The National Budget Estimates of Expenditure 2019/20 have been tabled in Parliament, and many other commentators and analysts have had their say. The main talking point has been the low growth projected for the period. This is compared to the promises of the Economic Growth Council of the target of 5 in 4 annual growth. The current target is roughly 20% of the projected target, and at this moment we must assess the controllable factors and do something about them.
The most debated topic is the relationship between growth and inflation and that needs to be explained in a simpler format for the non-economists like me. If these are in fact being dictated by external agencies, then we need to question a few seeming givens. Over the past several decades we have had no growth, but still inflation has been very high, the depreciation of the dollar has been rapid, productivity has fallen, so have exports, and the trade gap has widened. This is the conundrum that has been our own albatross.
The Budget 2019/20 shows an inadequate level of capital expenditure, and I suggest that our Jamaican psyche of not maintaining assets in good working order is one reason. In a very simple way, buying assets requires the commitment to an annual recurrent expenditure for repairs and maintenance, and this removes much of the discretionary spending that can be done to suit various whims and fancies at politically strategic times.
Put very clearly: the cost of an asset is not merely its purchase price. If we buy a motorcar we would be foolhardy and reckless if we made no recurrent budget for insurance, tyres, oil and filters, and fuel. Proper capital expenditures will increase the recurrent expenses in future years. However the Government uses the cash accounting system, and therefore accruals for future years are left out, and scheduled maintenance need not be carried forward.
It therefore forces explanations, promises, and utterances that do not provide for political goodwill. One example is with roadworks. If maintenance of our new highways required an annual cost of 10%, then there would be no money for a St Thomas highway or Mandeville bypass, or pothole repairs. That could cost someone a few seats in a national election where repairs to bridges and rural farm roads are popular promises at public meetings.
It therefore seems plausible to me that there are other considerations outside of the balancing act between inflation and growth.
The interests of the private sector are essentially the same as asked in CSEC Principles of Business. “What is the purpose of a business?” Answer: “to make a profit”. Therefore the private sector cannot embrace a situation that promises low growth or no growth (no matter how hypocritical they are as they cuddle up to kiss the nether parts of “partyism” as described in Chaucer).
The private sector — large, medium, small, and micro — should all be focused on making a profit and to do otherwise would be to ask a thriving business to become a non-profit. So let us empower them and reward them through earned performance incentives as a path to sustainable growth and a basis for future employment.
This leads Government and private sector to a nexus. The interests of both are inimical, and unless this is resolved quickly, the result will be stasis, and that will not serve the country well. Inflation seems to indicate increases in credit, and the supply of currency in relation the supply of goods and services.
Despite this new talk about growth versus inflation let me remind all of us of previous utterances made by succeeding governments.
- We cannot accurately value the size of the local informal economy. So at best we are making a guess about an economy that is uncertain.
- We use the number of 3-5% growth if crime was under control.
- There is another guess about the growth effect if all workers could get to work on time and work 2-3 shifts that perhaps could have up to at least 5% growth potential.
So with just these three: 3+5 + (Government) 1.5 = 9.5%. At this rate of growth hold up the hands of all those whose primary concern would be inflation.
For poor simple me; if the relationship was stable or the supply of goods and services were increased at least proportionally relative to the money supply then there would be no change in inflation. One way of doing this is to focus on productivity and increased production. After all, when a furniture store has an excess of inventory, the operators have a sale, and prices go down, not up.
I ask: If all of us working people stopped producing and just smoked a spliff, would inflation fall? If we all earned more money so as to put food on the table and send our children to school, and depended less on Government handouts would that be so bad?
Idle money needs to be put in profitable and sustainable ventures, and this is the responsibility of the private sector as the “engine of growth”. As long as increased profits are real (meaning above the rate of inflation or measured in a stable international currency), then we should be cheering, and the IMF, World Bank, and IDB should be among our cheerleaders. We want to be like Singapore, but we don’t want to invest in infrastructure or equity capital/shared ownership.
When our genuine growth surpasses 15% then I would be willing to reopen this discussion about restraint again. Until then, I have little interest in keeping Jamaicans in poverty. Our strident decisions about the economy and low targets that compete with growth need further examination. We cannot underperform as a means of supporting sustainable growth. Perhaps we should make the promotion of equity capital investment, shared ownership, and the spreading of risk, as sexy as borrowing at usurious rates.
The sectoral debates will have to address some of these questions, even as we seem more interested in the entertainment of the upcoming by-elections in Portland. Let us not be blindsided and forget the real long-term decisions that should have been proposed in the Budget, and if necessary, challenge them.
This is what democracy is about, and informed debates, conversations, and clarifications, must be evident in the deliberation of the People’s Houses of Parliament.
