Editorial | Zacca’s industrial policy

The Gleaner congratulates Christopher Zacca on two accounts.

First, for his deserved induction into the Private Sector of Jamaica’s (PSOJ) Hall of Fame.

Mr Zacca has been a public-spirited executive who has held several critical positions in Jamaica, including five years as the executive president of the PSOJ and his current job as CEO of Sagicor Jamaica, the flagship entity of the Canadian-Caribbean financial services conglomerate, Sagicor Financial Group. He also has an appreciation of the workings of a public sector, having been a special adviser to former Prime Minister Bruce Golding and from overseeing reviews of Jamaica’s energy sector, commissioned both by Mr Golding and the current prime minister, Dr Andrew Holness.

The second front on which we commend Mr Zacca is his important, and timely, observations in his Hall of Fame acceptance speech on the need for Jamaica to transition from the macroeconomic stability of the past dozen years, to strong and sustainable growth.

Although not stated in those terms, implicit in Mr Zacca’s remarks is the call for what this newspaper and others have framed as extricating Jamaica from its low-wage, low-technology, low-value-added and low-growth trap. To be clear, no one, and certainly not The Gleaner, believes, or has made the case, that this should be at the expense of fiscal discipline, or the jettisoning of budgetary prudence, which, over four decades, contributed to the island’s economy expanding by a measly annual average of one per cent.

Since 2012, when the island was essentially a pariah in the global financial markets and with the technical staff of the multilaterals, Jamaica, across administrations, has massively reduced its debt from close to 140 per cent of GDP to just 72.2 per cent at the end of the last fiscal year. The debt is expected to decline further, to 7.3 per cent by the 2024-25 fiscal year end, and the current government’s aim is for it to reach 60 per cent of GDP by 2026-27.

FAR FROM PAINLESS

These achievements, gained initially in the context of International Monetary Fund (IMF)-mandated economic reform programmes, have been far from painless.

In the first two years of the project, the then finance minister, Peter Phillips, introduced J$40 billion in new taxes to meet preconditions for a loan agreement with the IMF. And while Greeks were rioting over austerity associated with fiscal targets less than half of this island’s, Jamaica, in the early years of the IMF programme, was required to run a primary balance of 7.5 per cent of GDP. Jamaica has continued to run high primary balances, including a projection for 5.6 per cent of GDP this fiscal year.

But even with most of the macroeconomic indicators pointing into the right direction – for instance, unemployment is a historically low 4.2 per cent – growth, as Mr Zacca noted, remains stubbornly sluggish.

“We’re also navigating a world in turmoil and one full of uncertainties – whether it’s environmental, political, or ideological,” he said. “Jamaica is not immune, and having gone through the pain of COVID-19, and of high global inflation, it is apparent that, as the society navigates these stresses, the divides in our society are widening and the political rhetoric is increasingly alarming.”

Even before the onset of the COVID-19 pandemic, which caused a 10-per-cent slump in the economy in 2020, growth was, at best, anaemic; one per cent in 2017, 1.9 per cent in 2018, and 0.9 per cent in 2019. There were relatively sharp growth spurts of 4.6 per cent and 5.2 per cent, respectively, in the next two years, followed by 2.6 per cent in 2023, as the economy quickly returned to its pre-pandemic level.

Since then, projections going up to 2029 were for annual average expansion in GDP of around two per cent. And even that, after the effects of a storm in the summer, will not be achieved this year. Indeed, the Planning Institute of Jamaica’s best outlook is for output to be flat, but most likely marginally negative.

NEW APPROACHES

It is against this backdrop that Mr Zacca called for new approaches to drive growth.

He said, “It’s time to pivot to a deliberate, two-pronged national strategy focused on maintaining fiscal discipline and the critical institutions, such as an independent central bank, that support it, while driving robust and sustainable economic growth. We have come too far to throw away the gains we’ve made, that would be an economic disaster, but fiscal discipline alone isn’t enough.”

Which is the unimpeachable argument that the social anthropologist and public intellectual, Don Robotham, placed on to the agenda more than a year ago, and why The Gleaner unequivocally endorses Mr Zacca’s call for “a coalition of civil society to work alongside both the government and the Opposition in developing, and, most importantly, implementing a new national growth strategy”.

Stripped to its core, Mr Zacca’s idea is about more than cutting some red tape or providing some incentives to a few areas of production, as important as these might be.

More fundamentally, it is a reprising of a concept that became a bit of a dirty word with the primacy of the Washington Consensus: an industrial policy.

In this island’s case, this approach demands, in the first instance, an urgent and relentless drive to lift educational training standards, as well as the incentivisation of research and innovation, so as to quickly pull Jamaica out of the doldrums of low productivity, low technology and low wages, and, therein, move further up the economic food chain. This, of course, must align with new areas of economic activity and investment, supported by a national consensus around the endeavour.

Jamaica ought to have no ideological fear of proceeding along this route. It is a strategy, even when couched in geopolitical and security terms, being increasingly pursued by major economies, including the United States, that previously eschewed such approaches.