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More false promises

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May 16, 2012 in Economics


More false promises

Wednesday, February 29, 2012 1:11:01 PM
Free up the Grey Economy

Romayne Robinson


Assuming that the fiscal management that Mr. Valentini talks about is a positive move, let us analyse both sides of the forecast if this is to be implemented.

The expectation is that Jamaica should “pull the informal economy into the mainstream to help ease its huge debt burden” which are words uttered informally by the World Bank. In taking informal economies and applying regulation to them, the statistics have shown that these policies almost always end up in the erasure of social harmony. The simple act of bartering between persons should never be assumed to be so great an economic activity, that any substantial revenue can be obtained. To put this into perspective, the World Bank will find that an accurate analysis of this sector will yield no significant benefit to the government. The benefit lies in the ability for people to make more informed decisions about what they buy. Also, the level of competition will develop and encourages persons to come up with better products and can increase levels of customer service, since the buyer and seller are closer and a more personal relationship can develop.

The policy that is being put forward is very much likely to push informal businesses underground and to stifle the very informal economy it purports to help.

What is more than likely to occur, is that a more stringent policy which is very likely to be counterproductive will arise. I say this having some experience and knowing full well that the model the World Bank uses to push regulation on the informal financial sector always ends up in an economic dictatorship. The model pushed through in the United States forces persons to even refrain from using simple cash to trade for goods. Some businesses which thrive on the sale of products with limited shelf lives have even been viciously attacked by the state and even shut down. These are especially targeted because they feature products with a very short ‘sell-by’ date and as such will fail easily when sales are with held. Jamaica’s thriving parochial and farming economies have always depended and survived well under the basic need to feed ourselves and to get the healthiest we can for our families.

The model of “Public-Private-Partnerships” which you mention is severely flawed and the benefits consistently steer themselves away from the lowest consumer. As a matter of fact, in the UK and rural/southern United States as well as several other developing countries such as Malaysia, and parts of the African sub-continent, where the World Bank has exerted its influence, small scale economies have suffered. I point you to Rawsome Foods in Arizona and the document published by the World Bank called the “ World Bank Assistance to Agriculture in Sub-Saharan Africa”. The standard of the products drops as the sellers are forced to satisfy government taxation, regulation, expensive health and safety laws, make a profit, keep their families fed and keep the customer happy as well. Think about it. When so much strain is placed on one product, it always under-performs and veritably fails. In the case of Africa, these small scale economies were very profitable before the 1970’s when the World Bank intervened.

In more cases that can be even discussed in this article, small or informal businesses as they are referred to will thrive more with less input from the government. Saying that “more of the population is accounted for and traceable by electronic means” means that the monetization of persons’ activities is the only concern of the World Bank. It also shows that this increased level of scrutiny on the lives of individuals can only lead to a policy where people are told what to do with their businesses, they are told what to sell and how to sell it and their profits are heavily monitored and consequently, heavily taxed.

Statistically, big government ruins people’s lives. These days, government policy is the chief deterrent in the development of economies and the sovereignty of countries economies is of absolutely no concern to the World Bank. It has systematically ruined the economies of several countries on both the macro and micro scales. This “e-Government framework supported by the private sector that, in addition to increase efficiencies and service delivery… will create new ICT skills and jobs in the government and in the private sector” is also a tremendous farce and has not proven to be beneficial either. Job creation is one thing but eCommerce jobs are very limited and closed to most of the population because of lack of training. Point-of-sale transactions are uncomplicated and despite the simplicity, require heavy capital investment as well as continued upkeep. When you implement a system such as this, you need a merchant account, you need a direct and always available phone connection and you need the device as well. Notice too that the jobs which you claim to be provided already exist because the banks and private sectors already own and operate these machines and they are their property as well.

The consumer is left footing the bill for the services at the end of the month and based on the income of most informal sectors of the economy, it will not suffice to be profitable.

I urge you to reconsider this policy and understand too that the basics of its development are not at al rooted in growth of small scale or informal sectors.

Response to the article “Capture the Grey Economy – World Bank official calls for Electronic Tracing.”

By Camilo Thame (Published in the Jamaica Observer Wednesday, February 29, 2012.)

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