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Issue #1722      March 9, 2016

Austerity ousts Jamaican government

On February 26, Jamaican voters turned the government of Prime Minister Portia Simpson-Miller, of the People’s National Party (PNP), out of office. She will be replaced as PM by Andrew Holness of the Jamaica Labour Party (JLP).

Andrew Holness of the Jamaica Labour Party campaigning during the elections.

Simpson-Miller’s PNP won only 30 of the 63 seats in the lower house of the Jamaican Parliament, while the JLP won 33. Voter turnout was only 47.5 percent, the lowest in the country’s electoral history. (Jamaica gained independence in 1962; the head of state is still Queen Elizabeth II, and the country still belongs to the Commonwealth of Nations, formerly the British Commonwealth). The margin of victory for JLP was only about 4,000 votes out of 870,663 cast in this country of 2,800,000 inhabitants – hardly an overwhelming victory for Holness.

Jamaica has been experiencing economic decline, sky-high unemployment, and a seemingly intractable crime rate for years, but some of these problems have been getting worse since the world financial crisis began in 2007-08. Jamaica has a particularly horrific burden of debt to the International Monetary Fund and private lenders, payments of which severely cripple the ability of the government to deal with the people’s needs. Jamaica is one of the worst examples of the “debt trap” that bedevils so many poor countries around the world.

Both PNP and JLP governments have felt obliged to go along with the neo-liberal program of imposing austerity in exchange for loans. Neither party presented any way of getting out of this situation in its election manifesto this year. JLP promised a big tax cut but it is far from clear how this would be accomplished. The JLP has the reputation of being the more conservative of the two major parties (there are some smaller ones also), while the PNP has moved far from the leftist positions espoused by its PM Michael Manley in the 1970s.

In his first term in office, 1972-80, Manley carried out a radical left-wing program of reforms which greatly improved the lives of poor rural and urban Jamaicans. However, the country was plagued by a campaign of violent destabilisation.

The United States government put heavy pressure on Jamaica to back off from its friendly overtures to Cuba and the Soviet Union, which Manley was relying on to help get his country out from under economic dependence on the US and Great Britain. A vicious press smear campaign against Jamaica got underway in the United States.

Manley’s second term in power, 1989-92, coincided with the collapse of the Soviet Union and the Eastern European socialist states and the triumph of what became known as neo-liberal capitalism. Possible help from the Soviets dried up, and friendly Cuba also found itself in difficult straits. So any hope that Jamaica could, in the short run, create an alternative route to development disappeared. Manley’s second term was therefore characterised by a much slowed-down reform program and a much higher reliance on aid from the International Monetary Fund and foreign private investment. The bright promise of the first Manley term in office disappeared, and Jamaica set out on a course of chronic indebtedness.

A punishing loan

Jamaica suffered other blows after Manley left office. It had a medium-sized banana industry, but in the late 1990s the US began to hack away at one of the supports of that industry, namely the Lomé Convention, whereby France and Britain, working through the European Union, had committed to preferential purchasing of bananas from their former colonies in the Caribbean and Africa.

The US went to the World Trade Organisation (WTO) to complain that this was a violation of the rules of free trade. The US is not a major producer of bananas itself, but US companies like Chiquita and Dole produce huge amounts of the crop, and profits for themselves, in South and Central American countries, including the infamous, despotically ruled “banana republics” where wages are lower and working conditions worse than in the Afro-Caribbean countries.

The WTO, established in 1994, ruled in favour of the US in this dispute. This was a big blow to all the countries covered by the Lome convention. Jamaica now does not produce bananas for export.

The mining and processing of bauxite (aluminum ore) was once seen as Jamaica’s royal road to prosperity, but in recent decades this hope has faded as other low-wage countries have edged out Jamaica in the competition, and a number of mines have closed.

To some extent, tourism has filled the gap, but the astronomical crime rate in Jamaica is seen as dampening the potential of tourism also. As in other poor countries, foreign investment is only attracted while wages remain low and regulation weak.

So Jamaica has ended up depending on one international loan after another, with more and more draconian conditions attached to each one. The latest one, which Jamaica negotiated in 2013 to replace an earlier one on which the country had defaulted, is particularly shocking.

Jake Johnston of the Centre for Economic Policy and Research has done a detailed analysis of this piece of usury, highlighting the fact, for example, that in exchange for the loan, Jamaica must run a budgetary surplus of 7.5 percent per year, far more than the surplus imposed by lenders on the distressed economies of the poorer Western European countries.

As a result, Jamaica is the only nation in the Caribbean whose per capita Gross Domestic Product has actually been declining over a 20-year period (Haiti’s is stalled at zero growth).

According to Johnston, much of the failure of the Jamaican per capita GDP’s failure to advance can be attributed to the stringent governmental austerity measures imposed on Jamaica as a condition for the 2013 loan.

Johnston writes: “The IMF program required a large, up-front adjustment, which resulted in the government cutting spending by over 2 percentage points of GDP in 2012/13 and by 2.7 percentage points in 2013/14.” This in a country whose social safety net was inadequate to begin with!

Jamaica has benefited from the PETROCARIBE program of discounted Venezuelan oil sales, and other aid coming from the countries of the Bolivarian Alliance for Our America (ALBA).

It is yet to be seen how long such aid can be sustained, given Venezuela’s current economic troubles and the threat from the newly elected right-wing legislature there to withdraw Venezuela from ALBA.

People’s World

Next article – Region Briefs

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