World Bank's Country Economic Memorandum For Jamaica: 'Unlocking Growth'

Excerpted from The Gleaner:
World Bank experts have attributed Jamaica's perpetually disappointing economic performance to low productivity caused by three major obstacles.

They suggest the country could achieve GDP growth of up to 5.4 per cent, but said that was predicated on the Government addressing and removing the constraints.

Low productivity... was ascribed to a high crime rate, deficient human capital primarily reflected in lack of adequate training for most of the labour force, and distortionary tax incentives combined with enclave development, manifested in the mining sector and all-inclusive resorts, that do not spill over to the rest of the economy.

Stumbling Blocks:
• "...rent-seeking activities dominate the Jamaican economy and that "the main actors in this process have become stumbling blocks in the attempts to achieve growth".

"A major conclusion of the study, not explicitly stated, is that there are groups that have a vested interest in the way Jamaica is presently ordered.
Despite the crime and grime you see all around, the poverty and unemployment, the degraded environment, these groups benefit from the existing system and will fight tooth and nail to keep it as is.
And they all look like us in this room" (a seminar at the University of West Indies)

• The report... said low productivity across the economy was reflected in total factor productivity - a measure of the efficiency of inputs in production - which has collapsed since the 1970s despite high investment in the country.

• "...the report suggested that CRIME was the major contributory factor to low productivity, saying that "it severely limits future growth and leads to a vicious circle as low growth further increases crime and higher crime rates further reduce growth".
In addition, crime constrains business expansion and diverts resources from productive activities to crime protection...

Consequently, Investment in Jamaica tends to flow into isolated or enclave activities, it said.
All-inclusive Resorts were cited as as one of the best examples of that enclave development model with its low spillovers, in that, while tourists avoided crime-ridden areas, their dollars remained in the resorts.
Mining Communities and International Businesses operating in Export Free Zones were similarly isolated from the greater Jamaica... referencing a 2007 United Nations-World Bank study which illustrates the link between growth and lower crime rates.

On that basis it said Jamaica could experience an annual increase of 5.4 per cent in per capita GDP, if it cuts crime rates to the levels prevailing in Costa Rica.
Statistics show that Jamaica has a murder rate of 60 per 100,000 inhabitants compared with Costa Rica which has a murder of about 7.8 per 100,000 and is considered one of the safest countries in Central America.

• The Migration Rate of Skilled Workers has also increased because of difficult living and business conditions, including crime and government policies, and this has had a negative impact of the level and growth of productivity as well as innovation and entrepreneurship...

• Another factor cited as affecting growth was Jamaica's Fiscal Policies and Budget-Management Practices and Policies.

The report said inconsistent, complex tax policy with numerous exemptions and special privileges have reduced tax revenue by an estimated 20 per cent, significantly reducing the Government's spending capacity.

The complex system of taxes and incentives also creates distortions for the allocation of capital and lowers investment productivity...

• CONCLUSIONS:
While acknowledging there is no silver bullet to solving Jamaica's problems, the report said actions that would have a direct bearing on productivity and the efficiency of investment include addressing crime as a national priority, reducing tax distortions and increasing labour force skills.

"These reform actions, if quickly implemented, will scale up productivity in traditional sectors and encourage investment in new sectors," said the report. "It is time this be done if Jamaica is to avoid losing another decade of growth and if the country is to make a clean break from the economic and social fragility of the past."

ADVANCES POSSIBLE:
• Two of Jamaica's best performing sectors - tourism and food processing - provide examples of how advances were possible once the constraints were resolved.

The improved environment could stimulate productivity in sectors where Jamaica has a comparative advantage, as well as encourage the emerging new activities which have been identified through value-chain analysis in the food processing and tourism sectors...

•The World Bank, in explaining the benefits to be derived from removal of those obstacles, said that a meaningful reduction in crime would make tourists feel safe to move out of resorts enclaves and enjoy new or revived tourist venues for sightseeing, entertainment, shopping, and dining.

• Improved labour and managerial skills could make the tourism sector more competitive in the region.

And given that Jamaica already enjoys an international market for its food products, improvements throughout the processed foods supply chain, including agriculture, transportation, food safety certification and marketing will quickly advance this sector...


Read The Gleaner Article @:
http://jamaica-gleaner.com/gleaner/20110619/business/business3.html

In A Related Article of How the Youth Envision Their Future Opportunities on the Rock:
www.jamaicaobserver.com/news/Most-young-Jamaicans-feel-they-would-be-better-off- overseas-survey_9025429

So did they take any responsibility for insisting on the free trade zones, continuously slashing the public sector (which provides health, education, and professional development), and thus making a vacuum filled by criminals to provide social services the state can't afford to, thanks to IMF/World Bank agreements?

Right. Didn't think so. Nothing in this report that's not obvious to anyone not collecting a high, tax-free salary at the World Bank.

Relevance to Treasure Beach? Low crime, good food, community tourism, commitment to education: you already have the treasures the WB says all of Jamaica needs. Keep up the good fight to protect them, and do your best to help the young people to go away for school and experience, and then bring that back home to strengthen the community.

Right On...Sisterfire!

Structural Adjustment--A Major Cause of Poverty:
"Debt is an efficient tool. It ensures access to other peoples’ raw materials and infrastructure on the cheapest possible terms. Dozens of countries must compete for shrinking export markets and can export only a limited range of products because of Northern protectionism and their lack of cash to invest in diversification.

Market saturation ensues, reducing exporters’ income to a bare minimum while the North enjoys huge savings.

The IMF cannot seem to understand that investing in … [a] healthy, well-fed, literate population … is the most intelligent economic choice a country can make."
— Susan George, A Fate Worse Than Debt, (New York: Grove Weidenfeld, 1990)

Many developing nations are in debt and poverty partly due to the policies of international institutions such as the International Monetary Fund (IMF) and the World Bank.

Their programs have been heavily criticized for many years for resulting in poverty. In addition, for developing or third world countries, there has been an increased dependency on the richer nations. This is despite the IMF and World Bank’s claim that they will reduce poverty.

Following an ideology known as neoliberalism, and spearheaded by these and other institutions known as the “Washington Consensus” (for being based in Washington D.C.), Structural Adjustment Policies (SAPs) have been imposed to ensure debt repayment and economic restructuring. But the way it has happened has required poor countries to reduce spending on things like health, education and development, while debt repayment and other economic policies have been made the priority.

In effect, the IMF and World Bank have demanded that poor nations lower the standard of living of their people.

A Spiraling Race To The Bottom:
The IMF and World Bank provide financial assistance to countries seeking it, but apply a neoliberal economic ideology or agenda as a precondition to receiving the money. For example:

• They prescribe cutbacks, “liberalization” of the economy and resource extraction/export-oriented open markets as part of their structural adjustment.
• The role of the state is minimized.
• Privatization is encouraged as well as reduced protection of domestic industries.
• Other adjustment policies also include currency devaluation, increased interest rates, “flexibility” of the labor market, and the elimination of subsidies such as food subsidies.
• To be attractive to foreign investors various regulations and standards are reduced or removed.

The impact of these preconditions on poorer countries can be devastating. Factors such as the following lead to further misery for the developing nations and keep them dependent on developed nations:

• Poor countries must export more in order to raise enough money to pay off their debts in a timely manner.
• Because there are so many nations being asked or forced into the global market place—before they are economically and socially stable and ready—and told to concentrate on similar cash crops and commodities as others, the situation resembles a large-scale price war.
• Then, the resources from the poorer regions become even cheaper, which favors consumers in the West.
• Governments then need to increase exports just to keep their currencies stable (which may not be sustainable, either) and earn foreign exchange with which to help pay off debts.
• Governments therefore must:
---spend less
---reduce consumption
---remove or decrease financial regulations etc, etc

• Over time then:
---the value of labor decreases
---capital flows become more volatile
---a spiraling race to the bottom then begins, which generates
---social unrest, which in turn leads to IMF riots and protests around the world
• These nations are then told to peg their currencies to the dollar. But keeping the exchange rate stable is costly due to measures such as increased interest rates.
• Investors obviously concerned about their assets and interests can then pull out very easily if things get tough
---In the worst cases, capital flight can lead to economic collapse, such as we saw in the Asian/global financial crises of 1997/98/99, or in Mexico, Brazil, and many other places. During and after a crisis, the mainstream media and free trade economists lay the blame on emerging markets and their governments’ restrictive or inefficient policies, crony capitalism, etc., which is a cruel irony.
• When IMF donors keep the exchange rates in their favor, it often means that the poor nations remain poor, or get even poorer.
Even the 1997/98/99 global financial crisis can be partly blamed on structural adjustment and early, overly aggressive deregulation for emerging economies.
• Millions of children end up dying each year.

Competition between companies involved in manufacturing in developing countries is often ruthless. We are seeing what Korten described as “a race to the bottom. With each passing day it becomes more difficult to obtain contracts from one of the mega-retailers without hiring child labor, cheating workers on overtime pay, imposing merciless quotas, and operating unsafe practices.”
— John Madeley, Big Business Poor Peoples; The Impact of Transnational Corporations on the World’s Poor, (Zed Books, 1999)

This is one of the backbones to today’s so-called “free” trade. In this form, as a result, it is seen by some as unfair and one-way, or extractionalist. It also serves to maintain unequal free trade ...

As a result, policies such as Structural Adjustments have, as described by J.W. Smith, contributed to “the greatest peacetime transfer of wealth from the periphery to the imperial center in history”, to which we could add, without much media attention.

(From Global Issue by Anup Shaw)

Thanks for all the great links, Zed!

Life & Debt: Stephanie Black's Classic Documentary on the International Monetary Fund (IMF) & the World Banks' globalization policies... its harmful effects on the Jamaican Economy & Political/Social Development.

A Sampling of the doc, with former Prime Minister Michael Manley, in our voice, describing some ties that bind:
IMF Decimating One Country After Another:
VIDEOS:
www.youtube.com/watch?v=YoIJPwfsbqg

World Bank Creating Poverty (BBC Newsnight)
www.youtube.com/watch?v=DrynBzUpyag&NR=1

Life & Debt: A Review in Assata Shakur's Revolutionary Forum:
www.assatashakur.org/forum/conscious-edutainment-videos-movies-tv/30335-life-deb t-how-imf-world-bank-has-impoverished-jamaica-other-countries.html


Other Reviewers (distributors), in an attempt to portray balance, have described the film in spooky-smug fashion:

• Life and Debt is a... feature-length documentary which addresses the impact of the International Monetary Fund, the World Bank, the Inter-American Development Bank and current globalization policies on a developing country such as Jamaica.
• This methodically rabble-rousing film can be read two ways: face-on as a laser-sighted expose of Jamaica's economic strangulation by an IMF hell-bent on fomenting chaos and dependency in the name of slave-wage sweatshops and the almighty Mickey Dee's, or, from a slightly more askew angle, as the grimmest Black science-fiction movie of all time. A tale of one very small Black planet's near hopeless struggle against a technologically superior alien adversary more malevolent than anybody's Borg.
• We learn of Jamaican farmers, food producers, and policy makers coerced by the IMF to dismantle their own prodigious food industries so that subsidized foreign competitors can crush them in the local market.
• We're reminded of the Clinton-led suit against Jamaica's banana industry on behalf of Chiquita and Dole, which ensured that those brand names now controlling 95 percent of the world's banana trade can scarf up JA's minuscule portion too.
• We hear of offshore poultry wholesalers who demand the return of their impounded caches of 20-year-old chicken, blithely claiming their poison meat was really intended for Haiti.
• The film also gives an inhuman face to the IMF in the form of the devil incarnate, deputy director Stanley Fischer, who plays the smug villain with mustache-twirling relish.
• The director confesses that "the film is supposed to make you mad," and hopes that editing it in her bedroom aided in transferring her sense of mission to the viewer.
(House of Nubian)

JLP Soars As Crime Falls:
http://jamaica-gleaner.com/gleaner/20110624/lead/lead3.html

World Bank: High electricity prices, crime and lack of skills hold companies back
http://www.jamaicaobserver.com/Jamaican-firms-complain-too-much-World-Bank_90555 19#ixzz1QCd3jjd2