Jamaica, model of ‘expansionary austerity’

There is that island in the sun. But, first, a journey through turquoise waters of another tourist destination.

There we find a set of islands that comprise Greece. That country, a member of the ‘periphery’ (word of profound meaning), continues to experience its massive economic, social and emotional) Depression unleashed since 2007, in which Greek policies were not entirely blameless.

As member of the eurozone with the euro as its currency, Greece has had limited to nil options available with regard to monetary policy to deal with the economic catastrophe. Aside the fact that the country was integrated into the union with the feverish ‘connivance’ of now very ‘aggrieved’ parties. Lacking its sovereign currency, Greece could not resort to devaluation as a tool of monetary policy that might have allowed more flexibility, and minimised, or rather contained, the severity of the damage to the economy and the concomitant exacerbation of the country’s debt.  Paul Krugman, Simon Wren-Lewis, and others have also touched on this option, albeit unavailable, at the moment.

With its own currency, the Jamaican dollar, Jamaica with a population of some three million provides a case study of the costs of ‘expansionary austerity’. We get a picture of the trajectory of the government’s Debt/GDP, courtesy Trading Economics,

jamaica-government-debt-to-gdpNow such results would and did follow, under the guidance (and strictures) of the IMF. As we move on, it is useful to remember that the initiative of Venezuela from 2005 and on would serve to assist its energy-dependent members of PetroCaribe to reduce their economic costs – while offering the unintended consequence of having more funds to service debt. Another picture from Trading Economics shows us the annual growth in the country’s GDP. Not so hot, ehn?

jamaica-gdp-growth-annualThe fact that tourism accounts for a substantial portion of the the island’s income peers through that trajectory – reflecting the effects of that ‘Great Financial Crash’ (GFC) that began in late 2007.

The Jamaica austerity crisis, to be euphemistic, has long been out there. Then, again, size of country and, worse, its relative ‘unimportance’ in the global neoliberal game.

The US President had visited Jamaica in early April for a very brief talk and photo-op session with members of Caricom, visited the Bob Marley museum where he would remind folk that he had Marley’s music, did the chat with ‘young leaders, did the Usain Bold pose, tried a phrase of the dialect, then flew on to the VII SoA in Panama. At that time, however, there would be a report out from CEPR of the US on Jamaica, from which there would be a brief report, Jamaica Suffering from “Most Austere Budget in the World,” Imposed by the IMF, New Paper. Now if we accept that Greece is also of this world…

Some key findings of interest from that report by Jake Johnston,

Jamaica has suffered declining average living standards over the past 20 years, with GDP per capital actually falling by 0.3 percent annually over the past two decades.

Jamaica’s 7.5 percent primary budget surplus dwarfs even the budget surpluses being demanded of crisis-hit countries such as Greece, which was expected to run a primary surplus of 3.0 percent of GDP this year and 4.5 percent for years thereafter – and even this is widely considered politically unsustainable.

The paper finds that Jamaica’s high debt-to-GDP ratio comes even after two debt restructurings, both as preconditions to receiving IMF support. After multilateral loans were cut off in 2012 following the breakdown of Jamaica’s previous IMF agreement, net flows from the multilateral banks turned negative for two consecutive years. Even after the signing of the new IMF agreement, Jamaica paid $138 million more to the IMF than it received last year, and Jamaica still owes the World Bank and Inter-American Development Bank over $650 million through 2018.

And something substantive to chew on, the inescapable conclusion,

“Alternatives to IMF-imposed austerity are key if Jamaica is going to emerge from its debt trap and begin economic recovery,” Johnston said. “Perhaps most important would be debt cancellation.”

As if we did not already know that. Then, again, in the case of Greece, there are those other two titanic ‘Institutions’ (EU and ECB) to contend with – unyielding, even vengeful, cupidity has its own demands.

In the case of Jamaica, indefinite debt servitude; in the case of Greece, definite indefinite debt servitude, for both even worse economic disaster – if the neoliberal lunacy of the ‘elite’ class is allowed to prevail.

What Jamaica needs is the choir of similar experts to join the voice of CEPR. To rework and enliven the title, we can say, ‘Jamaica, fare well!’.

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