The evolution of structural adjustment and stabilization policy in Jamaica

Introduction The history of economic policy in Jamaica since World War II, viewed at some distance, reflects the broad sweep of fashion in the history of economic development. The cycles of industrialization by foreign investment, import substitution, populist socialism, and structural adjustment are all present. The most recent phase of that history, that of structural economic reform, has however presented some confusion in the literature on Jamaica. At one extreme, economic reform may be dated from 1977, when Jamaica signed its first Stand By Agreement with the IMF, accompanied by the usual list of conditionalities and their implications for economic reform. Witter and Anderson (1991);, largely using that fact, and Lora (1997);, using a narrow list of indicators, imply that Jamaica is an early reformer. At the other extreme, some key elements of economic reform were not implemented until 1991. Following this vein, Handa and King (1997); suggest that economic reform is a phenomenon of the 1990s. The survey of economic reform below reveals a country drawn reluctantly into the reform era, implementing some aspects of economic reform from the early 1980s, delaying others until the 1990s and ignoring a few elements entirely. Economic liberalism has not caught the popular imagination in Jamaica. The fundamental liberal ideas underlying structural adjustment reform are not popular in Jamaica, and have for the most part been foisted on the people by first, an unwilling administration, and later, by an unfocused one merely following to a limited extent world economic fashion. This unwillingness and lack of commitment will be important in understanding the inconsistency in the reform process as it unfolded in Jamaica. Jamaica represents an interesting case study of economic reform for a number of reasons. First, the various aspects of economic reform occurred during distinct periods. This case stands in contrast to those, such as Chile in the late 1970s, that changed economic policy radically over a relatively short period of time. The Jamaican case, therefore, may be instructive in understanding issues surrounding the timing and sequencing of reform. The other reason why Jamaica presents an important case study is that, amongst reforming economies, it has one of the worst records of economic performance in Latin America and the Caribbean during the era of economic reform. While average growth in the region was 2.2 percent per annum in the 1980s, Jamaica grew at an annual average of only 1.4 percent 1 . In the 1990s, the discrepancy worsened. The economies of Latin American and the Caribbean averaged 3.0 percent per annum from 1991 to 1996, but Jamaica's average growth rate was a mere 1.3 percent. Even within the Caribbean alone, Jamaica's relatively poor performance is manifest. The average growth rate for the period 1980 to 1996 is 3.0, whereas Jamaica managed only 1.4 percent annually over the same period.