IMF: It Mek we Fene

Orville Taylor, Contributor

I remember with vivid detail the pronouncement by the former finance minister when he assured us that Jamaica would be spared the pain of the global financial crisis, so we had nothing to lose sleep about. Unfortunately, one who looked abroad while remaining Man a Yard hardly saw the coming crisis.

Then, I wondered if IMF meant Illusive Minister of Finance. Other comments followed, such as the IMF is a different creature from what it was in the past and the experiences then do not have to be replicated.

Of course, the guarantees came from a Bruce Golding-led Government or Jamaica Labour Party (JLP) - I am not sure which is which - that has a reputation for telling us exactly what the truth is. So we accepted it like gospel.

Nonetheless, there are important details which we needed from the Government, regarding the state of negotiations, and we never got them. It became a political cricket ball. On the one hand, the Government tried to tell us that the relationship was good with the Fund, and the People's National Party (PNP) promised us that it would renegotiate the agreement. I have long learnt not to be comforted by a promise, therefore, when Dr Gene Leon, the IMF representative in Jamaica, stated, "I can't talk about renegotiating something which has not yet finished ... ," I was unmoved.

Leon had made it clear that there was little wiggle room, whether there was a change of government or not. Therefore, while he couldn't say it, there was no doubt the comments by the PNP were, at best, wishful thinking, and at worst, politicking.

cold facts about imf

Don't be mistaken: the IMF and its brother, the World Bank, were established in 1944 at the Bretton Woods Conference, with an understanding that the head of the World Bank had to be an American nominated by the American president and the Fund by a (non-Eastern) European. There is no delusion that Third World countries can dictate its policy.

Typically, the IMF, like any other bank, will only lend under conditions which it sets. In the past, what was needed by a mendicant government was a letter of intent, which was a proposal about what the country intended to do with the money. Oftentimes, by the time the plan was chopped, redlined, deleted and edited, the final design looked so different, the original strategy of government was so compromised that it was bound to fail.

Banks want to minimise their risk. Such is the IMF. Today, the letter of intent is not as it was, but the IMF still has to approve your plan or you will not get the money.

The IMF has historically had a bias against large expenditure on welfare programmes, including education. Therefore, although the construction of more schools and the overhaul of the educational system will ultimately pay major economic dividends, it sees this as social-welfare and safety-net issues rather than real investment.

Yet, any teacher, inner city, or poor rural parent can tell you that investing in the education and health of your children is one of the best uses of money, both at the personal family level and at the societal level.

trouble looms

Though a very scary prospect, devaluation was one of the most common recommendations of the IMF. The argument behind it was that with the lowering of the value of the local currency, the price of exports would also be reduced, making them more desirable and competitive.

However, if there is no real increased demand for our products, and the relative price at which we can sell them falls, isn't it clear that we would be earning less for the same quantity of sales?

On the other hand, with an insatiable appetite for foreign goods, the balance of trade deficit went through the roof. In a scenario where we cannot compete with even Trinidad and Tobago today, imagine when our dollar slips to US$1:J$100.

My fear is that with a more public IMF agreement than a controversial MOU, the only Jamaican export which will increase are persons who Uncle Sam sends extradition requests for.

The stereotype of the sort of expectations a government has to fulfil includes a major reduction in the fiscal deficit and decrease in the public debt. Standing at J$10 billion, the Budget deficit is such a large pothole, the PNP's JEEP might just fall into it and break an axle. While capital projects such as construction are not difficult to sell, the IMF always 'recommends' the diminution of the public sector, under the mantra of reform, restructuring, redundancies, right-sizing and a lot of other Rs expressed more commonly by the trade unions.

In the 1980s, there were public-sector job cuts. Leon is on record as saying, "The wages constitute about one-half of the expenditure of the government between wages and interest ... two-thirds of expenditure, between 70 per cent and 80 per cent of revenues, so you have to go for something that is able to make a statement." This sounds eerily like what the IMF said to prime ministers Michael Manley and Edward Seaga between 1977 and 1992. Indeed, the IMF has changed.

A common prescription was wage guidelines and wage ceilings. Between the 1970s and 1990s, there were these restrictions on free collective bargaining. Collective labour agreements were vigorously monitored to see if they adhered to the limit on wage increases. Even the labour laws were amended to prevent the Industrial Disputes Tribunal from making awards beyond the mandated 10 to 15 per cent limits. When the last administration told its employees they were not going to receive their seven per cent increase, and when the figure was set in stone, what was it?

Our current finance minister, Peter Phillips, was a lecturer in the consortium graduate programme at the University of the West Indies (UWI) at the heights of the 1980s and he, more than most others, knows just how little progress came under the IMF's regime then.

IMF structural-adjustment programmes unfortunately do not generally work, and unless one closes one's eyes, one is unlikely to find an overwhelming success story. Jamaica has been the poster child for such programmes and strategies, which were tried with little luck and success across Africa, Latin America and the Caribbean. In 1991, at a symposium held in Venezuela hosted by the International Labour Organisation, the conclusion was that the 1980s was a "lost decade". This era, when structural adjustment was the prescribed Phensic for every economic sore foot, saw less-than-desirable economic growth or none among the countries which attempted it.

Furthermore, in those countries where there was any positive economic outcome, the majority of it accrued to the capitalist classes. Studies by Michael Witter and Patricia Anderson of the UWI showed just how disastrous it was: the gap between rich and poor widened, persons were forced out of the formal labour market, and the working poor grew. For example, 35 per cent of working Jamaicans earned less than half of the liveable wage in 1977. By 1985, this fraction reached 61 per cent.

This is the eucalyptus oil which Andrew Holness was pussyfooting about telling us. Those of us who depend solely on salaries and wages are going to see a depreciation in our standard of living, and the persons who are at the lowest end of the spectrum are going to suffer most.

Oh, by the way, I bet that the J$18m per year that the political ombudsman's office gets will go a far way in erasing the deficit.

Dr Orville Taylor is senior lecturer in sociology at the UWI and a radio talk-show host. Email feedback to columns@gleanerjm.com and tayloronblackline@hotmail.com.