Don Robotham, Contributor

Amid all the hullabaloo about dual citizenship and by-elections and who is humiliating whom politically, the nation seems to have lost sight of a far more important reality: The global economic crisis is upon us with potentially devastating consequences.

Already, we have seen the closure of Alpart and the 'temporary' closure of the two Rusal-owned plants at Ewarton and Kirkvine. This development spells disaster for communities around Linstead, Mandeville and southern St Elizabeth. Given the level of crime in Clarendon, one shudders at the thought of a similar fate befalling Halse Hall. The bauxite-alumina closure may represent as much as a 60 per cent loss of foreign-exchange revenues from this source. Had it not been for the sharp decline in oil prices and the generosity of Venezuela's PetroCaribe, we would have imploded already. Still, how to fill this gaping hole which has opened up in our foreign-exchange budget is a crucial issue facing the country.

There has also been a collapse in government revenues. Notwith-standing the draconian curtailment of capital expenditure, the budget deficit for the current fiscal year is likely to be in the region of seven per cent of GDP. How to finance this particular hole in our national budget is the number-one economic and political issue facing the country.

Youth unemployment

The plot thickens: Inflation is running at about 13 per cent, with food inflation at about 25 per cent. This imposes unbearable burdens on nearly all social classes. From the business point of view, it places enormous pressure on wages and, therefore, on costs and profitability. Remittances, which until recently, have been an important cushion, are in sharp decline for the first time in 10 years. This is especially true for remittances from the United Kingdom. Tourism arrivals are up about 12 per cent but, as we would expect, tourism expenditure is down and heading further south. When all this is put together, the economy is already set to decline by about 2.8 per cent for this financial year, before the full brunt of the global economic crisis is felt.

We do not as yet have the January 2009 figure for unemployment, but from December 2008, the rate has been inching up above 10 per cent. However, most of the negative effects on the economy occurred early this year. The labour force survey results for January and April 2009 will, therefore, be very important to see where we are heading. But what we need to focus on is not the general unemployment rate but the rate among young people and the poorest Jamaicans. Thanks to some excellent work by Professor Patricia Anderson and Colin Williams, we have a better fix on the dimensions of this crucial problem.

According to their study, youth unemployment in Jamaica (14-24 age group) already stood at 24 per cent for 2006. For young women, the unemployment rate was 32 per cent. If one looks at the age group 18-29 years, the average unemployment rate was 22 per cent in 2006. But if one looks at the poorest groups, among the unemployed youth (quintile 1), the unemployment rate rises to an astonishing 31 per cent. This means that one could estimate that the female youth-unemployment rate in the poorest quintile was already at 41 per cent from 2006, before the present global economic crisis hit. The implications of these figures for our crime and homicide rates should be obvious.

It is early days yet and the global economic crisis is only just beginning to play out in Caribbean, Latin America, Africa and Asia. No one really knows how long or how deep the crisis will be, but there is agreement on two things. First, this is without doubt the most severe economic crisis since the Great Depression of 1929. In the United States alone, the total value of the so-called 'toxic assets' held by the big banks is estimated at $4 trillion. Globally, the estimate is about $12 trillion. The second thing on which there is agreement is that any recovery in the United States, whenever it may come, is unlikely to be robust.

The era of 'bling' expenditure by the US consumer, including 'bling' vacations to the Caribbean, is, therefore, over. This has profound implications for our tourist industry - of which the all-inclusive sector has been essentially a bling product. Current efforts by some to make their product even more bling betray a pathetic lack of vision which is likely to come back to bite them - and us!

'Bling' expenditure

So, where do we go from here? The first thing that is urgently required is a new International Monetary Fund (IMF) agreement. All indications coming from Washington is that events have compelled Dominique Strauss-Kahn to recant the unhelpful stance he took on his recent visit to Jamaica when he made his notorious "no room for stimulus" statement. Today it is extremely likely that the IMF funds to support countries in distress will at least be doubled. Moreover, the World Bank is in the process of establishing its so-called Vulnerability Fund which will make support and development funds available at very low interest rates. We must access this as well, and do so urgently.

Our seven per cent budget deficit represents a hole of about US$600 million. In current conditions, there is no prospect whatsoever of raising this money on the private capital markets. Nor can public sector layoffs solve a problem of such dimensions. So it is back to the IMF after all these years. We should not fear this step. It should not become a political football. It is simply unavoidable if we are to stave off collapse.

A New Moyne Commission

What we should concentrate on here is not going back to the IMF but the issue of conditionalities. Already, there are many favourable sounds emanating from new US Assistant Secretary of State Shannon, from Prime Minister Gordon Brown and indeed, from the IMF itself. A relaxation of conditionalities is on the cards for low-income countries, especially in Sub-Saharan Africa.

But Jamaica (and most of the Caribbean) is classified as an "upper middle-income country." This means by those criteria, we are not usually eligible for concessionary assistance. But as Sir Alister McIntyre has constantly pointed out, in the Doha Round meetings it has been well-established that special consideration has to be given to the interests of small and vulnerable economies. This opens an important avenue for us to make our representations and to make them now.

Important as these efforts are, they address only the immediate budgetary and foreign-exchange crisis. We face an even graver challenge in the long-term. If bauxite collapses and tourism and remittances remain flat, how will Jamaicans live? What will be the medium- and long term outcome for our children and grandchildren? What will happen to our already stratospheric homicide rate? Indeed, it would be foolish to think that a crisis of this magnitude will confine itself purely to the economic sphere. Profound political, social and cultural consequences are sure to follow at the global as well as local levels.

When faced with a similar crisis in the 1930s, our society did not descend into political demagoguery, vacuous business school rhetoric or media stunts. Deep and serious analysis, political education and institutional building were the roads taken. Out of this effort came the Jamaica Welfare, our modern trade-union movement, our political parties and the institutions of state, which we currently have.

The British, too, took the crisis with the utmost seriousness, passing the Colonial Development Act of 1929, establishing the Moyne Commission and passing the Colonial Development and Welfare Act of 1940. It was out of this that the entire concept of the Industrial Development Corporation in the then British colonies arose, pushed by Creech Jones and the Fabian Colonial Bureau with Rita Hinden's and Arthur Lewis' encouragement.

If we agree that the crisis of today is of similar gravity, then surely a similar effort is required. Our own version of the Moyne Commission is sorely needed. It is not too late to end the sterile political theatre on both sides of the fence and to buckle down to tackle the monumental challenges the nation is facing.

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