LIFE AND DEBT A debrief HSB 4 U
LIFE AND DEBT: A debrief HSB 4 U Maharaj 2016
Jamaica: A brief history 1655 18 th Century: sugar cane export flourished “GEM OF THE CARIBBEAN” for England 1807: English occupied Jamaica created agricultural-based economy (slave labour) to support industrial revolution in England abolition of slave trade= no more sugar cane exports Then, serious drought 1865: social, economic progress from English new technologies (irrigation) restarted the cash cropping industry
1920: sugar cane demand from Europe= increased importance for Jamaica 19 th century rise in banana trade 1890= banana replaced sugar cane as major export Great Depression (1930 s): demand for economic development from Britain (Colonial) British rule 1 million pounds per yr for 20 yrs for Jamaincan development BUT… funds were not implemented to deal with Jamaica’s structural problems
After independance from Britain— Jamaica incured alot of debt to help structure their new emerging economy– it was VERY weak Reality hit-- high import market from the colonial years, old habits die hard– if you re-vert to a agricultural economy = moving backward Micheal Manley decided that progress was key and was mentored by Britain to use the IMF to build CREDIT Emerging Issues indebtedness to international lenders (IMF and WB) IMF= structural adjustment policies and forced free trade Conditions of Loans= unrealistic expectations Example : IMF JAMAICAN GOV’T “Weaken the value of the JM dollar = attract foreign investors to come to Jamaica”… What about the cost to the people?
What’s the deal with the IMF? The IMF is only concerned with shortterm borrowing to meet immediate needs of a country The interest being paid by the borrower = more $ in the pockets of 1 st world nations (U. S. , Great Britain, etc. ) The World Bank was established to help rebuild countries after WWII (i. e. England)- Jamaica under British rule 1962: Jamaican Independence after 300+ yrs
Post- independence: what did this mean? Jamaica quickly realized they had financial troubles because lack of economic strength they needed time to build their economy! No trade relationships No monies and support for investements and lack of CONNECTIONS to keep $$$ coming into the country
Then, 1973: hike in oil prices= a large $$ impact Jamaica is oil importer– the existing economy is based on oil! went to private banks for loans IMF: “try to cutback spending”
Pressure from the imf Manley: felt pressured to approach IMF because Jamaica unable to pay for imports Wanted repayment plan compatible for long-term development IMF: “development is Jamaica’s problem” IMF: loaned $$ short term with high interest rates, imposed heavy conditions and restrictions
IMF’s conditions 1. Budget cut-backs 2. Devaluations in currency ($$) 3. Interest rates under their control 4. Free trade 5. Privitization = vicious cycle, because there is no money allocated for development of Jamaican economy
Imports and exports IMF restricted spending to healthcare & education Initially, IMF: decrease imports, increase exports Imports: what comes INTO the country Exports: what goes OUT of the country Jamaica is dependent on imports from other countries: oil, medicine, books, food, etc. Debt reaches $7 billion
Crops Jamaican crops are rotting, because U. S. crops are cheaper buy in Jamaica (CRAZY!) Mechanization (faster than hand methods) Outsourced labour (third world labour) No rules No unions No work standards IMF put pressure to open up to imports: Previous measures prevented imports Jamaican farmers had control and say before IMF imposed restrictions to
Produce (think: honeydew melons) Jamaican produce is more expensive ($$) because it is not mechanized “Can a machine compete with a machete? ” To Jamaican farmers: Produce doesn’t meet standards Size Packaging Weight Shine/Colour ** The system is broken/rigged for profit “Free trade flows in one direction: toward the U. S. A. ”
Dairy industry had been growing in Jamaica 1992: government took out loan of $50 million from Inter. American Development Bank to support dairy industry and help farmers UPGRADE their machines etc Condition: had to abandon local subsidies (additional financial support to farmers, i. e. tax cuts), and abandon restrictions on imported milk products This REVERESED any progress that was occuring in the Dairy industry
With no restrictions on imports re: milk U. S. A. started exporting powdered milk to Jamaica Powdered milk: cheap (affordable), does not spoil (for longer transportation), easier storage Result: Jamaican farmers went out of business could no longer keep up with imports of powdered milk; cut back on local business Local dairy industry fails
Banana industry: The LOME agreement Jamaica produces 90, 000 tonnes of bananasexported to UK (former colony) Europeans who had colonies in the past wanted to give them extra help The Lome Agreement is an agreement of African, Caribbean, and Pacific (ACP) countries with the European Union, which gave former colonies extra help in trade= guaranteed market, tariff free
Is the Lome agreement fair? U. S. (on behalf of Chiquita) went to the WTO and charged that this preferential treatment of certain countries was against WTO rules of free trade Chiquita, Dole, and Del Monte (U. S. owned) control 95% of world banana market= most grown in Latin America under repressive and exploitive regimes; very low wages (sometimes $1/day).
In Honduras, Chiquita banana workers went on strike; they were forced back to work at gunpoint: there are no unions to protect workers!! Under these conditions, the multinationals can bring their produce to market more cheaply. Banks won’t invest in Jamaican bananas because the market is too risky RESULT? The banana market fails
The Kingston Free Trade Zones (FTZs) emerged in the early 1980 s as a way of increasing foreign exchange, export earnings, employment for low-income workers and access to technology
Free trade zone In the free trade zones, workers paid less than what American workers would be paid. Kingston Free Trade Zone (FTZ), encircled with fencing and barbed wire, rows of factories, assembly of garments FTZ not part of Jamaica= not subject to things like income tax, duties, not subject to any other Jamaican laws. Don't meet the quotas= don't get paid for the work you did. $30/week wages. On the job, one can't talk or go to the bathroom freely. Workers have to pay many taxes (where is the $$ going? !)
Foreign companies were promised that Jamaican workers would not form unions = keep wages low With NAFTA being signed, more incentives for investors to go to MEXICO $1. 51 an hour No taxes or transport fees Shorter distance Solution: Chinese workers imported tension between Jamaican workers and Chinese workers- WHY? Chinese getting paid in US $$! Then-- How is Jamaica going to repay loans they took out to open the FTZ?
What was the IMF’s response? Director of IMF says: key to growth is to attract foreign investment (private investors) Manley says that private foreign investors won't provide money for some of the things the country needs: infrastructure, education, healthcare, food selfsufficiency= they are only interested in making a profit
How can jamaica change imf policy? Votes in IMF are proportional to the size of the country in the world economy, so U. S. has 17. 5% of the vote, then Japan and Germany. Old word thinking of territory= wealth/importance To change an IMF policy, need 80% of the vote (can't be done without the support of U. S. and W. Europe). Does Jamaica really have a “say” in changing policies? How is this ironic?
Mcdonaldization Mc. Donald’s could be purchasing Jamaican productsinstead, they import them (Why? ) Mc. Donald’s using cheaper imported beef American ranchers use an anabolic steroid Stilbestrol that isn't sold in Jamaica, enabling them to produce more meat more quickly (and therefore, more cheaply)= “Cancercausing agent”
Slavery? In slavery, the master would take the best part of the food. Similarly, today in America, only the best parts of the chicken are sold (the back, neck, feet, etc. ), are dumped into Third World countries. Dark meat from U. S. being sold into Jamaica at 20 cents/lb. , even though it costs 50 cents/lb. to produce, simply because it can't be sold in the U. S= Jamaican chicken farmers are suffering
Social Justice? ! Exploitation Sub-standard conditions Free market destroys local subsistance economy (cash economy vs. Bartar) Westernization more desirable than ‘stagnation’ but at what cost!?
- Slides: 25