LIFE AND DEBT:
A debrief
HSB4U
Maharaj 2014
Jamaica: A brief history
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1655: English occupied Jamaica and created
agricultural-based economy (slave labour) to
support industrial revolution in England
18th Century: sugar cane export flourished
1807: abolition of slave trade= no more sugar
cane exports, followed by serious drought
1865: social, economic progress from English
including new technologies (irrigation)
restarted the cash cropping industry
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1920: sugar cane increase; increase in land
size
19th century: rise in banana trade, 1890=
banana replaced sugar cane as major export
Great Depression (1930s): demand for
economic development from British rule= 1
million pounds/ yr for 20 yrs on development
BUT… funds were not implemented to deal
with Jamaica’s structural problems
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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,
especially the IMF= structural adjustment policies and
forced free trade
The weakness of the Jamaican dollar= due to a series of
devaluations imposed by the IMF
What’s the deal
with the imf?
 The
IMF is only concerned with short-term borrowing
to meet immediate needs of a country- the effect is
more $ in the pockets of 1st world nations (U.S.,
Great Britain, etc.) because of high interest rates
 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?
 Post
independence, countries like
Jamaica quickly realized they had
financial troubles because lack of
economic strength= they needed time to
build their economy!
 1973: hike in oil prices= a large $$ impact
 Jamaica is oil importer- went to private
banks for loans
 IMF: try to cutback spending
Pressure from the imf
 Manley:
felt pressured to approach IMF
because Jamaica unable to pay for
imports
 Wanted repayment plan compatible for
long-term development
 IMF: development is Jamaica’s problem
 IMF: loaned $$ short term with high
interest rates, imposed heavy conditions
and restrictions
IMF’s conditions
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1. Budget cut-backs
2. Devaluations in currency ($$)
3. Interest rates under their control
4. Free trade
5. Privitization
= vicious cycle, because
there is no money allocated for
development of Jamaican
economy
Imports and exports
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IMF restricted spending to healthcare &
education
Initially, IMF: decrease imports, increase
exports
Imports: what comes INTO the country
Exports: what goes OUT of the country
Jamaica is dependent on imports from other
countries: oil, medicine, books, food, etc.
Debt reaches $7 billion
crops
 Jamaican
crops are rotting, because U.S.
crops are cheaper to buy in Jamaica
(CRAZY!)
 IMF put pressure to open
up to imports: previous
measures prevented imports,
ensuring Jamaican farmers
their own market (too small
to be self-supporting)
Produce (think: honeydew
melons)
 Jamaican
produce is more expensive ($$)
because it is not mechanized- “Can a
machine compete with a machete?”
 Produce doesn’t meet standards
 “Free
trade flows in
one direction: toward
the U.S.A.”
Dairy industry
 Dairy
industry had been growing in Jamaica
 1992: government took out loan of $50 million from
Inter-American Development Bank to support dairy
industry
 Condition: had to abandon local subsidies (additional
financial support to farmers, i.e. tax cuts), and
abandon restrictions on imported milk products
 Abandon
restrictions on imports= U.S.A. started
importing powdered milk
 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 business
dramatically
Banana industry: The LOME
agreement
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Jamaica produces 90, 000 tonnes of
bananas- exported 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
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
$$ going?!)
 Foreign
companies were promised that Jamaican
workers would not form unions
 Chinese workers imported= tension between
Jamaican workers and Chinese workers- WHY?
Chinese getting paid in US $$!
 FTZs are counterproductive- factories now moving to
Mexico= cheaper labour, loss of 18,000 jobs
 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.
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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
 McDonald’s
could be purchasing Jamaican productsinstead, they import them (Why?)
 McDonald’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)= “Cancer-causing 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!?