Lots of wounds had to licked after Thursday’s voting was over. Tory councils got booted.
PM Johnson’s Partygate antics weighed heavily:
London was a ‘bloodbath’ and the PM now lives in a Labour-controlled borough:
The outcomes elsewhere were mixed, though it was a good night for the Lib-Dems.
So, what’s next?
The UK is learning to ‘live with’ Brexit, much like it’s being asked to “live with” COVID. One problem, though, is that Brexit was a policy position bombarded onto a population, as opposed to some set of natural phenomena. But, both have crept into the lives of Britons with devastating effect. The latest spin of the Brexit wheel is essentially about ministers admitting they bamboozled the electorate. Read on!
First, the delay of border controls:
Next, admissions from the minister who negotiated Brexit that the people were misled:
In a world of properly functioning politics, this would be grounds for the bags getting packed by the leader of government. No such actions, yet. But, on top of other scandals, is this act of political deceit not a straw too many for the political camel to bear?
I’ve enjoyed some personal refocusing by giving more attention to humourous takes on life’s issues. Cartoons are the easiest to understand, visually, although jokes are good, but sometimes don’t do well in translation:
Macron wins another turn as France’s president:
A humourous take on a common problem on urban areas:
The internal contradictions of some American political posturing:
New waves of COVID spread are putting parts of China, namely Shanghai, into a strong lockdown:
Elon Musk’s pending purchase of Twitter is raising concerns and comment, especially the spectre of a door reopened for former President Trump:
The possibility that Russia’s aims are much wider than Ukraine was noted:
Misogynistic reports about Angela Rayner, MP, were given a subtle pushback:
British PM, Boris Johnson, is still in the eye of a political storm:
Some good historical perspective on the current wave of inflation:
If you’ve not followed some US political events, this may miss you:
Finally, out of time:
Context:
Originally posted on Perspectives: Cast iron building on Orange Street – photo: Paul Hamilton This post was first published as a two-part article in …
Before It’s All Gone: Preserving Jamaica’s Architectural Heritage
Finance minister, Dr. Nigel Clarke, began the set-piece budget debate, yesterday, with the presentation of budget spending priorities (shown in the extensive thread, below):
It includes substantial infrastructure spending and financial support to many parts of the population and economy, in light of the devastating economic impact of the COVID19 pandemic.
That impact is clear from the main economic news that GDP likely declined over the year -12%; most importantly, for people, 130,00 jobs lost during pandemic, against 100,000 created in four previous years:
Against this planned spending, the finance minister again committed to “no new taxes”. But, that’s a nice phrase that covers the fact that tax revenues have exceeded budget, consistently, under the current and previous JLP administrations.
Public understanding of this process was again helped by the publication of an interactive version of the budget:
The budget schedule is as follows:
Dr. Clarke detailed yesterday the $830.8-billion Budget for the new fiscal year, which he tabled in the House on February 18.
The Standing Finance Committee of the House had met on March 3 and 4 to consider the Budget.
Opposition Spokesman on Finance, Planning and the Public Service, Julian Robinson, is expected to make his presentation on Thursday, March 11, while Opposition Leader, Mark Golding, will speak on Tuesday, March 16.
Prime Minister, the Most Hon. Andrew Holness, will make his presentation on Thursday, March 18.
On Tuesday, March 23, Dr. Clarke will close the debate.
On Tuesday, March 23, Dr. Clarke will close the debate.
Conventional wisdom during the pandemic is that remittances would shrink, substantially, as economic activity slowed and incomes were squeezed. See several analyses by the World Bank:
So, policy focus was on how to keep remittances flowing:
The story continued this way into mid-year:
Countries like Venezuela—already in dire economic straits—were seeing remittances down sharply into November:
But Africa was bucking some trends, falling by much less than projected:
So, too, Pacific countries:
However, apart from a few months at the outset, Jamaica has seen remittances hold up.
Remittances to Jamaica have remained almost on the same level as in 2019 or higher, through the calendar third quarter:
Why? Some argued that farm workers going to Canada and the USA were more numerous than in previous years.
The best explanation I’ve seen came from the Bank of Jamaica and is that travel restrictions have forced Jamaican diaspora support to come in the form of remittances rather than cash brought during travel to the island.
So, the expected shrinkage in the supply of foreign exchange due to remittances and tourism has been notably muted. This is thus a disguised form of tourism in that the arrival of people is not what really matters economically to the destination country, rather what tourists spend in that economy. This could also expalin some of the robustness seen in African remittance flows, where proxmity to, and air links with, Europe would mean similar patterns as for Jamaica and its diaspora. With the USA, it’s less likely that travel to and from Africa explains much, as air links are generally poor; though links to Europe are excellent and could have been a transit point in the past.
For Jamaica, it could also be argued that it’s better that flows keep coming from diaspora sources–rather than unconnected random foreigners–which (like remittances, in general) more likely goes fully into the local economy in the first instance (accepting that in later stages it can finance spending on imports as well as local goods and services).
Bottom line is that more foreign exchange is coming into the country than had been anticipated. That’s consistent with the exchange rate not collapsing.
************
Data consideration:
The Balance of Payments treatment of remittance flows isn’t really important in this assessment, but here it is, for better understanding.
In the balance of payments framework, compensation of employees is a component of income while workers’ remittances are a component of current transfers; both are part of the current account. Migrants’ transfers are a component of capital transfers, which is part of the capital account.
Remittances in the Balance of Payments Framework: Current …
Predictions of a hard COVID winter are beginning to look right. Much of Europe is now bracing for an extended second wave of COVID infections:
Most European countries have decided to impose a range of national lockdowns. Germany, which had managed its situation well, is preparing for maybe five months of restrictions:
By contrast, the USA, which has gone through a wave of new highs of cases and deaths over the past two weeks is far from any sort of national restrictions. CNN reported:
‘More than 100,000 new Covid-19 cases were reported in the United States on Saturday, the 12th day in a row the country saw new cases of the virus rise by six figures.
Friday saw the highest daily case count since the pandemic began with 184,514 new cases.
As of Saturday afternoon US time, 116,716 new Covid-19 cases and 917 additional deaths had been reported.
The US has reported more than 10.8 million cases and more than 245,000 deaths since the start of the pandemic.’
Texas is way out in front, and President Trump refuses any such national measures, emphasizing last week that “this administration” wont do that, citing the financial/economic costs and lost jobs. (This was also his near ‘acceptance’ moment that he had lost the election.)
In fact, yesterday saw El Paso’s lockdown deemed illegal by courts. Newsweek reported:
‘Texas state appeals court rejected a stay-at-home order in El Paso County on Friday despite the community seeing a surge in new cases and rapidly decreasing space in morgue trucks and tent hospitals.
The Eighth District Court of Appeals ruled in favor of the state and local restaurant owners, who sued El Paso District Judge Ricardo Samaniego for issuing a city-wide shutdown after Texas Gov. Greg Abbott issued a reopening order on October 7.’
Asian countries are also ramping up restrictions:
What is also clear, is where life has moved back towards ‘normalcy’ has seen recent difficulties, with sporting and educational activities having to be curtailed as cases spike among playing and coaching personnel as well as with students and teachers.
Cancellations are starting to mount and affect fixtures:
Plans to adjust to COVID-affected schedules are coming into play in an otherwise full US fall/winter sports calendar:
Let me go out on a limb and say that I think the PM’s views are wrong that Jamaica’s economic progress (measured by increase wealth) will be greater if informality were reduced.
Part of the current plan (developed by the preceding administration under finance minster Nigel Clarke) to rebuild the economy is to reduce informality. Associated with that is the aim to increase the number and scope of those who are in the banking system. Now, many benefits can come from this, including making it easier for the state to know who are its citizens and what they are doing. Also, in principle, citizens should benefit from being able to use the banking system to intermediate and reduce dependence on cash. Of course, for many, cash is king because of its anonymity (aka keeping things informal, or less than fully formal).
However, it’s clear that informality has been a boon for Jamaica by giving it greater economic flexibility, which has been a crucial safety valve in the context of many structural inefficiencies.
I have lots of concerns about informal activities in Jamaica, because most of them are distortions. However, removing informality doesn’t automatically remove distortions or more positively create a society that is really full of level playing fields. I have mentioned many of these before, most recently in May, but I will repeat some of them here. I have also looked at them, as have others, as part of what we see as the normality of ‘hustling’.
Squatting:
Capturing land is a bigger national sport than track and field, and has been the route for many Jamaicans to get into the ‘housing market’. Of course, ‘market’ is a misnomer because much of the property and land acquired has been obtained cost-free. If we were to remove informality (and let’s assume we do it totally, rather than gradually) we would then have to watch the real housing market deal with people who perhaps have low capital and income and may not be able to ‘buy’ their way into the market, even if we assume they all want to enter at the lowest end. New demand and supply would have to come on stream and prices will then reflect this. At the outset, it’s likely that excess demand will exist, and housing prices would rise. Simply put, Jamaica does not have enough formal housing to deal with the transfer of people from informal housing. It can be created, but I cannot say how long it would take for some combination of the State and private sector to do this.
Jobs:
We do not need to get STATIN to tell us precisely how many Jamaicans work informally; the anecdotes are extensive enough to do the main analytical job for us: vendors; labourers (urban and rural); work done for cash (which could be from odd-jobs through to professional services that are ‘off the books’—escaping the eyes of the tax authorities); small businesses that are not incorporated and may be as wide as from sole proprietorship through to several employees. (Simple case: one woman has a chicken coop to raise live chickens for sale and eggs; she employs 4 people every 2 weeks to help kill and clean chickens, eggs from a dozen layers produce one egg each a day—all for sale, and hopefully make a profit after cost of feed and ‘wages’ etc are taken into account. None of this is illegal in the sense that these are legitimate activities, but it all happens without any references to formal structures. Banks do not need to participate in financing, holding deposits or other roles. Cash is king, mainly. Money may go to banks, but it’s not related to any economic activity and is likely never going to feature in any tax assessments.) None of this is confined to individuals and corporations can participate as suits their needs and doesn’t cause any moral problems. Businesses could actually be applauded if they did socially responsible things like supporting informal businesses.
There are bigger segments of activity, eg public transport (taxi and minibus services) that can go on with high degrees of informality because our society does not insist on proper licensing of operators and all who are involved in such businesses.
Some of these same activities exist in other societies that are highly formalized and the anecdotes about ‘gardeners’ or ‘odd job men’, perhaps performed by illegal immigrants or others in marginal positions (even students or moonlighting people) can be culled from them, as well as taxi drivers who are ‘asylum seekers’ actual or not. (It’s not hard to manufacture the needed documentation to make everything seem legal and above board—much socioeconomic activity thrives on trust, not confirmation of the basis of that.) In the UK, it could be ‘Polish construction workers’, in the US, it could be the ‘Salvadorian gardnerer’ (none of these are meant to be racial or national stereotypes).
If, for some reason, we choose to formalize these activities when those involved in them are not ready, chances are the worker will not agree (eg no cheques or credit card payments; no receipts, etc.) The jobs wont get done if ‘paper work’ is involved.
Now, all of that is fine because it means that incomes are maximized in many ways. ‘Buyers’ get jobs done/goods bought/services provided for less—lower basic prices and no sales tax/VAT/GCT etc. ‘Sellers’ get tax-free incomes, which they can spend as they wish, ideally on similar informal goods and services (a win-win).
If that were to change, the basic situation is that Jamaica would have to operate on a higher cost/price basis (as all of the taxes, fees, capital costs etc. that should be incurred are recognized).
So, reduced informality tends to give greater benefits to the State, especially the Treasury (ie collector of taxes, revenues, etc.) That comes at a cost to many private operators (individuals and enterprises).
Utilities:
One important element of informality is the stealing of utility services. We have seen during the pandemic an upsurge in complaints about bills, which have pointed to the standard global practices of utilities to try to compensate for theft by loading such losses onto the accounts of those who pay. If the government is serious and comprehensive in its dealing with informality, then this is a huge elephant in the room that has to be addressed. Again, put simply, many people and businesses live beyond their means by consuming utilities services for free or far less than the going rates. If the government were to eliminate that, then it would have to either provide income for people to be able to continue consuming at previous levels or force people to consume what they can truly afford (ie recognize true poverty). Ideally, the government would see the social value of access to water and electricity and have in place a safety net to support some minimum level of consumption for every household. (The essence of this was part of the PNP election manifesto with its proposed J$3000 credit for electricity bills.)
That’s not the whole of the informality story in Jamaica. It goes too to things I know the government wants to address and we should too, such as the identification of citizens as unique and tying that identification into the delivery of government services and goods. But, that is a separate aspect of informality that is to be addressed. It’s not really necessary for the economy to function in the sense that not much really depends on each of us knowing exactly with whom we’re transacting. What we need is to know is: services/goods will be given on agreed terms; payments will be made on time and in keeping with agreed terms (in full, over time, etc, with interest, with penalties, etc); taxes and fees due to the State for these activities will be duly recorded and made properly; any legal rights of workers or providers are respected fully. (That’s how many effective and large financial markets operate.) I might have missed a few things, but I think the idea is clear. All of that could occur if we each were assigned a number and that was all we had to exchange. The national database would then connect the number to individuals. So, we could actually operate the economy on the basis of near total anonymity. If nothing ever went sour with transactions, we wouldn’t really need to know precisely whom we should try to track down for retribution; the system could be able to search for ‘xx22yy11’ and get his/her particulars to then feature in whatever ‘corrective’ or ‘restorative’ processes were involved.
Finally, the concern with informality is also largely about measurement. We have a false picture of many things because data sets only or mainly cover formal activities. That’s not trivial because policy is not going to be well framed if it understates the extent of gains and losses within the country. So, reducing informality for that reason is good, but again, its downside comes from the need to expose to the world things that happily go on ‘under cover’. If we accept that 40% of true economic activity in Jamaica is informal, it means that policy levers tend to only affect just over half of what we want to affect. That’s a huge frustration to policy makers.
I wont talk about illegal activities, and formalizing those. We have to move the moral compass a lot to bring many activities that are now illegal into the formal world because it would be legalizing them. Now, it can be done, eg prostitution is legal, has been decriminalized or abolished as a crime in many countries. But, to bring into the legal frame current crimes like lotto scamming, would push the moral envelope, because it would be near impossible for say Jamaica to legalize it so that our scammers could fleece the world—it’d be great for our budget, though. Likewise, society isn’t likely to want to bring into formality (ie legalize) a lot of violent crimes. Of course, one could posit that these changes happen, but it would be in a world most of us would not recognize or want to live in.
If none of the above is convincing, then take the view of the IMF’s MD when discussion informality and inclusive growth (my emphases):
“Take the case of digitalization. It has created more opportunities for individuals to engage in informal employment to supplement their income. Think of all the people who work in the gig economy. But we may be missing gig economy employment in labor force surveys. The informal economy can provide income or a social safety net. But it is a complicated issue.”
I rest my case.
Since the onset of the pandemic in the spring, many have focused on and argued about trade-offs between health and the economy. It’s not really an either or matter, as it needs to focus on what elements of the economy may be deemed important and what aspect of health provision is important. So, to me, at least, it’s not about an economy working fully as it did before and health focused just on COVID-19 issues. In a simplified example, we could say that policy makers would try to preserve the activities of the main economic drivers in terms of income and jobs, with an eye on how they could proceed while not worsening dramatically the chances of keeping good control of the pandemic. The health focus could be how to ensure that resources directed at addressing COVID-19 (personnel, facilities, tests, and medicines, say) were given priority, subject to not playing key elements of routine and emergency health care in jeopardy.
That said, an interesting study was conducted by MIT in the summer to look at this trade-off. It found: ‘Vital forms of commerce that are relatively uncrowded fare the best in the study; less significant types of businesses that generate crowds perform worse. The results can help inform the policy decisions of government officials during the ongoing pandemic. As it happens, banks perform the best in the study, being economically significant and relatively uncrowded.’ So, it pointed to categories of economic activity there in a sense more COVID-friendly. It then allows some assessment of what policy makers sought to protect, so bars/restaurants might have found favour, but they serve some important social support functions in allowing people to preserve certain senses of normality. Likewise, many would understand schools being less favoured because of overcrowding despite therisks of losing out on educational development.
In Jamaica, discussion about this trade-off has centered around closing/opening our borders, mindful of the significance of tourism; curfews, when and how long; restrictions on movement, mindful that compelling certain high risk groups to remain at home might be good from a health perspective, but have harmful effects on ability to work and earn; and policies to encourage working from home, thinking that economic activity without the need for commuting, would yield health benefits for less economic loss.
The discussions roll on. One clear decision in recent weeks, has been that another lock down is not part of government thinking; the economic costs are deemed too great.
Some business people have since been arguing for short curfew hours.
However, I asked if the curfew were only 10pm-5am what is the health/limiting virus spread benefit we’re supposed to be getting from it being that short?
Some interesting interactive charts about national responses to the pandemic also give insight into how countries have prioritized activities and policies (eg income support). So, the charts below show how the UK and Jamaica had different trends in visiting various places. We can see the sharp decline in the period from around mid-March and lock down because the norm in many countries. Then, from April, we see activities resuming, and in many instances, these are still far below pre-pandemic levels.
I’m not going to characterize economic outcomes during the pandemic as if they’re unexpectedly awful: the bottom has fallen out of the world economy and we’re part of that. Our pain has different sources and remedies and that’s what’s important to understand. Simply put, we’re highly dependent on other countries, especially the USA.
Data for the 2nd calendar quarter and 1st fiscal quarter, April-June, and now available: they show the economy contracted by 18% compared to the same period in 2019:
No sector has escaped. In services, hotels and restaurants have been brutalized—declining 88%—while in production sectors, mining and quarrying declined 25%. The sharp decline in tourism explained the former as the sector limps along at about 10-20% capacity. Alpart closing affecting mining badly, and limitations on movement badly affected ‘other services’ and ‘transport etc’.
Tourism has borne the local economic brunt of the pandemic but played its part in suppressing the health impact. Sector spokesmen stress how tourism has tried hard to respect health protocols. But, they fear being made scapegoats to justify another closure of our borders.
Obviously tourism is especially fragile now.
Some perverse positive trends: remittances are up: The BOJ governor commented in a published statement, “Incredibly, while the global forecast is for remittances to decrease by 20 per cent in 2020, remittances to Jamaica have increased since May, evidenced by a 15.7 per cent increase in May and a 41.6 per cent increase in June, after a very small decline in the first quarter.”
Despite the tired howls that the sky is falling almost every time the exchange depreciates, the FX market is showing the resilience and behaviour it should with a flexible exchange rate. The J$:US$ rate touched 151 over a week ago and was trading at about 143 last Friday. Again, BOJ governer Byles: “It must also be noted that the newly reformed FX market continues to operate in the way that an FX market is supposed to work. The exchange rate is supposed to act like an elastic band that contracts and expands automatically, to transparently reflect the state of the market and the overall economy.”
There’s no shortage of FX: “An even clearer picture was painted on Tuesday, September 1, 2020, when the Bank of Jamaica intervened in the market, offering US$20 million via a B-FXITT (Foreign Exchange Intevention and Trading Tool) flash sale. For the first time since the start of 2020, the market did not ask for more than what was being offered. The market did not even ask for half of it. BOJ received bids for only US$7.8 million, or 39 per cent, of what was offered. This is an emphatic and unequivocal indication that the FX market is presently adequately funded and in no need of extra funds.”
However, the sharp contraction of the quarter reported ought to be much more than the next quarter, as the economy opened up again from mid-June, albeit with many operations and workers not at full tilt. The surge in positive cases that has led to the official change of status to ‘community transmission’ may bring with it greater irregularity of activities, as firms and organizations deal with identified cases and some shut down temporarily to clean and sanitize. Tougher enforcement of health protocols may also push some businesses past their tolerances and business will fall, eg for public transport due to enforced lower ridership.
So, we might have touched the bottom of the downturn, but that will not be clear till next quarter. Either way, the road to recovery will be long, whether it’s not until early 2021/22 or later.
Cogito Ergo Sum
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