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 wangle 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 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.
Ok – so Jamaica has a serious and critical debt problem. This is therefore the challenge of our time, for our generation to fix and I believe wholeheartedly that we can – why are we educated if not to find solutions? if we don’t, then our children will have to fix it, and if they don’t then theirs will. Could I find just 20 humble and willing people who aren’t motivated by greed and personal welfare, who aren’t caught up with always going to party at maiden cay and getting drunk on Friday nights – who are not so egotistic as to think that they are better than their ordinary countrymen , who are patient and ingenious , who are prepared to sacrifice for the good of those who will come after, whose names will be deserving of marking the halls dedicated to them and their work, and whose names children of the future prosperous Jamaican nation will proudly bear? Could I just find 20 people who understand that things will never get better unless I can find these 20 people? And could those 20 people inbox me with the subject – Revolution!
6 thoughts on “Cauterizing Jamaica’s Debt Wound”
Thank you for this article. My thoughts are that Jamaica needs a cultural change. We need to stop this class-prejudice mentality that excludes people from opportunities. We all succeed if everyone gets a chance. We have created a culture of dependence through the already-lame education system. For too long we have raised our children to believe that if they went to school and got degrees that they would succeed in life. Too many J’cans are well-educated and have no where to go. Visas are increasingly harder to get so many are stuck on the rock with student loan debts and little or no opportunity.
We have to teach our children to create their own opportunities through the establishment of businesses. A businessman or woman is an independent individual. If we were a nation of entrepreneurs the IMF would never be an issue. We would be the lender not the borrower. If only the business community could start mentoring young people to start businesses. If only business education/financial education/entrepreneurship was introduced island-wide beginning at the primary school level we would be so much better off today. The onus is on all of us to fix the problem,
JA may have to default and do without IMF support. This means that many in the public sector would lose their jobs. The country still must function. Our people need to step up to the plate and even volunteer part-time to do the work that is necessary to keep the country running. Just a thought, I’m sure there are better solutions out there. Please do share, JA needs them desperately.
Thanks for reading and commenting, I heartily agree with all you’ve said, if you look at the last few posts on my blog you’ll see that that’s the same message, though earlier ones pertain to India. Everyone’s coming to realize that change rests with us…not with some revolutionary power which will descend from above.
I totally agree with TAL’s comments, but with one caveat. The focus on entrepreneurship is only as positive as it is inclusive. Entrepreneurship related training and mentorship must be accessible to all Jamaicans–and this will require commitment to education. Literacy and numeracy is required before one can start thinking about a successful business. Right now access to quality education is hardly equitable in Jamaica. If the focus is on starting entrepreneurial training right now, those who would benefit from the training would be those is a position to be successful and many young people with incredible creativity will be left behind based on lack of basic skills.
The unfortunate reality is that Jamaica is, and has long been, deeply in the hole. A bailout and debt restructuring would be the start of fixing the problem. Real long-term solutions involve thinking about how to make use of the country’s resources properly, real investment in long-term development, a real commitment to community development, and real investment in infrastructure in the countryside.
Instead, we’ve had pilot projects that have gone nowhere. Small-scale initiatives that have depended on local energy and that have died when the people driving those initiatives have died, and a refusal to see the good in what the rival party does (an amazing blindness in both parties). There are many more shortcomings, but it isn’t worth listing them.
One image that’s remained with me for decades is the Economist’s caption to the photograph of Eddie Seaga being sworn in as prime minister back in 1980. I asked Canute James if he was responsible for it, and he laughed and denied all responsibility. It was “I swear to borrow as much as I can.” For far too long in the decades after independence every prime minister (Bustamante, Sangster, Shearer, Manley, Seaga, Patterson) seems to have taken that oath. Story come to bump, as they say on the rock.
hi Frag, thanks for your comment, afraid i don’t know the ins and outs of the 70s…