Anders Danielson - The Political Economy of Development Finance: Public Sector Expansion and Economic Development in Jamaica

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The Political Economy of Development Finance

The Political Economy of Development Finance

Public Sector Expansion and Economic Development in Jamaica

Anders Danielson

First published 1993 by Westview Press, Inc.

Published 2019 by Routledge
52 Vanderbilt Avenue, New York, NY 10017
2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN

Routledge is an imprint of the Taylor & Francis Group, an informa business

Copyright 1993 Taylor & Francis

All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers.

Notice:
Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe.

Library of Congress Cataloging-in-Publication Data
The political economy of development finance: public sector
expansion and economic development in Jamaica / by Anders Danielson.
p. cm.
Includes bibliographical references and index.
ISBN 0-8133-1767-3
1. Fiscal policyJamaica. 2. JamaicaEconomic policy.
I. Title.
HJ863.7.D35 1993
339.5'2'097292dc20 92-41563
CIP

ISBN 13: 978-0-367-29490-8 (hbk)

Contents

Guide

1. Tables
2. Figures

When I embarked on writing this book, my main motivation was to find an explanation of why the Jamaican Democratic Socialist experiment under Michael Manley in the 1970s appeared to have failed. At the time, I was more or less convinced that the causes were externalthat the deep recession in the world economy conspired with conservative currents in the U.S. and the International Monetary Fund to render it more difficult for small poor nations to choose their own path of development. I read three prominent Jamaicans' account of the demise of Democratic Socialism (Girvan, Bernal and Hughes, 1980), Michael Manley's (1982) own statement of the IMF negotiations and IMF and the Debt Crisis (Krner, et al., 1987), and my initial suspicions were confirmed: the outside world, and the IMF in particular, were to blame. If I ever needed further encouragement in my quest, I could turn to Michael Kaufman's (1985) Jamaica Under Manley or to Evelyne and John Stephens' (1986) Democratic Socialism in Jamaica two solid books by eminent scholars which emphasize external conditions and the attitude of the IMF to explain the failure of Democratic Socialism.

However, when I began to examine the available data more closely, my initial conviction began to fade; from the material emerged a picture of a mismanaged economy, of an over-enthusiastic government without the fiscal discipline necessary for growth without debt constraints. I simply found it difficult to believein view of the data material I had collected at the Department of Statistics in Kingstonthat the international economy, the U.S. and the IMF were responsible for the economic stagnation and political turmoil in Jamaica during the 1970s and the first years of the 1980s.

I wrote this book partly in response to what might be called the "received view" of Jamaica under Manleyrepresented by the studies quoted above. My main conclusion is that the Manley government tried to accomplish too much in a very short time. The Manley government was elected on a program which meant huge increases in public expenditures. This also impliedalthough the program was noticeably less emphatic on this pointthat taxes had to be increased correspondingly. The dramatic increases in tax rates slowed down economic activity drastically. To make things even worse, the estimated tax raises were not sufficient to keep pace with the virtual explosion in public expenditures. The resulting budget deficits (and hence growing debt) put additional burdens on Michael Manley's shoulders and rendered it increasingly difficult to come to terms with the structural problems in the Jamaican economy. This explanation seems to correspond pretty well with the facts.

This analysis, however, presumes that the Manley government acted with the intention of doing what was "best" for society. Although a common assumption in economics, it is not necessarily realistic. Since the completion of a first draft of this book, I have come across some literature explaining phenomena like those in Jamaica under Manley from a public choice perspective (notably Gelb, Knight and Sabot, 1991 and Krueger, 1992; my own attempt is contained in Danielson and Lundahl, 1992). I now believe that insights can be gained by analyzing public activities from the point of view that the government has the welfare of itself, or certain favored groups, in mind, rather than society as a whole. Parts of the manuscript (especially ) were revised accordingly.

In writing this book, I have received criticism, comments and encouragement from numerous people. At the University of the West Indies at Mona, Dr. Edward Greene, Director of the Institute of Social and Economic Research, and Dr. Mark Figueroa, Head of the Department of Economics, provided me with necessary research facilities. I have also had the opportunity to discuss certain statistical matters with people at the Statistical Institute, the National Planning Institute and the Ministry of Finance, all in Kingston. I remain in great debt to these people as I do to the head librarian at ISER and the staff at the University Library of the UWI. Ms. Leila Gonzales, then at the UN's Development Programme in Kingston, provided me with statistical material on particular issues.

I would like to express my sincere thanks to Dr. Malcolm Cross at the University of Warwick and the staff at the University Library at Warwick who helped me to find the material I needed; my gratitude is extended to the staff at the Library of the Institute of Commonwealth Studies (University of London) who endlessly and patiently carried heavy statistical volumes from the basement to my study desk.

In Lund, I have received comments from a large group of people. In particular, I would like to thank Professor Markos Mamalakis from the University of Wisconsin-Milwaukee, who provided numerous perceptive comments on the use and abuse of national accounting data. Renato Aguilar, Anders Bergquist, Hans Bjurek, Ronald Findlay, Carole Gillis, Gte Hansson, Lisbet Hellvin, Elias Kazarian, Ari Kokko, Carl-Hampus Lyttkens, Bo Sdersten, Laszlo Somogyi, Charlie Stuart, Johan Torstensson, Rosemary Vargas-Lundius and sa Weibull all read the manuscript (or parts of it) and provided helpful criticism and encouragement.

I owe a special debt to Mats Lundahl, now at the Stockholm School of Economics. He supported my efforts with characteristic enthusiasm and vigour, and he has always waited patiently for me to return from my excursions into the most obscure parts of the library. Although I never quite managed to get him interested in the works of Kalecki, his profound erudition and his gargantuan appetite for the necessities of life has beenand isan important source of inspiration for me.

Finally, I would like to express my gratitude to those who have made it possible for me to eat, read and travel during the completion of this study; various grants from the University of Lund, SAREC, SIDA, Anders Otto Swrds stiftelse, Sknska handelskammaren, Stiftelsen Lars Hiertas minne and Gyllenstiernska Krapperupstiftelsen enabled me to travel to Kingston, London, Coventry, Amsterdam and New York and get the literature, the statistical material and the information without which I could never have completed this study.

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