The end of the innocence
Remember when the days were long
And rolled beneath a deep blue sky
Didn’t have a care in the world
With Mommy and Daddy standing by
But “happily ever after” fails
And we’ve been poisoned by these fairy tales
O’beautiful, for spacious skies
But now those skies are threatening
Armchair warriors often fail
And we’ve been poisoned by these fairy tales
— The End of the Innocence – Don Henley
The Government’s decision to “change course” five days after serving up a draconian tax package which saw the poor and low wage earners having to bear the brunt of closing the fiscal deficit gap to the tune of $21.8 billion has, in the main, been well-received.
But the salient question that has yet to be unequivocally addressed is how does the Government intend to stimulate the economy? Has it identified the engines of growth and how does it intend to both lubricate and ignite that engine so that citizens can enjoy the fruits of their labour without the taxman dipping his sticky fingers into their pockets?
But the salient question that has yet to be unequivocally addressed is how does the Government intend to stimulate the economy? Has it identified the engines of growth and how does it intend to both lubricate and ignite that engine so that citizens can enjoy the fruits of their labour without the taxman dipping his sticky fingers into their pockets?
The decision to revise the tax package indicates that both the voice and will of the people are clearly adhered to by governments of Jamaica and that unlike many other countries, obstinacy and a deaf ear are not the order of the day. The tenets of democracy are alive and well in Jamaica. Ten years ago, the gas riots signalled the country’s anger with the 31 per cent hike in gasoline prices which moved the price at the pump from the Jamaican equivalent of US$1.55 to US$2.01 per gallon. This saw three days of intense rioting resulting in nine people killed, 160 people arrested and the economy grinding to a standstill.
The then prime minister, PJ Patterson, reversed himself, reducing the gas tax by 45 per cent and announced that other ways would have to be found to make up the US$37 million budget shortfall.
“The events of last week served to remind us that any solution we devise as a Government cannot succeed without the understanding and the involvement of the people,” said Patterson in Parliament..
Those words could have come straight out of Bruce Golding’s mouth on Wednesday night. The more cynical among us may well say that this reversal was enacted to avert riots and mass demonstrations, and so the prime minister had no choice but to come to the nation with a somewhat better “equitable deal”.
The decision to remove the taxes on basic food staples has taken the steam out of the Opposition’s strategy of instigating decension and getting people to take to the streets. What is now needed is a more consensual approach with the aim of getting the country out of its present predicament which sees a debt burden of $1.3 trillion, interest payments of $175 billion and a budget deficit of $79 billion. This is not the time to score political points, as the country stands looking into the abyss.
There can be no doubt that the present administration did not create this cup of woes, and so those that did must surely play their part in making it more palatable for Jamaicans. Rather than taking to the streets and blowing the trumpets of defiance, viable prescriptions should be proffered, ones geared to greater productivity and better services in Jamaica.
At the same time, the Government cannot continue to manifest its innocence in the ways of economic and fiscal management. The announcement on Wednesday night was, for all intents and purposes, the fourth tax package since April. Though the situation sees a contracting economy with ever decreasing revenues, the Government must present cogent plans in a timely fashion.
Did it underestimate the impact of the global financial crisis? Should it have gone to the IMF sooner? Has it fashioned a creditable macroeconomic plan that will see the country growing rather than in perpetual decline? Is the minister of finance competent and is the task before him beyond his capabilities? This is not the time to address these questions, let the historians ponder them in years to come.
The IMF may well have coerced the Government into taking the measures that it did last week. The Golding administration may well have thought that it would have to demonstrate its good faith in addressing its revenue shortfall and its people would have to pay the price for that US$1.3 billion lifeline from the IMF. Its measures may well have been ill-conceived and rushed and it may well have learnt a salutory lesson here. Rather than think temporary panacea, think big picture.
Jamaica is indeed blessed with a fecund land which makes agriculture viable. It can make the move from a sugar cane industry to a cane industry. The world economy will rebound and its bauxite/alumina industry will once again find its voice. Not to mention that the emerging economies of India, China and Brazil provide good markets. Manufacturing has got out of its coffin with Omar Azan breathing life into a moribund industry. Tourism continues to be the lifeblood of Jamaica and will continue to be the retaining wall of the Jamaican economy.
The people of Jamaica are both industrious and exhibit great ingenuity once given the chance. The dollars in their pockets must have some value and help to create better lives. The Government cannot squander these existing gifts. Many academics and analysts are quick to point to Lee-Kwan Yu, but Singapore did not have Jamaica’s blessings. What it did have was a disciplined society where crime and sophistry did not serve to undermine its economy and a people who bought into the vision. It sought to attract foreign direct investment and created the prevailing conditions for it. In short, it had a masterplan and stuck to it.
Jamaica demanded independence but nearly 50 years on, the country’s plight gets worse with each succeeding year. There are those who ask whether it would have been better off under British rule, but that is so far removed from what the real questions should be which are, how can Jamaica be put on a path to prosperity and growth? How can its citizens enjoy a better standard of living? How can succeeding generations do better than those that went before?
It is generally acknowledged that low taxes, interest rates, low inflation and a stable currency are the foundations of a sound economy, but this reality continues to elude successive Governments.
It is not good enough to simply say the poor cannot bear the brunt of taxes and it should be equitable. By heavily taxing the middle and professional classes, a government sends out the signal that it does not pay to succeed, it does not pay to do it right and conduct your life as a model citizen. But apart from paying high taxes you will have to contend with increasing GCT and a host of other taxes that simply take away the joy of living.
The Government cannot be short-sighted in its efforts to appease the poor and less fortunate. It would do better getting them to aspire to a better and more rewarding living. Taxing consumption and finding a way to enforce better compliance would have proved far more equitable. Low taxes would lead to greater consumption and serve as an inducement to more foreign direct investment.