Ordinary Jamaicans suffered from policies recommended or imposed by the West. These policies favoured financial speculators who eventually dragged Jamaica into a crisis in the 1990s. The recent global financial crisis has made things worse. Jamaica is now one of the most indebted countries in the world.
Slavery to democracy
The island was discovered by Columbus in 1494 and the indigenous population was soon more or less wiped out. Jamaica then became a Spanish Colony until 1655 when Britain captured it. Most of the population are descendants of slaves brought over from Africa. Slavery was abolished in Jamaica in 1838. However, official racial discrimination continued until the late 1930s. A vibrant anti-colonial movement emerged, peacefully secured independence in 1962 and then created an enduring democracy. However the economy remained trapped by the colonial legacy, reliant on exporting cash crops such as sugar, cocoa and coffee.
Accumulation of debt
All developing countries were advised that if they borrowed money and invested in ‘modernisation’ their economies would ‘take off’ making repayment easy. Jamaica followed this advice and the process was initially successful with a fairly diverse industrial base created. However the 1973 oil crisis increased the amount Jamaica had to borrow whilst at the same time global recession led to shrinking revenues and panicking Western banks who had lent enormous amounts to developing countries called in their debts.
From the mid 1980s Jamaica’s last resort was to seek loans from the IMF to pay existing creditors and keep the country running. The IMF was happy to lend to ensure that the banks in rich countries who had lent recklessly got their money back. The IMF was now also in a position to demand Jamaica agree to a program known as structural adjustment, to remodel the economy and pay off the debt. Structural adjustment applied to many aspects of the economy including public spending, trade policy and regulation.
Cuts to public services
Structural adjustment imposed ‘austerity’ by cutting public services to make more money available for debt repayment. This has many negative consequences. Education standards fell with much larger class sizes and fewer trained teachers. In the 1980s healthcare standards declined. For example there was a 60% drop in the number of registered nurses. Fees were either increased or introduced for many vital public services which had previously been free.
Trade liberalisation = importation
Secondly the IMF demanded reforms which they argued would make the country’s economy more competitive. In reality the IMF, which is controlled by developed countries, took advantage of the indebted government’s need, by demanding a system which effectively replaced locally made products with imports from the rich world. Jamaican industry declined and agriculture which had employed much of the population was devastated by subsidised US produce. This unprecedented dependence on imports simply increased Jamaica’s debt. The decades since liberalisation have seen little or no material improvement in Jamaicans’ living standards as jobs were lost and the debt burden made the country less competitive.
Private debt, public pain after deregulation leads to banking crisis
Structural adjustment also called for deregulation of the financial sector. Just as in Britain, The USA and Ireland deregulation led to a property boom. The boom was followed by a crash when banks lost huge amounts lending for overvalued building projects. Jamaicans then stood to lose their savings and pensions, so the government stepped in to bail out the banks in 1994 and 1995. The bailout eventually cost roughly 40% of GDP. This money was borrowed from international lenders. Jamaica is unusual in this respect as a developing country. whose debt is mainly held by private lenders both at home and abroad rather than to other countries and international organisations.
This debt resulted from policies imposed by the West and has had devastating consequences. Jamaica has made little progress towards the Millennium Development Goals in the last decade. In some areas the situation worsened, treatment of tuberculosis fell from 79% in 1997 to 41% in 2006, equally primary school enrolment is now down to 87% from 97% in 1991.
Global economic crisis hits Jamaica hard
Jamaica’s debt to the rest of the world has increased by a third during the financial crisis, and now stands at more than £1,800 per person. The Jamaican government spends £240 per person in debt repayments each year, more than it spends on education (£130) and health (£60) combined. With an annual income per person of £2,900, Jamaica has never been considered for debt cancellation because it ‘is not poor enough’.
The recent global recession brought Jamaica to the brink of insolvency. Whilst interest payments were costing 65% of tax revenues. Jamaica is now borrowing more money from the IMF to stay afloat. One of the IMF’s conditions is a three-year wage freeze for public sector workers, which the Jamaican supreme court has declared illegal as it breaks previous commitments. Given current and predicted inflation rates in the Caribbean island, the freeze is likely to amount to an effective 25 per cent cut in incomes. Public spending overall is to be cut by 20 per cent by 2012 on levels before the financial crisis
Last updated: April 2011