In my Blog post titled (Court Rebuffs Criminal Rights Group) I referenced a January 8th Chicago Tribune Article Titled: JAMAICA’S DEBT HURRICANE:
I have posted the Article here for your consumption.
Americans concerned about the impact of public debt on the global recovery have focused — with good reason — on Greece. Closer to home, however, the tourism mecca of Jamaica illustrates the catastrophic effects of borrowing way too much, and the painful choices that follow. This saga, less familiar than Greece’s, is a lesson for lawmakers in the U.S. and elsewhere. The Caribbean nation actually is in worse financial shape than Greece: Jamaica has more debt in relation to the size of its economy than any other country. It pays more in interest than any other country. It has tried to restructure its loans to stretch them out over more years, at lower interest rates, with no success. Such a move would be risky for its already nervous lenders. So Jamaica is trying to wrangle a bailout from a skeptical International Monetary Fund. Another deadline for a potential deal just came and went last week, though negotiations continue.
Jamaica is caught in a debt trap. More than half of its government spending goes to service its loans. The country can spend barely 20 percent of its budget for desperately needed health and education programs. Its infrastructure is faltering. It lacks resources to fight crime. It has a little margin to recover from natural disasters such as Hurricane Sandy. To set itself straight, Jamaica needs a restructuring, and a bailout with significant debt relief. No way can a small economy that has limped along with growth at less than half the global average for two decades pay back the fortune that it owes. But as with Greece, as with America, as with the state of Illinois, government leaders have balked at imposing the inevitable hardships. Saying no to favored constituents is no easier in Kingston than in Springfield.
The potential alternative is worse: Defaulting on its debt would ruin Jamaica’s prospects for many years to come: It would undermine the island’s critically important trade relations with the U.S. It would discourage badly needed foreign investment in its tourism, agriculture and mining sectors. The only thing worse than doing what Jamaica must do to live within its means would be not doing it. That hard fact is being faced to some degree by debtor nations around the world. Jamaica is an extreme example of the fate that could befall Spain, Italy, Japan or, yes, the U.S., if debt keeps piling up. The analogy only goes so far since those much-larger economies have better resources to manage their finances. Jamaica has few options, apart from beseeching the IMF.
The American “fiscal cliff” deal was good news for Jamaica, which could not afford another U.S. recession. The island’s financial stewards have taken some practical steps to depreciate the local currency and curb inflation. The broader solution, however, is as obvious and necessary in Jamaica as it is in Greece and other countries mired in debt: Reform taxes, curb pension costs, cut public payrolls. In Jamaica, that austerity-based formula has, unfairly, gotten a bad name. Critics of trade liberalization, privatization and deregulation point to Jamaica as Exhibit A of First World policies gone awry. IMF-imposed fixes more than a decade ago — after public debt had ballooned in the 1990s — made conditions worse, the critics say. What really happened, however, is that IMF fixes gave Jamaica a temporary lifeline, but government never stopped borrowing and spending. The lesson of Jamaica is not that access to credit is bad. It’s that irresponsible stewardship is bad. We’re cautiously optimistic that Jamaica’s current leaders will do better: Finance Minister Peter Phillips says his government must do whatever is necessary to reduce its out-of-control debt. Job One: Jamaica must make enough painful progress to win the confidence of the IMF, and of private lenders.
While the rest of us wait to see whether the island nation escapes its debt trap, we’ll see whether other countries learn the lesson of Jamaica: Stop digging such deep, deep holes in the beach.http://articles.chicagotribune.com
Jamaica’s External debt: $14.7 billion (31 December 2011 est.) (CIA fact-book)
As a Jamaican I’ll tell you, I have a range of emotions regarding the Article, anger is not one of them.
Well as is to be expected the bone-headed politicians in Jamaica found it within themselves to criticize the Article rather than face the realities documented therein. Special advisor to the prime minister, attorney-at-law Delano Franklyn said that Jamaica was not in the same position as Greece which had to make unilateral decisions to reduce its stock of debt, while Opposition spokesman on finance Audley Shaw said it was not true that his party balked at imposing tough decisions to address the debt problem when they formed the government between 2007 and 2011.Read more: http://www.jamaicaobserver.com
Delano Franklin left, Audley Shaw right.
Franklyn said the Tribune’s editorial gave the impression that Jamaica was seeking a loan from the International Monetary Fund when it is in fact negotiating with the Fund to get its approval by putting in place the correct fiscal measures, including reduction of the debt, in order for Jamaica to approach the international market for funding. Meanwhile, Shaw, a former minister of finance, took issue with that a statement in the editorial that Jamaica’s current Finance Minister Dr Peter Phillips “says his Government must do whatever is necessary to reduce its out-of-control debt”. Shaw said the editorial suggested that the debt problem was the fault of the previous government. “That is an expression of ignorance on the part of the Tribune writer. The fact is, it is well established that our debt problem did not start when I became finance minister in 2007,” an adamant Shaw emphasized. Read more:http://www.jamaicaobserver.com.
I want to scream, lets face it,we knowing these politicians are arrogant morons, we know that they are the quintessential big fish in the little pond, a pond by the way which is drying up real fast, but are these clowns for real?
Our country is in serious trouble and other than the predictable default ignorance label they use, because of course no one knows anything but them, these two morons could not credibly refute anything in the article, so they attacked the writer.
This is traditionally how they operate , it would be much better to look at the entirety of what was said in the article and see how the facts stated could be addressed, but that would mean humbling themselves and saying “what we have been doing has not been working, we simply cannot continue on this path”.
Say what you want about America’s almost 16 trillion-dollar debt, they can print money to honor their debt obligations, yes there would be inflation, but the economy is large enough to absorb some inflation without widespread calamity.
The Americans can point to what they have done with the money they borrowed, whether you agree with how those monies were used is another conversation for another day.
One thing is certain is that they have good roads, good schools and great infrastructure , and yes they have the wars I know , I know, well some Americans will argue that those wars are, and have been in America’s long-term strategic interest.
What does Jamaica have to show for the debt burden that is eating up more than half of its Gross domestic product, just to pay the interest on those loans?
This is an untenable situation which is unsustainable, it is guaranteed to keep generations yet unborn enslaved.
This is the heart of whats at stake, yet both sides of the political clown-show is intent on saying “who me I didn’t do it” or “they don’t understand what they are talking about”. Of course when it comes to us Jamaicans, no one knows anything but us, look where it’s gotten our country.
Jamaica needs bold leadership , it will require sacrifice, not necessarily severe austerity which will cause a contraction of the economy, or cause even more devastation to the most vulnerable. There will however have to be an understanding that the public purse will no longer be a piggy-bank for whomever is in power to do with it whatever they want.
There must be an understanding that the country cannot get to prosperity through borrowing. The country’s leadership must appreciate the importance of education and fiscal prudence. In short the era of thievery and hand-outs must stop now.
Above all Jamaica needs leadership which understands that above all the single biggest problem facing the country is it’s exceptionally high crime rate.
Leadership must be more sophisticated than what presently exist, we simply cannot get to first world status by picking up mangoes, the world has simply moved past that kind of parochialism and simplicity.
Jamaicans will have to look to themselves as the source of their own progress and less to party. The choices right now must be a sane mix of austerity, and crime reduction, holding the strain on spending is critical to getting the debt burden under control, reducing to a minimum serious crimes and acts of violence will engender confidence, which hopefully will result in a return of serious investment opportunities to the country.
The problems will not be solved overnight, all stake-holders must be on board if it is to work. Of the stakeholders no group is more critical than public sector workers and their unions. Unions will have to learn to stop posturing and grandstanding in an effort to broaden membership.
None of the aforementioned proposals will come to fruition with the present crop of leaders, some of whom couldn’t tell their heads from their asses.