Saturday, October 29, 2011

Why debt repudiation is a common sense approach to Jamaica's economic crisis

1. Omar Davies, Bruce Golding and Audley Shaw have said on many occasions prior to the Debt Exchange (JDX) that Jamaica would never default on its debts. Omar Davies famously and proudly told UWI students that paying the debt will ALWAYS take priority over taking care of the country’s domestic needs.
2. In the talks prior to the signing of the 2009 IMF Agreement it was clear to the IMF and their technocrats that Jamaica’s debt level was not only unsustainable (the country was perilously close to a default) but required a radical reduction of the debt stock beyond the usual measures: suppression of government expenditure, etc. The IMF/UNDP suggested what became known as the Jamaica Debt Exchange (JDX) which resulted in a $40 billion write off of the local debt.
3. So beholden was the government to creditors that it was paradoxical for it to be the IMF/UNDP (who serve the interests of creditors) to encourage this debt write off instead of the government acting proactively and pragmatically on behalf of the most vulnerable. The government was dragged along kicking and screaming, even though they now proudly point to the JDX as one of their achievements.
4. A principle has therefore been established that normal means alone cannot be used to reduce an unsustainable debt level. European banks have been forced to write off 50% of the Greek debt because the Greek government was politically unable to impose more austerity measures on the population.
5. Despite the JDX, the debt stock is now at an even higher level. This is a result of the country’s high propensity to borrow which reflects deep ‘structural’ problems.
6. Objectively with 1.2 million or about 45% of the Jamaican population living below the poverty line and a 13% official unemployment rate it is clear that should the government impose more austerity it runs the risk of stirring up political resistance. It would literally be bleeding the poor dry.

WHAT TO DO? Taxing those who can afford it.


7. If precedent is to go by the Government will continue to refuse to impose radical new taxes on the wealthy. The Golding government, for example, using specious and self-serving arguments, refused to put a special tax on the super profits of the banks. Both BNS and NCB, not surprisingly (it is the trend all over the world) have been reporting record profits for several years now, and there is absolutely no temptation on the part of the government to increase taxes on those profits.
8. There was, however, a reluctant and minimal tax on earnings over five million dollars. But this was for one year only! It once again shows a clear class bias typical not only of this JLP government but the PNP as well. [By contrast former UK Prime Minister Gordon Brown increased the tax level to 50% in 2009 for those making over 150,000 pounds].
9. The ideology behind refusing to tax the wealthy is that they will engage in capital flight and capital strike. We must all sink or swim coddling the rich.
10. With political leaders wearing such ideological blinkers it usually requires a strong political push from below to get them to face reality. This government and certainly the opposition seem to feel confident that the chances of such a movement developing are not very likely.
11. In the absence of such political resistance, the government aided by the ideological class, the IMF and the media, will continue to argue that it has no option but to suppress demand levels even further i.e. cutting fiscal expenditure (especially hurtful where education and health are concerned) and to institute public sector layoffs (which are pending) combined with imposing more taxes, which according to tradition, as we said before would be to tax the poor and the working class even more.

The radical but pragmatic option: debt repudiation
12. The truth is that in addition to increasing taxes on the wealthy [the current IMF-backed plan to impose a regressive tax policy under the guise of tax reform must be exposed and resisted], the only other effective option is to repudiate the debt. Argentina is one country to have done so recently with significant debt reduction results. Other countries in history have done so including the United States during the civil war, Mexico, and Cuba.

What does repudiating the debt mean.
13. The Government declares to all creditors that there is an immediate moratorium on all debt payments, but a door is diplomatically left open for negotiations. The national debt is approximately J$2 trillion. About 500 billion, the equivalent of all taxes collected is paid over each year.

Categories of creditors/negotiating strategy
14. First, there must be a forensic audit of the debt to determine what portion corruptly went to politicians, bureaucrats and private sector accomplices. Lenders are sometimes complicit with these corrupt practices. Morally and politically the poor should not be required to pay back such debt since they received no benefit.
15. Currently one politician is before the courts, and another is awaiting a ruling from the DPP. Highway 2000 and the US$62 million Palisadoes Highway are two projects which smack of corruption and which are of dubious benefit to the poor.
16. The late 1990s Bank bailout and the resultant FINSAC debt on the surface is also dubious debt. There is currently a FINSAC Commission of Enquiry going on but without a forensic audit being required this is a grand waste of taxpayer’s money.
17. The unearthing of such corruption is a legal, moral and political negotiating tool with creditors.
18. To amplify the point -- because the Jamaican constitution guarantees that debt has a first lien on the consolidated fund --creditors are not obliged to be responsible in their lending practices which gives rise to the concept of irresponsible lending.
19. There was no obligation, for example, for any lender to Air Jamaica to concern itself with whether the airline was bankrupt and able pay back its loans because all of Air Jamaica’s loans were guaranteed by the government. This would be a prime example of irresponsible lending.
The paradox of local creditors
20. Some local creditors are in fact government institutions which have invested in government bonds. This poses very little political problem for central government in cancelling this debt. The state must take responsibility for social welfare including pensions.
21. The Banking oligopoly owns a significant portion of the debt as well. The fact that they have enjoyed such super profits in the past years strengthens case for debt cancellation.
22. Generally speaking the government has the option to offer long term bonds with radical value reduction if it feels the need for a less acrimonious approach.
23. Should capital strike and capital flight be the response then government would obviously be forced to nationalize the banks, or any sector that engages in capital strike, and to take measures to prevent capital flight.

Negotiating with foreign creditors
24. Without precise data as to who are the foreign creditors, and the appropriate negotiating strategy, it is clear that government would generally demand a significant write off of the debt.
25. Argentina was able to get a 75% sovereign debt write off in some cases.
26. Creditors would rather get something on the dollar than nothing at all. This is something that those who predict doom and gloom fail to appreciate.
27. Externally it would be advisable to seek to form a debtor’s club with other heavily indebted Caribbean countries.
28. All of this requires a commitment to protect the 45% of the population living below the poverty line; to prevent further deterioration in our health care system; to invest in education at all levels; and to prevent the total breakdown of the country’s infrastructure which is inevitable should the present path of fiscal contraction be continued.
29. That is the pragmatic nature of debt repudiation.
30. It is a commitment to protect the poor and the working class generally, the class that is the producer of wealth, but expropriated by the few.
31. Finally we need to refute the ideologists who keep talking about growing our way out of the crisis.
32. According to the World Bank "Jamaica was one of the world's slowest-growing economies in the last four decades. In the 2000s, Jamaica's average real GDP growth ranked 180th out of 196 countries. Jamaica's ranking in terms of average real GDP growth continuously deteriorated during 1960-2008. Jamaica also lost ground against countries in Latin America and the Caribbean. Its ranking in the 2000s was 29th out of 34 countries." Furthermore, says the World Bank “There is no silver bullet for all of Jamaica’s problems, or any single, unique binding commitment whose removal would solve them.”
33. In other words, those with mono causal explanations, such as it’s because of crime, or it’s because of bureaucratic red tape, or it’s because of the need for tax reform why the economy isn’t growing, are really promoting a self-serving agenda, designed to distract from the root concern.
34. And as for those who promote economic growth as the magic answer, they need to be reminded that there can be economic growth with little or no improvement in the standard of living of the poor and the working class generally.
35. If the economy can’t ‘grow’ for whatever reason then the cake has to be divided up more fairly. We cannot allow for the alarming rates of poverty to continue increasing and for the country’s infrastructure to disintegrate further.
The political system has to change from a two-party dictatorship to a people’s democracy.

Lloyd D’Aguilar
Campaign for Social and Economic Justice

Tuesday, October 25, 2011

Prime Minister Holness must move beyond platitudes

Moving beyond rhetoric and platitudes

In his first speech as prime minister, Andrew Holness had things to say about corruption, education, garrison politics and the debt. The following are some of the things that Prime Minister Holness should do to show that he has intentions beyond rhetoric and platitudes:

1. Reveal to the country who paid Manat and Phelps. This was the issue which lead to Bruce Golding’s resignation and which still taints the entire leadership of the Jamaica Labour Party, including Holness. If Holness is serious about turning his back on garrison politics and corruption then he ought to come clean in terms of whether Christoper Coke or some mysterious JLP donors made the payment.

2. Give the green light to the Public Defender to initiate an enquiry into the role played by those who had command responsibility for the Tivoli massacre – Prime Minister Bruce Golding, Police Commissioner Owen Ellington, and Chief of Staff of the JDF, Major General Stuart Saunders, among others. Bruce Golding declined to answer the Public Defender’s letter asking for a commission of enquiry and now that he has resigned this cannot be the end of the matter – even if the media now chose to focus on the election circus. So many innocent people should not have died because of Bruce Golding’s folly, and those responsible for murder must be held accountable.

3. Repudiate Bruce Golding’s “not in my cabinet” policy of discrimination against gay Jamaicans. The upcoming Commonwealth Conference has been petitioned about doing away with buggery laws that still exist in some commonwealth countries. It is time for Jamaica to also repeal its buggery laws and respect the human rights of all citizens, including gays. Holness must declare his position now.

4. Initiate a forensic audit of the almost 2 trillion dollar public debt to determine how much of it was stolen by politicians, bureaucrats and affiliated private businessmen. The poor cannot be expected to pay back loans for which they did not benefit and did not contract.

5. The debt cannot be repaid at the expense of the poor. Hold a referendum on whether the debt should be repudiated and the alternative policies to put in place.

6. As Minister of Education and now prime minister Holness must initiate a loan forgiveness programme for all tertiary students who cannot move forward with their education because of debt.

7. Not only early childhood education but secondary and tertiary education is a human right – and should be free. A declaration about this would go along way toward determining whether Holness is serious about education or just running up his mouth. A people thirsting for education and social advancement cannot wait a decade for this to happen.

8. Access to health care is also a human right and therefore incompatible with the present policy of underfunding. Will the IMF to which Holness seems so beholden, sign off on adequate and increased funding for health?

9. Corporate Jamaica, and the rich generally, should be required to pay increased taxes and shoulder their rightful portion of the economic crisis. The current tax reform being urged by the IMF and others is nothing but a trick to increase taxes on the poor and the working class. We need a progressive tax policy not a regressive one.

10. Special increased taxes on the Banking /financial oligarchy that is making tens of billions of dollars of profit while 1.2 million poor Jamaicans are living below the poverty line.

11. Bruce Golding threatened at the last JLP Conference to make his income and assets public because he said he had nothing to hide. Despite the threat and the boast nothing happened. Holness should now go one step further and publish his own asset and income statement to dispel any notion that he may have benefited from corrupt acts committed by the Golding government of which he was an integral part. The LNG scandal is one of the many which has tainted the government -- the people have yet to learn about all who benefited.


Finally, on Thursday October 27 at 1:00 PM the Marcus Garvey People’s Political Party (MGPP), supported by Campaign for Social and Economic Justice (CSEJ) will be having another Occupy Jamaica protest outside the Bank of Jamaica. Let’s build a democratic movement to take Jamaica from the One Percenters who run the country as if it is their private property.

Lloyd D'Aguilar
Campaign for Social and Economic Justice
http://www.youtube.com/watch?v=va8iBF4CA0U
http://lloyddaguilar.blogspot.com/

Monday, October 17, 2011

Occupy Wall Street coming to Jamaica

The Marcus Garvey People’s Political Party (MGPPP) is calling for a demonstration in front of the Bank of Jamaica on Thursday at 1 PM to express sentiments similar to those being made in America by the Occupy Wall Street (OWS) movement or the 99% Movement and which has now spread to many other countries especially in Europe.


The Jamaican context for similar expressions

Though Bruce Golding was forced to resign because of his involvement with confessed drug dealer and arms trafficker, Christopher Dudus Coke, he still had a hand in selecting his successor Andrew Holness. Golding promptly took Holness to Washington to meet with the directors of the international financial institutions that are currently running Jamaica’s financial affairs. The visit was felt to be necessary to underline Holness’ stated intention to continue with the policies of his predecessor and ultimately the Jamaica IMF agreement.

What is this continuation of policy to which Holness has committed himself? Very simply, the IMF agreement with Jamaica is designed to ensure that creditors, local and foreign, who are owed more than a trillion Jamaican dollars are paid their pound of flesh as per agreement. And, as is the refrain in the United States, 99% of Jamaicans (who had no part in contracting this debt) will unfairly have to bear the burden of paying back the debt, especially hard on the 1.2 million who are living below the poverty line, including the 14% (according to official statistics) who are unemployed.

The OWS movement, which is being replicated all over the world, is shining a bright spotlight on a reality that exists globally -- not just in New York and the rest of the United States -- that it is the poor, the working class, who are being forced to bear the burden of this global economic crisis. The US financial aristocracy for example, [the 1%] were bailed out by the US government with billions of dollars of public money and there is nothing positive to show for such largesse. Unemployment is at its highest since the 1930s depression and there is no will to tax the rich as the OWS and the majority of Americans are demanding according to recent polls.

In Jamaica the situation is no different. On the verge of defaulting or declaring bankruptcy the JLP government turned to the IMF for a bail out, but with the understanding that massive burdens would be placed on the poor as the basis of the IMF guarantee to creditors.

The fact that the government has not completely performed its end of the bargain as demanded by the IMF should not be interpreted to mean that there is any fundamental conflict between the two. One of the main sticking points is that the government had been expected to institute massive public sector layoffs, but not done because of declining public support over the Coke affair which they fear would be compounded by labour strife. As the IMF no doubt realizes such savaging (as Seaga sympathetically describes it) has to be done at the most opportune time.

Will Andrew Holness be able to pull it off? Or must it wait until a possible PNP government is in power? There is no reason to believe that the PNP would be shy about taking such resolute action. After all, they have been crying for the government to get back on track with the IMF.

So if the real import of the OWS or 99% Movement is to have any meaning in Jamaica the appropriate slogans and demands must be raised.

1. No to public sector layoffs. The unions have sent mixed signals about this. as if they would be prepared to accept such layoffs. These trade union bureaucrats must not be allowed to betray the workers.

2. Tax the rich. The government could only muster the courage to impose a minimal tax increase on incomes over 5 million dollars for one year! The taxation measures being discussed in parliament and endorsed by the IMF is nothing but a trick… to impose a more regressive taxation system on the poor and the working class and reduce taxes for the wealthy and for corporations. This must be rejected.

3. Repudiate the debt. It cannot be repaid. The Debt Exchange, though praised, did not go far enough. Where is the economic rebound to come from to reduce the debt other than from squeezing the poor who cannot be squeezed any further.

4. Debt repudiation must be accompanied by a forensic audit of the national debt to determine who else other than those before the courts, have corruptly enriched themselves at the public expense. The culprits are many, and in very high places.

5. Those financial institutions which engaged in irresponsible lending to our politicians should not expect the poor to pay back such loans. Highway 2000? Palisadoes Highway? etc. etc.

6. Free health care. The deteriorating situation in public hospitals is not because of user fee removal as the PNP and some doctors foolishly believe, but because of underfunding.

7. Free education. The same problem as in the health sector – poor test results are a direct result of the historical underfunding by successive governments and now the savage cuts undertaken by this government.

8. Massive public works programmes must be enacted to put people back to work.

The above is the context in which an OWS or a 99% Movement makes sense in Jamaica.

Lloyd D'Aguilar
Campaign for Social and Economic Justice

Sunday, October 9, 2011

Bruce Golding plays another three card trick

Orchestrators of Tivoli massacre must not go unpunished

Once again Bruce Golding has one been able to outmaneuver the media, commentators, talk show hosts, and so-called civil society. Forced to resign because he compromised himself with Christopher Dudus Coke, there are rumours of very damaging conversations between himself and Coke caught on tape in possession of the American DEA and Justice Department. Instead of focusing on such issues, the Jamaican media have become obsessed with the unfolding drama of who will be his replacement, and what will be the effect on upcoming elections without him in the race.

A distraction
All of that is of little significance compared to the role that Golding played in the unnecessary deaths of 73 to 200 people in Tivoli Gardens. Golding may have negotiated his resignation with the Americans as a way of saving himself further embarrassment, but as far as Jamaican society is concerned, there can be no deal.

Golding keeps saying that Coke’s constitutional rights were violated and yet he agreed to the extradition and resultant deaths of so many people. If Golding’s resignation as some commentators are now saying shows that he is not obsessed with power, then why did he not resign then, or stand up for Coke’s constitutional rights come what may.

Golding’s actions then and now are the signs of a very compromised, selfish and cowardly politician . . . not of a patriot.

Questions
(1) Do Jamaican authorities (those who recorded Coke’s conversations ) have copies of the tapes that are in possession of the Americans?

(2) Shouldn’t there be a commission of enquiry into these tapes to determine if any local co-conspirators of Coke have breached Jamaican laws?

(3) Why has the Public Defender refused to conduct his own investigation into the role played by those with command responsibility for the Tivoli massacre --- prime minister, police commissioner, head of the JDF, and others -- to determine if they have criminal charges to answer?

The media and so-called civil society organizations seem to believe that the snuffed out lives of poor Jamaican people are of no great significance but we in Campaign for Social and Economic Justice will continue to remind the world that there are mass murderers in our state apparatus who have the potential to commit far worse crimes than were committed last year.

And these mass murderers are emboldened by our continued silence.
Lloyd D’Aguilar

Campaign for Social and Economic Justice

NB: Date for internet launching of Looking Back Looking Forward (formerly on Newstalk 93 FM) will soon be announced.