Wilberne Persaud
Senator Don Wehby, minister without portfolio in the Ministry of Finance and the Public Service contributed an interesting piece in the June 21st edition of The Sunday Gleaner titled 'Making most of Foreign Direct Investment'.
In it, he links analysis with policy and prescription. Beginning with the notion that the "concepts of economic growth and investment are inextricably linked" he tells us that "over the years, Jamaica has benefited from high levels of foreign direct investment (FDI), an important injector of capital and foreign exchange into the economy".
It was on average, US$720 million between 2003 and 2006 rising to US$866 million in 2007.
Continuing, the minister laments the fact that "despite high inflows of FDI, Jamaica continues to grow at a sluggish pace."
Sluggish growth despite high levels of FDI causes "many to question whether we have the absorptive capacity to translate FDI into growth and employment. Too often, these funds go towards the purchase of imports and end up flowing back out of the country. For example, the tourism sector attracts the most FDI, but a very high proportion goes towards the import of food and manufactured materials, a lot of which we produce here in Jamaica, but not in the right quantity or quality. This is also true of labour and expertise in other industries."
There is a whole lot of Jamaica's economic condition and peoples' everyday reality tied up in these few words of the minister.
Economic cost
But first we might inject a bit of caution. Has Jamaica truly "benefited from high levels of FDI" over the years?
It is by no means clear from an economic cost benefit standpoint, that we should so describe our good fortune in attracting FDI.
It may be best simply to say Jamaica experienced high levels of FDI.
The matter of net benefit is altogether different and would be subject to other kinds of analysis.
That said, there are a few core questions which have attracted and shall always attract our attention as we contemplate economic performance and changing societies over time.
These core questions are, indeed, the ones that got us started on the discipline we know today as economics.
Adam Smith, faced with huge changes in his society asked the question that led to his treatise: 'An Inquiry into the Nature and Causes of the Wealth of Nations'.
There was turmoil, massive population movements and tremendous growth in wealth alongside varying levels of inequality.
Smith figured, division of labour and specialisation along with of course, investment to be driving forces. Marx later fingered accumulation of capital.
He also spent a whole lot of time explaining that the process of technological change was a centrepiece of this form of accumulation.
He didn't use our modern term 'technological change'.
Rather he spoke of things like embodiment of labour into machines that converted energy and motion, enabling greater output and expanded surplus but the concept was the same.
It was mid 20th century before economists returned to Marx' insights of organic linkages among investment, technological change and economic growth.
There is no growth without investment. But technological change is the basis of explosive growth and development.
It includes not only physical aspects of production but also organisational elements like Ford's assembly line.
Senator Don Wehby, the minister without portfolio in the Ministry of Finance. - File
For Caribbean economists living their reality in what was then termed underdeveloped countries - ex-colonial possessions - their question would have had to be the opposite of Adam Smith's. Their treatise titled: 'An Inquiry into the nature and causes of the Poverty of Nations'!
Minister Wehby is grappling with some elements of this general issue. We need, however, to avoid confusion. We cannot or should not describe all inflows of foreign capital as investment. Should a foreign hotelier bring funds to Jamaica for hotel operations to purchase Texan prime beef burgers, from Jamaica's standpoint that is not an investment, but rather a foreign exchange inflow.
If the FDI numbers the minister quotes reflect such transactions then the relationship between FDI and growth must appear soft.
Fact is Jamaica exhibits an inability over the years to optimally absorb inflows of foreign direct investment (FDI). This much is true and rightly concerns the minister. His solution encompasses five pillars: infrastructure maintenance and development, investment in people (human capital), improving the small-business sector, creating a business-friendly environment by reducing crime and bureaucracy and finally marketing Jamaica and its positives for FDI. Each of these desiderata is critical to the economy's ability to absorb foreign direct investment. Indeed, they are critical to optimal absorption of any investment!
Fundamental importance
Missing here are three areas: that of an emphasis on technological change, creation of linkages among different sectors of the economy and social-sector elements that are also of fundamental importance. Yet where are the specific policies to drive outcomes in these areas to their best positions? We seem to think that all useful technology must be from abroad and imported. Lecky's creation of the Jamaica Hope must be classed among the elements of technological change and gives the lie to this idea. Technology is not only the IPhone, IPod and flat screen TV! In agriculture we have lost extension officers to the insurance industry. In social services we lost social workers to financial services in the '80s and '90s.
If we really want to improve Jamaica's absorptive capacity for investment generally, these issues will have to be targeted and measures put in place to push them to desired levels.
Here's a simple fact. If every traffic hour in Jamaica is rush hour, of what use is better road infrastructure?
Heavy spending and beautiful blacktop will not improve productive efficiency.
Alternatively an efficient, highly used public transportation system would achieve this. So which way to go? Which combination? Choices we have to make.
People will generally support sensible choices. But first people must be sufficiently educated to understand and sufficiently fed to not respond to the unsustainable handout.
Achieving Senator Wehby's desiderata requires both choice and simultaneous implementation - kind of 'all or nothing at all'.
Financial Gleaner Columnist, wilbe65@yahoo.com