Jamaica: Caving in to the IMF

September 25, 2007

The following article updates the May-June 1978 NACLA Report
on Jamaica, "Caribbean Conflict: Jamaica and the U.S."

In the most recent round of the battle between progressive forces in Jamaica and their local and international opponents, the International Monetary Fund (IMF) once again stepped into
the arena to deliver what may be a final knock-out blow to
"democratic socialism" on the island. After suspending an
earlier loan agreement with the Manley government last December, the IMF agreed in May to extend Jamaica a new loan for $240 million. The Jamaican government, however, has once
again paid a heavy price in accepting the IMF's draconian
conditions, which include:

-30 percent devaluation of the Jamaican dollar - the fourth in a year and a half - with 15 percent devaluation immediately, and 1 percent a month for the next 15 months.
-Balancing of the government budget.
-Relaxation of government price controls on essential items.
-Wage restraints.
-Taxation to boost government revenue.
-Dismantling of the State Trading Corporation.

Hardest hit by the IMF's bludgeon will be Jamaican workers and peasants. With the inflation rate expected to reach 30 to 40 percent this year, the relaxation of government price controls on basic foodstuffs will mean skyrocketing prices. The price of chicken has already jumped by 54 percent, and cooking oil, bread, milk, sugar and flour have all increased. The new tax on gasoline, cigarettes and liquor to augment government revenues will fall heaviest on low-income people.

THE PEOPLE PAY

The IMF's insistence on a 15 percent ceiling on annual wage
increases over the next two years - combined with lifting of price controls and runaway inflation - will have a disastrous impact on the standard of living of the masses. According to the Jamaican newspaper, the Daily Gleaner,

For the mass of people who earn $20 to $60 a week a massive
increase in prices will completely change their life style.
Most factory workers and school children will have to get
into the habit of walking again, because with three children
at school, no working class family can afford $9 a week for
bus fares alone. The cheapest traditional Jamaican lunch - a
patty and a soft drink, now costs 75d and again, with three
children at school this works out at another $10.

The IMF's multi-million dollar loan package is unlikely to help Jamaica's unemployed, nearly 30 percent of the work-
force. According to the conservative Jamaica Manufacturers
Association, recent price increases of between 30 and 80 percent on all commodities could mean a serious jump in
unemployment if a drop in workers' buying power triggers an economic slowdown. This would be especially threatening
to business interests at a time when strikes and shutdowns are
at an all-time high.

Balancing of the government budget will mean a cutback in the programs benefitting Jamaica's working and unemployed poor which had won the Manley government its progressive reputation. The special government programs which provided jobs to the unemployed, the land-lease project which provided low-rent lands to peasants, the literacy program for political education of the masses, and the land reform program will all be cut back severely in the coming year's budget.

Beneficiaries of the IMF package are both foreign and local capitalists. The limitation on wage increases will help to
raise employers' profits significantly. And the devaluation of
the Jamaican dollar, combined with the elimination of a dual
exchange which penalizes the nationals, means a windfall gain
for the U.S.-owned bauxite companies, who buy bauxite from
their Jamaican subsidiaries in U.S. dollars. In another move
that pleased the bauxite companies, the Jamaican government
rolled back the bauxite levy from 8 to 7 1/2 percent, and
dropped the minimum production quota for some companies. Jamaican merchants will also benefit from the dismantling of
the State Trading Corporation, which was established by the
People's National Party (PNP) government to remove control
over the foreign trade from the merchant class.

MANLEY'S ABOUT FACE

As recently as January 1977, in the face of international efforts to destabilize his government, Prime Minister Manley
defiantly rejected the terms of an IMF loan, declaring that
Jamaica was "not for sale." But five months later, under pressure from the country's mounting foreign exchange deficit, Manley opted for the IMF solution, accepting the austerity program that went along with the Fund's support. The progressive tone of the Manley government came to a definitive halt, with the 1977 resignation of D. K. Duncan, a leader of the left wing of the PNP, from his ministerial post in the government. When Jamaica narrowly failed to meet the economic standards required by the IMF, the loan agreement was unilaterally suspended by the IMF. The Fund could easily have
used its discretionary powers and overlooked the minor short-
fall as it had done in the case of Italy for reasons of political expediency.

The suspension precipitated a new balance of payments crisis
by early Spring of '78. And in May, when Jamaica re-opened
negotiations with the IMF, the Manley government was on shaky ground. The country had less than one month's foreign exchange reserves on hand. If the IMF did not come through with the stand-by loan there would be neither money for essential food imports, nor to pay outstanding debts.

The new IMF agreement puts an end to both the substance and illusions of democratic socialism in Jamaica. The left wing of the PNP has little hope of influencing future government policies, which are increasingly determined by the dictates of
the international capitalist community. Two possible future
scenarios were described by Jamaican political economist George Beckford in a recent interview.(*) Either Manley will
step down in the next few months - as the right wing opposition Jamaican Labour Party (JLP) is demanding - and be replaced by a more "liberal" member of the PNP. In this case,
the U.S. and its allies could be expected to step up loans
needed to sustain Jamaica (since the IMF loan covers less than
one-third of the $800 to $900 million the country needs to cover its deficit). This would effectively bring Jamaica
squarely back into the international capitalist camp, tighten
North American control of the economy, and shift the balance
of forces in Jamaica to the right.

Alternatively, if Manley tries to finish out his term of office, he is bound, according to Beckford, to be faced with an upsurge of popular protests by the masses, unable to sustain the burden of IMF-imposed starvation. This situation could bring the ultra-right of the PNP to power, possibly in coalition with the JLP, and with the support of right-wing paramilitary forces.

The Jamaican left has roundly denounced the IMF agreement, adding to the precarious situation of the Manley government. And the JLP has taken advantage of Manley's weakened position to denounce the agreement as a sell-out of the working class by the PNP and socialism.

Whether Manley goes or stays, prospects for the immediate future look gloomy for Jamaica's poor and working class. The tightening of the IMF noose has not only worsened the economic crisis in Jamaica, but also augers the end of this experiment in "democratic socialism." As Beckford sums up the recent Jamaican experience and the IMF's role:

The IMF is really the contemporary U.S. marines. The U.S.
no longer has to land troops in these countries (Jamaica,
Chile, Portugal, etc.) to keep them hooked on the
capitalist system. The IMF is going to do it for them.

(*) Interview with George Beckford of the University of the West Indies, Jamaica, conducted by Robert K. Girling.

Tags: Jamaica, IMF, austerity, PM Michael Manley


Like this article? Support our work. Donate now.