#COVID19Chronicles-205: November 2, 2020-Patrick Hylton-Economic Outlook For 2021 And Beyond: When Can We Expect Recovery And How To Accelerate It?

This column, by Patrick Hylton, NCB Financial Group president and CEO, and chairman of the board of National Commercial Bank Jamaica, which appeared in the Sunday Gleaner, is really a good read. I need to reread it and think a bit more about what it suggests:

It’s reproduced below:

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Even as sentiment globally has become more positive over recent weeks with more respondents seeing better than worse economic conditions in six months, the path to global economic recovery is uncertain – recent surveys of global executives show that most believe it will take until 2022 Q3 or even 2023 Q3 for a full recovery of global GDP.

The tourism slowdown will likely impact the pace of recovery in Jamaica. In a spiral effect, the pandemic has reduced both the demand from travellers and the supply from institutions (given travel restrictions and closures). As a recent survey on leisure travellers indicates, only around 60 per cent showed interest in travelling, the same amount post-COVID versus pre-COVID, meaning it may take time for consumers to feel safe travelling again.

Table 1 exhibits the economic recovery scenarios.

Uncertainty surrounding the latest vaccine developments and herd immunity evolution (possible by spring to late 2021, depending on vaccine efficacy and coverage), as well as lack of clarity around the economic reaction to unprecedented government stimulus packages, leave a lot of question marks related to the speed of the potential economic recovery in the post-COVID period. In Jamaica, a lot will depend on the results of the upcoming tourism season in the first quarter of 2021 – which could provide further clarity on the anticipated speed of recovery and growth prospects in the long term.

Having summarised these implications and the outlook for 2021, one can ask, what lessons Jamaicans can take from global examples? Emerging changes resulting from COVID-19 could create an appealing platform to drive further economic reforms in Jamaica that can help it become more competitive on the regional and global scales. Balancing health considerations (lives) with economic considerations (livelihoods, especially in tourism with the upcoming peak season) is a critical task that has to be effectively addressed. In addition, acknowledgement and acceptance of new digital trends are critical to staying competitive in the global and regional context. Considering the acceleration of specific consumption trends and observation of key economic challenges in the past, I have identified five strategic themes to consider to drive an accelerated recovery path:

STRATEGIC THEMES

Strategic Theme #1: Accelerate digital transformation through investment in infrastructure and ensuring access to everyone. Our economy has seen the emergence of digital initiatives for several years, but they have been significantly accelerated with the evolution of the COVID-19 pandemic, which has rapidly shifted consumer habits. There is a clear consensus that economies won’t return to pre-COVID, non-digital models; instead, we are likely to ride the wave of further digitisation. 

In light of that, it will be important to further invest in availability (e.g., infrastructure) and accessibility of digital services, including addressing the digital divide in information and communications technology between urban and rural areas with tailored policies and alternative supply models. The introduction of simple and widespread solutions at-scale to local citizens and businesses (e.g., mobile P2P payments, a national identification system, e-Commerce, etc.), will allow easier and faster access to information and services, as a result driving up productivity, and reducing inequality. The GOJ has indicated that the development of this infrastructure will be one of its highest priorities.

Strategic Theme #2: Increase financial inclusion and accessibility to drive more opportunities for individuals and businesses. Many countries globally (including Jamaica) have faced challenges with the identification and distribution of targeted stimulus packages to the most affected individuals due to their limited inclusion in the formal financial ecosystem. Accessibility and openness of the financial system to every Jamaican will be critical to unlocking the next phase of economic growth – as it will allow easier access to government support, more opportunities to finance emerging business opportunities or consumption requirements, and greater awareness of building up investments and savings to ensure resilience for the next potential crises.

Strategic Theme #3: Invest more in local talent build-up and proactive reskilling of the workforce to create more employment opportunities and improve labour productivity. COVID-19 has changed the landscape for the overall workforce resulting in a short-term unemployment spike, as well as long-term changes in the type of skill set required for specific job positions. In addition, enforcement of strict lockdown measures to contain the spread of the virus has also brought adverse effects on labour productivity in the short term. Inadequate infrastructure and insufficient preparation of remote work models resulted in significantly lower productivity. 

Long-term investment in building up strong local talent pools through targeted education programmes and focused at-scale efforts to reskill the existing workforce to better fit the requirements of the future could make Jamaica more competitive on a regional and global scale – thus attracting more foreign investments and creating additional job opportunities. This will also drive improvements in labour productivity, which can be further accelerated by investment in capabilities and infrastructure to support remote work, which will be mission-critical to build resilience in case of a prolonged pandemic or emergence of another crisis later down the road.

Strategic Theme #4: Launch a targeted effort to reimagine the local tourism industry and emerge even more competitive post-crisis. Sudden border lockdowns and imminent travel restrictions have brought challenges to the tourism industry. Being one of the economies with the highest exposure to tourism, Jamaica is severely affected by global and regional trends in tourism – particularly by the reopening timelines of critical air routes that connect it with potential visitors. A smart and agile approach to reinvent tourism will be required, as Jamaica prepares for the upcoming peak season at the end of 2020. 

Various countries are using different methods – from enabling ‘working visas’ for digital nomads to attract long-term visitors with high purchasing power (e.g., Barbados, Estonia, Croatia) to attracting at-scale tourists by positioning themselves as a COVID-19-free zone, having invested in support infrastructure to rapidly and reliably detect and contain virus spread. Jamaica has taken the initiative with the establishment of the resilient corridor among a myriad of other initiatives to breathe new life into the industry and to prepare for the new normal.

Strategic Theme #5: Enable significant growth of micro, small and medium-sized businesses on the back of improving the ease of doing business. Micro, small and medium-sized enterprises are critical for the local economy. More than 30 per cent of employment comes from sole proprietors, indicating the significant importance of this business segment for the overall economy. At the same time, these businesses are most exposed to crisis-induced uncertainty and short-term pressure. Governments have made determined moves to support them – based on global research, more than 90 per cent of countries have released SME-focused measures. The Jamaican Government has followed suit with significant support packages. 

There could be an opportunity, beyond the short-term measures, to transform the business landscape for SMEs – by simplifying the regulatory context, creating additional access to financing, and building up supporting talent and infrastructure to drive sustained growth of micro, small and medium-sized enterprises. This could be particularly relevant with a view to the development of the high-tech and digital sector.

To conclude, the COVID-19 crisis is a major challenge for global economies and society – it has brought a sudden and unexpected change in our daily lives. It has made a significant impact on the health outlook (with more than 45.5 million confirmed case globally) and introduced challenges on the macroeconomic front. Jamaica has not been spared from these effects.

At the same time, this crisis also creates an opportunity to conduct a thorough transformation of the local economy. This is particularly important given the cyclicality of macroeconomic events – building a resilient and strong economy now, which can be competitive regionally and globally, is critical for long-term sustainability and stability of the economic outlook. Now is the time to take action and jointly drive change to ensure a better future.

Fundamentally different: a look back at a career #5: Back to Africa, again

Africa is a massive continent and its countries have incredible variations.

I’m really pleased that my first visit to Africa wasn’t as an IMF staff member; it pays to see things from a different perspective. Having said that, I’d gone to the continent first as a staff member of the Bank of England, as a footballer, mainly, during an international 40th anniversary celebration of Reserve Bank of Malawi (RBM) in the mid-1980s. Its highlight was playing the top two teams in the country, Silver Strikers (sponsored by the RBM, which had started as a social club for central bank staff) in the ‘Silver stadium‘ in Lilongwe, with a crowd of about 20,000 and live radio broadcast. Nothing like hearing your name over the loudspeaker: “Dennis Jones…on the ball…” 🙂 We also played the many-times national champions, Bata (now ‘Big’) Bullets in Blantyre, the other main city.

What was incredible about these matches was our opponents included several national team players, some of whom had trained in Brazil. They were shocked that our team had players in or over their late-20s; for them, retirement by 24 was normal. It was also an exhausting experience to play football at altitude, both dealing with a ball that flew so fast and far, and sucking on thin air. Lilongwe is on a plateau, 1,050 metres (3,440 ft) above sea level. Blantyre lies at an elevation 1,039 metres (3,409 feet).

Three things were extraordinary about Malawi, still under the iron-fist autocratic rule of President Hastings Kamuzu Banda. First, was the conservative dress code, notably, the policy that women were expected to dress “modestly”, that is no bare shoulders, and legs covered to below the knee, Second, was the creation (in 1981) of Kamuzu Academy, a private boarding school that was founded by, and named after, Banda, and described by its proponents as “The Eton of Africa”. Third, was Chibuku shake-shake, a beer made from sorghum grain, about which I’ve written before.

But, Fund work sent me to the continent many times.

My first mission was to Kampala, Uganda, doing technical assistance on international reserves, for the Statistics Department, about which I’ve already shared some stories. But, it was where I discovered the ‘double’ massage: two masseuses working the body at once 😳I’d wanted an hour but only a 1/2 hour slot was available, so…Undoubtedly, the best massage ever 👍🏾🤔

I also played squash for the first time on a court with no roof, at the residence of the World Bank country manager. In those days, I travelled with my squash racket like people travel with a tennis racket.

Madagascar was my next place to visit for Fund work, negotiating a Poverty Reduction and Growth program; my responsibilities were for the balance of payments and external debt (I was working in the Fund’s Policy Development and Review Department (PDR), which developed and oversaw the application of Fund policies, including reviewing mission briefings and staff documents at HQ, and on missions being a mix of ‘internal audit’, ‘policy integrity’, expertise on all things general policy, and working on the external accounts). It’s an odd situation to be part of mission teams, but not working to the dictates of the country department, but being ‘above’ them in many ways, representing the institution. My love (not) of doing debt sustainability analyses began there 😦

Madagascar is an island, to the east of the continental land mass and its population has ethnic traits from across the Indian Ocean. It’s the source of most of the world’s vanilla—originally from the Americas and now the 2nd most expensive spice in the world (after saffron). It’s losing its forests at an alarming rate—1-2% a year, and up to 90% of forests are burned each year. It has some of the world’s rarest and most-threatened species of animals and plant life. I was thrilled to see lemurs in the wild.

It’s where I had to work in French for the first time and in a country with long family names, the longest recorded being Andrianampoinimerinatompokoindrindra, you can imagine note-taking wasn’t a breeze. Its capital, Antananarivo, is referred to as ‘Tana. My notes were filled with ‘FM A said’ etc, ie finance minister [name]. It’s another elevated capital, and sits at 1,280 menters (4,199 ft) above sea level in the centre of the island. When I worked there, Marc Ravalomanana, a Malagasy entrepreneur and politician was president of Madagascar, having won election in 2002.

Mauritania always sticks in my mind because of Saharan sand in Nouakchott and because desert life is so different from anything else. For example, at the weekend, residents of Nouakchott prefer to head into the desert instead of to the beach. Pitching a tent and cooking lamb (méchoui) under the open sky, and in relative solitude.

Its ethnic mix is mainly Moors, originating from the north, and black Africans. originating from the south.

It’s a country where slavery was only outlawed in 1981, but is practised nationwide.

My missions there were negotiating a Poverty Reduction and Growth program, and I was again Mr. Balance of Payments and Debt. It’s where I was on 9/11/2001. I was recently kicking the French by now, and its use as one of my working languages was now well-established.

It was where I first saw a parallel exchange rate market working, live and large, in the streets and shops with rates calculated rapidly on calculators and money exchanged in huge volumes.

It’s where I experienced my first sandstorms and happened to be out running with my colleague to and from the airport one morning, and we had to navigate by sound and our voices. It‘s where I first saw women openly vilified for running and chastised for their wearing athletic gear, even long pants and long sleeves.

Maaouya Ould Sid’Ahmed Taya was president during my mission (having held office since 1984).

Guinea will feature more in its own right, because of my living there for nearly 4 years as the IMF’s resident representative. Sierra Leone will also feature apart as I had dual responsibilities as resident representative there, though non-resident. Travel between these neighbouring countries was not easy, and complicated because vehicles drive on the right in Guinea and on the left in Sierra Leone, and crossing the borders was always fun for the first 10 minutes.

Angola’s capital Luanda, has long had the reputation of being the most expensive city in the world. Coming out of the chaos of civil war in the mid-1970s and discovering oil, shortages and expatriates with high incomes made for a spiralling of costs, most notably for rental accommodation. Oil wealth does odd things to property values. I knew no Portuguese, and fortunately could work in English. I was on only one mission to Luanda (again, for PDR), not long after the end of my res rep assignment in late-2006. The odd thing about it was the authorities did not want a mission at that time and were not at all interested in borrowing from the Fund, but, we went through our hoops and loops. Though Fund thoughts were on a post-oil future, oil revenues were still gushing. So, it goes, sometimes, when economics and politics are at loggerheads.

South Africa was a transit point for the mission to Angola and also some regional meetings. I stayed in Johannesburg and had the chance to visit Cape Town, see Table Top Mountain and penguins at the Cape of Good Hope. I also got to see what a plane load of off-duty oil sector workers looks like on a long-distance flight from there to London. If you cannot take the liquor bought in duty-free onto the flight, what else to do but drink it before getting on the plane. To say the sight and sound of jolly, drunken British oil riggers for over 8 hours is not my idea of fun is an understatement!

Libya holds a special place as we visited soon after the embargo on US travel was lifted (February 2004). I met ‘Brother Leader’, Colonel Ghadaffi, who spoke to a conference of African central bank governors. Rhian was just 6 months old and she (one of the first Americans to visit) and Therese came along for the junket.

We had to fly from Conakry to London to Tripoli. On arrival, we were met at the plane door by Libyan officials and whisked through security to a VIP lounge. We waited there while other people arrived, some I recognized as governors. When the ‘group’ was complete, we were ushered out to a fleet of black Mercedes outside the airport arrivals. We got into the back of our car and greeted our driver. I don’t speak Arabic, so I used English and French. Then, off we sped, and I mean sped. Motorcycle outriders cleared our route as we hurtled along at 140 km an hour into Tripoli 😳‘This is new’ was the expression on our faces; Rhian was blissfully ignorant. We pulled up at a glitzy 5-star hotel that was the conference venue,checked in and went to our palatial room. Not bad!

Libya is strictly Muslim, and though Guinea is predominantly Muslim, Islam is practised there with a lighter touch, eg its main domestic business is beer making 🤔😳🍺 It took some getting used to having fake gin and tonic. More than any of the other Muslim countries, I’ve visited, with maybe the exception of Mauritania, Libya is incredibly chauvinistic, and my wife couldn’t stop marvelling at men alone sitting at tables of coffee shops, and women, alone, seen in markets and stores.

But, as trips went, the visit was on a different plane for splendor and history and political enigma. My baby daughter became a star and featured in lots of pictures being passed around by central bank governors 🙂 I suspect she recalls nothing about visiting the old Roman city of Leptis Magna.

Morocco was never a work location, but a favourite stopover en route to/from Mauritania, because a Tunisian colleague and I loved the food and feel of Casablanca. No Bogart-like experiences with Lauren Bacall. I discovered the literally moorish delights of pastillia. 

To offset that, I have fond memories of being steamed and massaged in a hammam.

Sénégal was also not a work location but Dakar was a transit point for Guinea and South Africa. We took a vacation there from Guinea, made better because the Fund rep there was a good friend and a Guinean, Ousmane Doré, who later was Guinea’s finance and planning minister (2007), and whose residence became our ‘hotel’.

In Sénégal, we visited Goree Island (Île de Gorée) the site from where slaves were shipped across the Atlantic during the 15th-19th centuries —a hard emotional visit as tourists. 😩

No two countries the same or remotely similar.

It’s not the economy, stupid! It’s the people?

Once in my working life at the Bank of England I had responsibility for a team that looked at economic development in English-speaking Caribbean countries. I got into a professional bind by arguing, against the official policy line that devaluation was to be supported as a way of easing Jamaica out of its economic woes. I argued, based on my understanding of how Jamaica had worked for decades, that while one side of the devaluation equation worked, the economy was titled in a way that meant the gains would go out on the other side: we imported more than we exported and the balance of that meant higher net costs but without the needed gains that could come from a more competitive exchange rate; we also had lots of tied contracts in bauxite that were not sensitive to exchange rate changes. My other reasons were based on ‘cultural senses’ that Jamaicans were not going to change habits fast enough to make exchange rate shifts work quickly; that was part of the truth but also reflected that fact that jinnalship meant Jamaicans were as likely to find ways around the change, eg by making use of remittances more (which, being in foreign exchange, meant full protection). I did not win the internal debate at the Bank, and my career did not tailspin. Fast forward.

Jamaica has done what many economists would see as the ‘right thing’ in recent years in dealing with the long-standing issue of a bloated fiscal deficit and its debt burden. Now, that improvement can be an important necessary condition, but is not sufficient, to use economics jargon. It’s also allowed the exchange rate to be ‘flexible’, or depreciate in visible terms. 

What economic policies are supposed to do is to change the way that ‘economic agents’ operate, based on certain assumptions about behaviour. What has so often been the problem with Jamaica (and many other countries) is understanding how people react and if they react in unexpected ways, how to taper policies so that the desired effects are still achieved. 

One thing certain about curbing fiscal excesses is that less money will slosh around between political powers and private people: that’s simple maths. That squeeze may have some negative economic effect, but it may be less if the previous beneficiaries find other ways to operate and make money. 

Similarly, with the exchange rate depreciation, significant numbers of people and businessmen are not totally exposed and can draw on foreign exchange buffers or substitute domestic items for imports enough to get by. 

The problem with all of this is that some of the things needed to change economic behaviour are not in the hands of economic policy makers. 

A simple example. Interest rates are meant to offer incentives to save (and by extension, to spend). Now, if people are fearful of banks (for whatever reasons) changing interest rates in the banking system does not affect behaviour much because people stay away from the system where interest rates matter. So, one of the first steps in this instance is to get over people’s fears and dislike of banks and other financial institutions. That is a matter of education and life experiences; the life experiences may have deeper roots than education can uproot, so it’s a hard battle to just ‘teach’ people about the benefits of banks. No sooner have the lessons been learned than a ‘disaster’ occurs when many people (and friends) lose money deposited in banks. The old suspicions resurface and new fears arise. So, the battle is nearly or totally lost. However, economic policy makers have few tools, of which interest rates are one. Stuck.

When I look closely at Jamaica, I’m as perplexed as I ever was why somethings don’t change or change at the pace at which a snail sprints. I have to wonder if it’s something engrained, like ‘in the water’ or ‘in our food’, which are sort of intangibles.  So, in that vein, is it ‘in the people’? 

All the macroeconomics are undone easily by a microeconomic set-up that does not correspond well to many standard ways of thinking about economics. Part of me sees this as a curse, but it has also been a boon.

The curse is that all the pulling of the macroeconomic levers don’t give the expected results. We know this, for sure, in Jamaica! The good part is that Jamaicans have found ways to overcome economic ‘problems’ and found many different ways to ‘survive’. Now, a key part of that survival is about not staying within all the legal lines that exist. That is one of the binds that stop me clapping every time I think about how Jamaica has not imploded. If the world were full of ‘wild West’ countries and anarchy was the mark of success, then Jamaica would be hailed, I’m sure. 

What is more puzzling to me over recent times, as I’ve had more chance to see life lived in Jamaica, is how many of the microeconomic quirks are not restricted to any social class. We’ve carved out a way of life that makes the most wealthy and best educated less different from those at the other end of the scale than wide wealth and education differences usually mean.

Monetary gains and losses do drive how Jamaican people act but in some odd ways:

  • Businesses do not strive to be the best as a way of ensuring their financial success; many are content to just do what they do; customers like it or lump it. This is not abnormal in many economies, but usually means the demise of enterprises. That is not the case in Jamaica, which means that businesses must be surviving WITHOUT business.
  • Time is (near) meaningless: if time is money in most people’s minds, it doesn’t have that connotation for many Jamaicans. (It’s one way of rationalizing why Jamaicans don’t see timeliness as important, because they have somehow given time zero value. As a fellow blogger pointed out to me today, saying ‘7.05’ means ‘sometime before 8’ to a Jamaican 🙂 ) But, economically, if money doesn’t matter (in the normal flow of events) then value must have ways of being preserved that are not apparent.
  • Attention spans are short, but ‘memories’ are long. Many Jamaicans will have ‘ready reactions’ to any phenomenon, but barely want to analyse what is really going on. (This is reflected in the way that ‘news’ and ‘events’ are reported–much of the ‘What’ and little of the ‘Why’.)Many Jamaicans live with the illusion of things being better in the past–despite lots of evidence to the contrary or no means of really comparing. What’s funny about that is that people will talk about the ‘good old days’ but do nothing (much) to recreate those times. I’ve yet to see a Jamaican ready to give up the motor vehicle, access to running water and (near) constant electricity, or the telephones, as part of the step back in time that is needed 🙂
  • Distortion is the norm. At its worst, this is all about corruption. Transparency International defines this as: ‘Corruption is the abuse of entrusted power for private gain. It can be classified as grand, petty and political, depending on the amounts of money lost and the sector where it occurs.’ The Merriam-Webster Dictionary puts it more simply: ‘dishonest or illegal behavior especially by powerful people (such as government officials or police officers): the act of corrupting someone or something.’ My take is that ‘powerful’ has to be scaled down to include anyone who has influence over others, which means that many more are actually in the position to be corrupt and do corrupt things. The fact that the deeds are common or long-standing doesn’t change their nature. This is something that the integrity of Jamaicans often does not understand or accept. 

The first three bullets point to the impact of ‘hidden economic activity’ that may be a principal or not trivial part of many people’s lives. I hope the economic logic of that is clear. The last bullet is different, as it points squarely to what ‘government’ does, more than other parts of the economy. It bothers me more than other things, because we have a country where many monetary flows are opaque, at the level of government, where transparency and accountability are supposedly built-in to protect ‘the people’. Without dredging through Archives we find too many stories such as reported last week about hay: Millions Down The Drain In Hay Project. The extracts say enough: 

  • ‘…financial mismanagement and lax oversight uncovered…
  • ‘In reference to the proposed revenue that was forecast, the project revenue is at a deficit of -$17,492,750,’ the auditors wrote…’At Bodles, they reported that no records were being maintained for the production of hay between April 2014 and December 2015. For the first six months of 2016, the audit found that 1,329 bales of hay were produced at both facilities, compared to a projected 54,000 bales.’

The average Jamaican lives with the sense that government is full of corruption and reacts with feigned or little surprise at stories such as these. The real surprise is really that such ‘malfeasance’ goes on undetected in many realms and for extended periods. But, as I’ve said before, corruption is so entrenched that its total beneficiaries are far more numerous than those who are not. If you don’t believe in ‘trickle down’ economics, then you wont understand how the ‘feeding tree’ of Jamaica misappropriation of public funds works. Everyone gets to eat because of someone taking money that is not truly theirs to distribute. To break that system is to break the society. 

In that sense, our pervasive corruption is worse, in my eyes, than the corruption often seen elsewhere, where a very limited pool of ‘elites’ benefit. In Jamaica, almost everyone’s life depends on it. 

Institutions like the IMF know that it’s not just the economic policy levers that need to be turned to fix the economy. However, the Fund cannot enforce changes in areas outside its mandate. Its structural policies must still stay within its ambit, so it tries to go to the limits but cannot go further. To get the whole of a country change economically requires a government to be committed to putting in place a wide swathe of policy changes that go in the same direction as the desired economic policy. In other words, it must have complentatry meaures to support the economic ones. Government must also fix itself by weaning itself away from some or all of its bad habits, such as evidenced by the ‘hay project’ fiasco. That is much harder than may appear in countries like Jamaica, where (as I have said, repeatedly) have built themselves on ‘rent-seeking’ behaviour. That has to stop and maybe unwound. Like taking out a thorn, it cannot be done without pain (real, imagined, or both). 

        Government ‘fixing’ itself is both direct and exemplary: how many countries can progress if government is seen to practice things it says it is against? Also, government must change first and fast.

        Jamaica is not alone is struggling to get its economic act together. Jamaica is also not alone in terms of countries that have struggled economically then made a major forward turn. However, it takes time, consensus, and coherence in policies. 

        Getting the macroeconomy right is only a step on this journey, rather than the journey, itself. I’m not sure Jamaicans understand that. 

        Jamaica’s growth puzzle: Trying to find some of the right pieces 

        I’ve written before that I find it disturbing that Jamaica’s academic economists don’t seem to spend much time outlining to the public problems with the local economy and possible ways to fix them. 

        I had an exchange with a Jamaican businessman yesterday about the exchange rate, and how it is badly misunderstood by many Jamaicans, who are fixated on the nominal rate of the J$ against the US$. He added that over many years he had ananlaysed the exchange rate trends and tried to explain them. He found many politicians, sadly, out of their depth in being able to understand notions such as purchasing power parity and the real effective exchange rate. He concluded that many Jamaicans are numerically illiterate. I agreed. 

        One of the problems with that illiteracy is that people focus on the wrong variables, and do not understand what changes in variables tell us. 

        Now, being a confirmed skeptic, I do not rely on politicians to be the guiding lights for much of what I think is important, except sometimes in the negativ. If a politician. says something is good, chances are it’s the opposite. Their vested interests get in the way of honest discourse. So, I’m having to listen to politicians talk about the economy and growth and productivity, and so forth, and then take a view opposite to what they say is happening. 

        Right now, I’m trying to figure out why Jamaica may, one, not be growing as fast as politicians have said (just over 2 percent) and why it may be that Jamaica will grow faster than politicians have said (currently focusing on #5in4–when it’s a hashtag, it must be important :))

        The slower-than-reported growth problem. GDP measures economic activity from the data on income, spending, or production. Depending on which measure is used, the story can be different. So, my argument about slower growth is about which of those measures we look at. 

        I think that spending will give a truer picture in a country like Jamaica, because we know that much activity is informal and thus under-recorded. That would suggest that data on income is understated in both levels and changes, especially as more information about income means more information about taxable capacity, and people dont like paying taxes. Spending data can be captured more readily and widely, even if it’s based on household surveys. Production is harder to measure, not least because many enterprises are loath to report data, so the series are often of spotty quality and less timely.We also have the age-old problem of whether the simple units of measuring output–prices–are really capturing all we want them to, especially if quality is changing. 

        So, my concern about how fast we are growing now is all about what do the three measures show. We could be at 2.3% quarterly growth, plus or minus a lot.

        I also think that, flaky as it may seem, people’s sentiments about growth matter, and I think most people don’t feel that they are living with faster growth.

        Will Jamaica grow much faster than 5 percent? Some people have noted, recently, that 5 percent annual growth is really a low bar for Jamaica. I am tending to agree. I think that there is more dynamism in the country than people seem to suggest. I also think that some of the faster growth will show up if we get better data about what’s going on. Now that is a taller order than many things, because data collection systems don’t just improve at the drop of a hat. But, here are areas where I think we need to look carefully.

        1. Watch electricity consumption. This is often a leading indicator of what is going on, because almost everything in modern economies needs electrical power. Even if it’s being used illegally without payment or proper connection, the turbines are working and juice is going to all corners of the country.

        2. Get a better handle on construction. My wife, who’s a pretty decent economist, said last night that construction is well-measured, because building work needs permits. I disagreed, because we know that much building goes on and has gone on without permits. We know, through the tragic deaths of workers, that a major hotel was being constructed in Negril without the requisite building and other permits. So, one can assume that data on this project was not being captured in official statistics. We can readily assume that a major project being derelict in its legality can be but the tip ofthe  iceberg. 

        We know also that a major growth area in the corporate area, Portmore, has recently extended its building approval amnesty. So, again, we know that significant amounts of construction were going on ‘under the radar’. If we could capture that well, we could find that construction alone has been moving ahead very fast. Anecdotal evidence suggests that’s true in the corporate area, where I’ve seen over the past three years a swathe of hosuing complexes go up and also a bevy of commercial spaces being built or extended. Similar trends are evident across the island.

        3. Bring more informal activity into the formal sector. Ha! Fat chance! My hunch is that this is where some faster growth may be lurking. My supposition is that, while not a ‘silicon valley’ in Jamaica, by its nature, the informal sector in its many forms has had to move faster to keep people afloat. Of course, we could find that a lot of informal activity (say, vending) is just at subsistence level. However, anecdotal stories of how people have used their ‘little jobs’ to support families, in general, and to do things like pay for children to go through schooling to university, suggests that ‘raising chcikens’ etc has provided a significant life-line. How the various activities get captured in data is a massive headache, because the incentives are strong to stay out of sight. Moves like having more taxation based on spending, rather than income, may offer a second-best way of capturing more informal activity, though. 

        4. Pay more attention to what income inequality tells us. This is tricky. It’s clear that those Jamaicans who live in upscale areas have done more than get by. Large houses, more cars, private schools, foreign trip, etc, all reflect a life-style that is supported by growing financial resources (whether self-generated or through credit).  Whether they are reflective of the robustness of professional and business life, they have done much better than average in a material sense. It may be that they have both higher income/spending levels than average, and that these have grown faster than average. If that’s so, we then. Need to go to the other end of the scale to see how the ‘dirt poor’ (no value judgement) have fared. Maybe, the best we can do there is to get more sectoral information from the banking sector about deposit holder and borrowers.

        So, let’s don some thinking caps and see what can be done to get a better understanding of this oh-so-important set of issues.

        Schools for scoundrels

        A few weeks ago, Jamaica’s Education Minister put his teaching community into a tail spin over a report on Crime and Education. The basic point was that certain schools were associated with a significant number of criminals in prison. The matter was botched in my view, not least by some loose language by the Minister and in the media that pointed the blame at schools as if they were factories, turning out hoodlums by the dozen. Naturally, that offended many teachers, who see themselves trying hard to shape children into good citizens, often in circumstances where the basic supports of life barely exist. They are struggling against some heavy odds.

        However, the more-than-a-grain of truth is that many criminals in Jamaica were failures at school. Testimony to that came in a current affairs discussion last night on TVJ’s “All Angles”. They failed at school? Schools failed them? They wasted their time? Schools lost patience with them? Discipline issues. This is a chicken and egg topic. But the bottom line is that many criminals dropped out of school or came away with a much lesser grasp of many rudimentary skills. They are persons just not well-equipped to do many things, other than basic labouring work. Fast forward. Crime as an occupation then becomes an easy option, especially if the ‘skill’ needed is brute force and callousness. The attendant dangers to personal well-being are then taken as one of the risks of the trade. Maybe, people talk themselves into walking away from that life, but it rarely happens.

        We can’t turn Jamaica around in a very short time, because the flow of potential criminals–if we take the failures in the education system as a proxy–continues unabated. But, can we manage the situation better? I want to be optimistic and say “Yes”. We know that various programs exist to put more resources into communities that have been plagued by crime. A lot of human time and effort is geared towards direct help. It’s not enough. Those communities often have little that will attract people or investors, so are condemned to ‘more of the same’. Life is so dire that little differences in opportunities can seem enormous, by comparison. If one street gets something a little better than the next, it may seem that the whole world has changed. That, too, can be the source of more rivalry–call it petty jealousy–over which people are not reluctant to take up arms.

        But, one element eludes many of these communities–jobs. Most people are brought up with the mantra of hard work being important. But, when you cannot find work to do, hard, or easy, many struggle to know what to do with themselves. People who are better educated or have other skills can make things happen. If you are lacking in either or both, you will struggle.

        Much airtime is being given to what Jamaica needs to move forward. A phrase that keeps haunting us is that the 21st century demands much higher levels of learning. We are in an era of fast-moving technologies. Jamaican politicians are sitting on the coat tails of a potential logistics hub development, but have not been very forthcoming about the type of jobs that will be generated and the kind of jobs Jamaicans are likely to get. They may not know. Or, if they know, dare not say. I’ll go there.

        Just last summer, we read about the ‘mass’ exodus of skilled port workers from Jamaica to Canada. Concern was voiced about loss of technicians, but a training programme and new equipment would help keep customers. Ironically, Jamaica was becoming a ‘technological university’ for the Canadian market. Target skills had been those trained in the maintenance exercises of the mobile equipment, such as the big straddle carriers, trucks and big container lifters. But also crane operators and heavy-equipment operators. The only thing working against this high demand was ‘indiscipline of some truckers when they go to Canada’.

        So, Jamaica has skills for the basic port work, but they are dwindling in response to the country’s fragile economic situation. Could they be brought back if the logistics hub works out? Probably not. Opportunities in Canada are far more attractive–harsh winter weather, notwithstanding. So, could we train enough people to do the work? We have time. But, the stock of people from whom trainees will likely come is unlikely to include many or any from crime-infected communities.

        Many people without work naturally get excited at the prospect of new jobs coming their way, even if they do not have skills to take advantage of the opportunities. Truth is, they are likely to still be stuck on the corner, hoping.

        If politicians can be honest about the prospects they see for their population, can they be honest about the potential disappointment that lays ahead for many striving for something to do? If they are, they know they will face questions about “What are you doing for us?” (leaving aside the dependency problem). Do nothing and keep watching what happens to crime.

        Jamaica’s crime problem is not unique in the Caribbean. Islands that have had a history of performing much better have seen their crime problems grow–The Bahamas, Barbados, Trinidad and Tobago–even surpassing Jamaica in some unenviable categories, on a per head basis. The common elements have been drugs, gangs, and unemployment, with a familiar base of low educational levels. The region’s teachers used to be one of the aspects that set us apart from other developing areas. We lost many to migration, but kept a good many, too. The reasons for failing education are many, but some of the results are clear. It’s an area we need to fix, at a national and a regional levels, and fix fast.

        National heroics

        Imagine that! I wrote a piece yesterday, which featured Minister Roger Clarke, and there I was in an audience under a big tent, listening to him, at the launching of an agricultural financing project in Morant Bay, St. Thomas.

        I’ll be interested how the local media report this event, but I have several reactions. The man is keenly aware of his image, and embraces it. He told the audience how he loves seeing his cartoon in the papers and wishes he could see one everyday; he frames each one and can’t wait for when he gets his royalties for helping sell papers. He mimicked the Boltian pose from yesterday’s cartoon, and shouted its caption.

        I was surprised when he touched on something similar to what I wrote, by saying that people must be wondering “What is it with these people and chicken back?” In making fun of his own image, he tried to clarify himself, saying that he had urged people to eat things other than chicken back–chicken meat, pork, fish, beef…and ox tail. He quipped that those who were now worried about the poor were really thinking about their poor dogs, for whom they usually bought chicken back. That may open up more avenues for problems.

        But, he wanted to outline ways in which his ministry was trying to build bridges between local supply and demand, and rebuild production in areas where good capacity once existed but had been reduced. Jamaica’s imbalance of food imports and exports has some odd elements. Why was Jamaica importing so much ‘Irish’ potato when it could grow much more? Could the right varieties of potatoes be developed to help reduce imports of potatoes for fries? Tilapia had been produced previously in plentiful quantities, but that had diminished greatly. More onions can be produced. “We love onions! Look how much is put on the fried fish at Border?” The mortality rate for certain livestock could be reduced. Grown animals could be brought to market faster. Many crops have been hit by diseases. It was interesting and appropriate that Mr. Clarke was paired with the Minister of Health, Dr. Fenton Ferguson, who is MP for St. thomas East. Those two portfolios should work closely together.

        Morant Bay has a revered position in Jamaican history and folk culture. It was the site of a rebellion in 1865, which involved the capture and execution of Paul Bogle, a native of St. Thomas and Baptist preacher, and George William Gordon, a landowner and politician. Bogle was much concerned about the conditions of the poor. Gordon was critical of the British Governor, John Eyre, for his handling of these grievances and support of abuses by the white landowners. Bogle led a group of black farmers to discuss their grievances with the Governor, but they were denied an audience. This lowered confidence in the British rulers and the group gained in membership. Bogle and members of his group were then involved in several protests, which resulted in the police being beaten into retreat. Brutal reprisals followed and a warrant was issued for Bogle’s arrest for riot and assault. He was captured, tried and executed. Gordon was also arrested for conspiracy and executed. The incidents set off political debates in Britain over the manner with which Jamaica was being governed; they became pivotal in the relation of Britain with Jamaica. Both Bogle and Gordon were made National Heroes in 1969.

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        Ironically, Jamaica’s small farmers are still under the cosh. They are sometimes at a loss to fix the ‘markets’: difficulties in moving produce; options for dealing with gluts; inability to deal with big producers and retailers, who could turn quickly to imports; financing problems; losses from praedial larceny (by the “two footed puss”). But, small farmers are the backbone of much of the food production which Jamaicans love to see and eat: yams, potatoes, callaloo, ackees, dasheen, cho-cho (Christophine), okra, mangoes, plantains, peas, more…

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        Take a road trip through the island and you’ll see that up close. Most people love that aspect of Jamaica, along with the many and tasty options for cooked food on the road. We know the wildly varied offerings at produce markets, such as Coronation. Let’s not get into health issues here, but our local producers know what people want, even if what they have to offer seems limited compared with supermarkets.

        So, we are headed back to Kingston and roadside vendors have much of what we could want by way of fruit: sweet sop, sour sop, mangoes, plantains, bananas, naseberries, plus honey, molasses, and noni juice. My wife is easily tempted, and when she hears the prices, not for single fruit but for bowlfuls, she’s transported back to our days in Guinea, when we got similar offerings. We buy enough to share. A happy carful.

        Buy local, eat local! It’s more than a hollow mantra. I do not like temperate fruit enough for them to get first pick. Sure, I’ll find a use for them, but do I want to pay four times the price just to have blueberries or Bartlett pears? I don’t think so. Those whose income allow, can choose the many imports, but is it because we have to show we can? When I ate jackfruit this week did I wish for something foreign? No. Our visitors don’t come here to eat what they buy in Bethesda. In Gandhian style, it’s good to try to be the change you wish to see.

        I’m not on a campaign to erase the US$1 billion food import bill singlehandedly, but I can see ways to dent it.

        Now, I’m going to check how my little market garden is starting to grow.