked into watching World Cup football. The Chinese have devised grand schemes to get doctors’ sick certificates to have the month free from work. Jamaicans just wont bother the doctor. Same results. But, when the Chinese go back to work, we believe that they will soon catch up, where the Jamaican will always be behind.

We have not figured out how to enjoy what we want on this tropical paradise and still get it done in terms of the things we say we are committed to doing. We need to treat getting to work on time the same way as we do getting flights to Florida: late doesn’t cut it. We need to do our jobs like those who fly planes: you can’t go and take long lunch breaks and expect the people to wait for you to return. They wont fly with you. We need some serious pride in ourselves and our country. In the same way that France, and much of England, too, has understood that cleanliness is very important, and now add to that by having organized waste collection and recycling, we need to follow. I went to Portland and back over the weekend. I did not appreciate seeing drivers in front of me throw their plastic bottles out of the window to land on the verge, and join other bottles. Who did the drivers think would pick up their garbage? I did not need to see piles of rubbish on the beach in the morning when I went for a swim.

I liked the way the people who organized the party I attended did it: guests picked up and put into plastic bags; men raked up and put into trash bags; a truck came and took it all away. We did not separate, as would have been the case in Europe, so that material could go for recycling and less would go to trash. But, we dealt with the cleaning. Some electricians came late in the day, to dismantle the lighting and dance set-up. They tried not to disturb our football-watching, but worked to clear the area fast, then head off. The caterers had done an excellent job with dinner and then breakfast. They get paid for what they do, but they did it to a very high standard. The principal guest said “delicious”; I said “excellent”. They left just before the last guests did, just after the first televised match. They cleared away, and left no trace of their activities. It’s not really hard, if you just do your job.

But, we are like the football players: we switch off. For them, the results are clear: Balotelli sneaks behind Cahill to head in at the far post–England lose 2-1. We try to do a rush job and it’s botched: Casillas had an easy clearance but muffs the kick and Robben dances away with the ball to help the Dutch to a 5-1 trouncing of Spain. Or Cote d’Ivoire, with time almost done and a tie locked up, giving away a needless penalty, and losing to Greece with the last kick, and not progressing to the next round, instead of the Greeks. Lost focus; forgot the context; lost the match. Beat themselves.

We look to blame others for faults of our own: we adopt the so-called ‘Suárez defence’. We do not commit any foul and bite someone. Instead, we trip and then stumble into their shoulder, and the teeth marks are just another indication of how the powerful elites will do anything to keep the little man from beating the bigger man. Like Uruguay, we are the perennial victims. Never expect us to shoulder (sorry, Chiellini) the blame for what we did.

Well, the world has other ideas. It wont give us a chance to steal victories when we have played like stinkers, and get to a penalty shoot-out and get lucky to take the trophy. No, the world treats us like marathon runners. Do it better than everyone else for a good long time and you shall win the prize.

Jamaicans love sport, so the analogies may get those message over better. We need to stop praising ourselves like we do cricketers, who can block and obstruct and be told they are doing a really fantastic job. We need to look for the example of the Jamaican sprint relay team, who thrash the Americans with basic talent, but great teamwork to pass the baton efficiently. We want to be like van Persie, having the imagination to craft the sublime header to startle the world and score the goal. That’s what our creative industries tend to do. We need to be grafters, whether old or young: work is work. Messi can be flashy, but most times, he just never stops working to do what he knows needs to be done. Dodging the boots and elbows, and not taking the easy option of falling over. Then, he sees his opening and takes it, left footed into the top corner, with time running out.

Take that! Messi's left foot can talk
Take that! Messi’s left foot can talk

Go and talk to Iran. Or, Timmie Cahill doing his job, even though it did not change the match: watch this.

Jamaicans know what to do. They just need to understand that it wont happen without their actually doing it.

Author: Dennis G Jones (aka 'The Grasshopper')

Retired International Monetary Fund economist. My blog is for organizing my ideas and thoughts about a range of topics. I was born in Jamaica, but spent 30 years being educated, living, and working in the UK. I lived in the USA for two decades, and worked and travelled abroad, extensively, throughout my careers and for pleasure. My views have a wide international perspective. Father of 3 girls. Also, married to an economist. :)