Recently there has been a great amount of outcry from exporters about the losses they have incurred as a result of the revaluation of the Jamaican dollar. Interestingly no one heard anything from them when the dollar was devalued. They engaged in quiet enjoyment of the windfalls from massive devaluation over the last five years but have been boisterous in their public wailing over the shortfalls resulting from a modest revaluation of the dollar.
In the context of a floating currency whose value fluctuates over time, exporters are regarding windfalls from devaluation as profits to which they are entitled and shortfalls from revaluation as losses for which they deserve some form of compensation or relief. In order words, self-correcting upward and downward movements in the exchange rate are not factored into their short or medium term forecasting and planning of their operations.
I was driving and listening to Straight Talk, hosted on that day by Mr. Charles Ross Executive Director of the Private Sector Organisation. In talking to a caller he insisted that the Jamaican dollar was over-valued and that the country would be better off with a devaluation. The caller took him to task. Among the many things the caller said was that the private sector and the government were jointly responsible for the high rate of crime and violence in the country because of the pressure they were putting on the people. A further devaluation he was sure would have the most dire social consequences. In listening to this conversation I was struck by the extent to which this leading spokesman for the private sector was wedded to monetary policy as a means of generating wealth in the country.
Both the exporters and Mr. Ross seemed trapped in the past while trying to operate in the present and think about the future. Somebody needs to inform them that wealth creation in the world is no longer depended on abundant capital, cheap labour and massive amounts of raw materials. Wealth in the world is currently being created by well-educated people, currently referred to as well developed human resources, and technology. Education and training and modern technology are the major means of production and productivity that results in wealth creation. More than anything thing else devaluation results mainly in the transfer of wealth from the poor to the rich and in the transfer of ownership from local to foreign sources. Devaluation does not create wealth. More than anything thing else devaluation results in the transfer of wealth from the poor to the rich and in the transfer of ownership from local to foreign sources.
If the truth be told many manufacturers and exporters are currently in trouble they have invested too little in the education and training of their labour force and when competitors were modernising their plants aboard, they bought the second-hand equipment and install them in their enterprises here in Jamaica. The short-term gains resulting from these myopic strategies are now being translated into long-term grief.
One must immediately note that all enterprises in Jamaica have not been myopic. A shining example is the acquisition by Air Jamaica of twelve new fuel efficiency wide-body planes. If Air Jamaica backs this up by aggressive training programmes with its employees, then there is every reason to believe that it will in the future become a profitable and competitive airline. The sad truth is that many of our manufacturing and productive enterprises in Jamaica have not seen things in this light.
These are some of the reasons why Jamaican enterprises with a 35 to1 dollars are being steam-rolled by Trinidadian companies operating with a 6 to 1 dollar and Barbadian companies operating with a 2 to1 dollar. Devaluating the dollar to 40 or 50 to1 will only postpone the day, at great cost to the general population, when Jamaican enterprises and the Government must switch from the outmoded and outdated economic development strategies of the past and face their new realities of the world.
It would be interesting to hear our exporters and Mr. Ross explain why with the current rate of exchange Jamaican products have been losing so much ground to Trinidadian and Barbadian products manufactured in circumstances in which the exchange is so unfavourable compared to Jamaica’s and why further devaluation of the Jamaica currency would increase our standing in the regional marketplace. If the devaluation of the Jamaican dollar to 35 to1 has taken place at the same time when we have been losing regional market share, then why should further devaluation reverse this trend?
If as a country we intend to get out of the economic rut we are currently then the most serious attention needs to be paid to our education system and to the modernising of the plants of the productive enterprises. As an educator, it is hard to find words to describe the devastation that has taken place in our education system as a result of the monetary and structural adjustment policies successive governments have followed over the last 20 years.
Since the contrast was made between unfavourable exchange rates of Barbados and Trinidad but their much better performance in regional trade than Jamaica, it is appropriate to make the comparisons with respect to their investment in education. Barbados spends just over $600 US per child in primary school while Trinidad spends a nearly $500 US per child. Jamaica, on the other hand, spends approximately $120 US per child. In fact, only Haiti and Guyana spends less than Jamaica on children in primary education. The difference is per capita costs at the secondary level is of the same order of difference in their magnitude. In secondary education, Trinidad put over 80 percent of their children through five years of secondary schooling while Barbados put almost all their children through five years of secondary schooling. While Trinidad has half the population of Jamaica it enters nearly 30 percent more for CXC examinations. Both Barbadian and Trinidadian students outperform Jamaican students each year in CXC. Only Guyana does worse than Jamaica. In the UNDP Human Resource Development Index Barbados ranks 24th, Trinidad ranks 33rd and Jamaica 77th.
Just on the basis of their investment in education and human resource development, Trinidad’s and Barbados’ better performance in regional trade can be explained despite the fact that Jamaica enjoys ‘considerable’ advantage in the exchange rate. The exporters and Mr Ross can continue to advocate devaluation until the Jamaican dollar reaches 1000 to1, if we do not pay more than lip service to the urgent need to improve the levels of education and training in the country we are going to find ourselves even poorer in the future. The sad think is that several sectors critical to the advancement of the country seem trapped in the past.