The global recession has hit Jamaica hard. Bauxite plant closures, significantly reduced tourism demand and fallout in remittances have added to our excellent record in both tax avoidance and evasion.

When we couple these impacts with our already heavy debt burden amid high interest rates and too high a budget deficit relative to national income, there seem only two immediate possible choices: debt default or International Monetary Fund (IMF) accommodation.

In any event, these are merely short-run responses - the first with calamitous short- and long-run consequences, the second with grim short-, but possibly wonderful long-run consequences.

So with debt default unthinkable, we enter a borrowing relationship with the IMF.

The sad fact is that our previous relationships with the IMF demanded deflationary policies - erroneously labelled structural adjustment, for they did not alter economic and productive structures - at the very time unemployment and hard times for the population were not what a good doctor should have ordered.

Organisation for Economic Cooperation and Development (OECD) countries all respond to recession with stimulus. Why can't we?

It is not that we can't. It is that with our present production, trade and demand structures, stimulus will make our condition worse.

Devaluation

Any stimulus will translate into higher import demand and another round of devaluation in our managed flexible exchange regime.

Attempts to stem that using higher interest rates will then stymie attempts at growth and employment creation. It's like feeding the diabetic sugared water to boost energy when exercise and a 'better' diet are the optimal indicated response.

Even if we broker and achieve a painless IMF accommodation, which is unthinkable, it is likely to be at least 18 months to two years before the US and world economy might return to growth paths that can rev up demand for our traditional exports and tourism. American consumer spending represents some 70 per cent of GDP.

Currently, experts suggest there is a shortfall of about US$760 billion in expenditure required to return the economy to full employment. My own assessment suggests that there is likely to be increased thrift among American consumers.

The stimulus and bailout achieved by Congress are insufficient and do not address effectively the huge losses in wealth encountered by homeowners as a result of real estate price correction and foreclosures.

In addition, the rebounding stock market in an upbeat Wall Street does not appear to be a lasting trend at this time.

In any case, Wall Street's current 'financially engineered' crop neither improves productivity nor creates wealth.

For that to happen, significant regulatory change is necessary, the politics of which is, to say the least, uncertain.

One choice

Wilberne Persaud, Financial Gleaner Columnist

This leaves us with but one sensible choice.

We must trim import demand, increase production of our agricultural sector, provide incentives to domestic output for home consumption and reduce energy usage by rationalising our transportation system, among other things.

The recent decision to reduce import duties on motor cars leaves me baffled. To be credible and offer the chance for successful balanced growth, any response to this crisis does entail structural adjustment.

But it is an adjustment that reworks the structure of our production and demand.

What I have been able to discern from our policy makers to date doesn't appear headed in this direction. We've heard of layoffs, reworking and trimming the Budget and travel tax. What we have not heard is how it is proposed to put our idle productive resources - among which people are central - to work, not within bureaucracies, but creating output. Talks surrounding the idea of a 'social partnership' should be guided by these prin-ciples. This is not an easy endeavour but it remains our only sensible and potentially winning option.

wilbe65@yahoo.com