Dear Editor,
News of the impending IMF deal is being greeted with a sense of relief, as if it were a solution to the country's economic problems, when in fact the loan is a continuation of the failed policies which have led Jamaica to this dubious economic position.
Jamaica already has one of the highest debt to GDP ratios in the world, and already spends approximately over 50 per cent of the national budget to service this debt. Yet, with a straight face we are told that the Government is adding more debt to what everybody concedes is already too high. Solution?
It has been argued that we are in trouble now and so we need to borrow more money today to prevent economic collapse. But what about tomorrow?
As economist Henry Hazlitt said, "Today is already the tomorrow which the bad economist yesterday urged us to ignore." We are facing our current economic woes because, as a country, we have had a short-sighted view and sought only to lessen today's pain by sacrificing our tomorrows.
If Government borrowing was the solution, then Jamaica would not have a problem since we have been excessively borrowing for decades now. It escapes me why, this deal will be beneficial, when all other were not.
The reality is that Government's continued borrowing is actually exacerbating the problems they are trying to solve. For example, the dollar's devaluation is due to the fact that as a country we have been paying out more US dollars than we have been collecting. However, when the Government borrows a sum of US dollars they have to repay that amount plus interest, leading to further devaluation as the dollar outflows surpass the inflows. Even with the proposed IMF deal this year, Jamaica will pay back more US dollars to the IMF than it will receive.
Furthermore, government borrowing creates structural imbalances that make the economy inefficient and worsens our troubles. The government uses the borrowed money to temporarily prop up the Jamaican dollar and in doing so subsidises importation. This is the reason we import so many goods, even food that we can and should produce locally. The borrowing makes importing goods cheaper than producing them here. As a result Jamaica's economy is unbalanced and overloaded with retailers and wholesalers and not enough producers. Government borrowing has made producing in Jamaica uncompetitive, so we will always be unable to produce enough to satisfy local demand or to earn foreign currency through exports. Thus the dollar will forever be falling, unemployment will forever be too high, and we will forever be asking for loans -- unless of course we stop trying to get something for nothing today, and start to consume only what we can afford based on our production.
Clevon Meikle
clevonium@hotmail.com
IMF loan part of the problem, not solution
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News of the impending IMF deal is being greeted with a sense of relief, as if it were a solution to the country's economic problems, when in fact the loan is a continuation of the failed policies which have led Jamaica to this dubious economic position.
Jamaica already has one of the highest debt to GDP ratios in the world, and already spends approximately over 50 per cent of the national budget to service this debt. Yet, with a straight face we are told that the Government is adding more debt to what everybody concedes is already too high. Solution?
It has been argued that we are in trouble now and so we need to borrow more money today to prevent economic collapse. But what about tomorrow?
As economist Henry Hazlitt said, "Today is already the tomorrow which the bad economist yesterday urged us to ignore." We are facing our current economic woes because, as a country, we have had a short-sighted view and sought only to lessen today's pain by sacrificing our tomorrows.
If Government borrowing was the solution, then Jamaica would not have a problem since we have been excessively borrowing for decades now. It escapes me why, this deal will be beneficial, when all other were not.
The reality is that Government's continued borrowing is actually exacerbating the problems they are trying to solve. For example, the dollar's devaluation is due to the fact that as a country we have been paying out more US dollars than we have been collecting. However, when the Government borrows a sum of US dollars they have to repay that amount plus interest, leading to further devaluation as the dollar outflows surpass the inflows. Even with the proposed IMF deal this year, Jamaica will pay back more US dollars to the IMF than it will receive.
Furthermore, government borrowing creates structural imbalances that make the economy inefficient and worsens our troubles. The government uses the borrowed money to temporarily prop up the Jamaican dollar and in doing so subsidises importation. This is the reason we import so many goods, even food that we can and should produce locally. The borrowing makes importing goods cheaper than producing them here. As a result Jamaica's economy is unbalanced and overloaded with retailers and wholesalers and not enough producers. Government borrowing has made producing in Jamaica uncompetitive, so we will always be unable to produce enough to satisfy local demand or to earn foreign currency through exports. Thus the dollar will forever be falling, unemployment will forever be too high, and we will forever be asking for loans -- unless of course we stop trying to get something for nothing today, and start to consume only what we can afford based on our production.
Clevon Meikle
clevonium@hotmail.com
IMF loan part of the problem, not solution
-->