Away from this lush, mountain-capped Caribbean island, Prime Minister Michael Manley likes to portray Jamaica as a major force in the struggle by developing nations to become economically independent. In speeches in various world capitals, Manley calls repeatedly for a "new international economic order" for poorer countries. He often laments big-power "imperialism."
At home, however, Manley is being forced to put his country's economy through the wringer, precisely to satisfy the demands of these very industrial nations. Almost bankrupt from an outsized balance of payments deficit, Jamaica has had to take out a $244 million, three-year loan from the International Monetary Fund. And that means meeting IMF terms for getting its economy up to snuff.
Jamaica's new belt-tightening is one of 21 cases in the past several years in which the IMF has required borrowing nations to take stringent austerity measures to qualify for multilateral aid - part of the 130-member organization's growing power in the face of changing economic conditions. Technically, the fund doesn't mandate specific policy changes. But it won't lend the money until it's satisfied with a country's program.
To meet the IMF's conditions, Jamaica last month began gulping down a harsh dose of economic medicine that includes a massive 30 percent devaluation of its currency, stringent controls on imports, a series of big tax increases on manufacturing and tourists, higher interest rates, limits on credit expansion and a tight wage ceiling on worker's raises.
The result has been a virtual shock wave for already hard-hit Jamaican workers, and a new jolt for the island's close-knit middle class that has sent many fleeing to the United States. Despite government subsidies, prices of many necessities - such as food and gasoline - have jumped more than 30 percent since early May. Domestic business is off. And jobs are scarce.
A can of condensed milk - a staple to the island's poorer families - now costs more than 50 cents at Jamaican food stores. Cigarettes run $1.36 for a pack of 20. And gasoline now costs $3 a gallon in Jamaican currency. Even beer prices have soared - to 65 cents a bottle, up from 41 cents two weeks ago. Says one prominent union leader: "You look at this thing and you just want to cry."
Moreover, Manley's leftist "democratic socialist" government, which won a landslide victory last December before the country's financial straits were made public, is now coming under increasing criticism from both labor and business. Although the charismatic Manley is not up for relection until 1981, his supporters concede they're no longer fully confident of being returned to office.
Admittedly, terms or no terms, almost everyone in Jamaica agrees the hardship would have been a lot stiffer if the IMF had rejected Jamaica's loan application. Without the IMF money, a high Jamaican official says, private banks would have curtailed their lending and foreign exporters would have cut off short-term credit, stifling needed trade.
With problems of that magnitude, the remedies would have been harsher. "To try to go it alone would have meant operating a siege economy," a finance ministry official said.
"You'd virtually have to retire from international commerce, which would be next to suicide for a country that has to import as much as we do. And that would mean serious political upheaval. There really was no choice."
The question is, did the IMF go too far in prodding Jamaica to accept these harsh terms, and how much did Manley's government have to say about what policies it would adopt to meet the fund's terms? Manley himself often has criticized international lending agencies for failing to take account of the "fragile" economies of developing countries. Was this another such IMF fluff?
The negotiations leading up to last month's loan came against a backdrop of continued decline in the Jamaican economy. Caught amid high oil prices, falling revenues from its sugar exports and a tradition of heavy government spending, Jamaica gradually ran down its monetary reserves. Inflation intensified. Layoffs increased. The nation was facing an economic disaster.
In 1977, Manley applied for - and got - a $78 million line of credit from the fund. But after months of half-hearted cutbacks - including an abortive austerity program imposed after Manley won his December 1976 reelection - Jamaica failed to meet previously agreed on economic targets, and the fund closed the window on the loan. The government tried to get along without the IMF's help but eventually it asked for another loan.
Last February, an IMF field team flew down to Jamaica to begin negotiations for the loan, but - with the previous year's performance in mind - insisted on a much tougher set of conditions. On IMF prodding, Jamaica was forced even before the talks began to agree to a 15 percent currency devaluation. When negotiators did sit down in earnest, fund officials were decidedly stern.
Just how much Jamaica was coerced into adopting the politicians it did, and how much flexibility it had to pick and choose, depends on the perspective. Although both sides agree that the fund didn't actually dictate the measures it wanted Manley to adopt, the goals the field team set were so specific, it was hard to avoid the tough decisions.
The fund team was headed by David Finch, a bespectacled, fiftyish Australian who has spent his career as an IMF field representative. Far from being dictatorial, Jamaican officials report, Finch and other staffers were almost deferential about what policies Jamaica would have to adopt. (Earlier, Finch had handled loans to Italy and Great Britain as well.)
As a Jamaican official in on the talks describes it, "They never told us specifically what policies we had to follow to qualify. All they would say was, 'You show me what you want to do and I'll tell you if it's correct.' By the end, we were pleading with them, 'Please just impose your conditions and be done with it.' But they said Jamaica had to make up its own mind."
To their credit, Finch and other team members spent their first several weeks simply studying the Jamaican situation, conferring with union and business leaders to see how much each side would be willing to sacrifice. In the process, even Jamaican officals were astonished at their thoroughness. "I learned a lot about this island," one says, "that I didn't know before."
The negotiators' jobs also were made easier because the loan was carried out under a new form of lending pool that gives borrowing nations up to three years - in contrast to the normal one year - to get their financial houses back in order. And a western observer adds pointedly. "There also was more-than-usual regard for appearances. The IMF people were well aware of third-world attitudes toward the fund."
But ultimately, finance ministry policymakers say, Finch was determined about what Jamaica could and couldn't do. "He's by far the toughest negotiator I've ever run into," says one senior official here. "He'd never say no - just sit there, patiently, like some sort of professor, and then says, 'Yes, but . . .' The gnawing thing was he was so nice about it you couldn't get angry."
By April, there were only two major points of disagreement:
Jamaican officials resented Finch's demand that they devalue their currency by 30 percent (15 percent at the start, and 15 percent a month until the 30 percent is reached). "Our feeling was that 15 percent in total would have been enough," a high Jamaican official recalls. "But we finally had to do it, all 30 percent."
The second was the government's plans to take over all importing through a state trade corporation. The IMF team contended that with so many of Jamaica's trade transactions now coming through U.S. and British subsidiaries, a takeover now would discourage needed expansion. The result was a compromise: Jamaica would "monitor" imports, and if things got out of hand. Manley could publicly call attention to the problem.
On the rest of the package, there was "virtual unanimity," a ministry official asserts: Jamaica would devalue its dollar according to the IMF formula; Manley would try to hold the line on government spending and boost taxes to reduce the budget deficit; imports would be controlled tightly and wage increases would be held to 15 percent.
There's no question these policies have resulted in hardships. Since the program went into effect last month, prices have risen sharply for almost everything, including basic necessities; retail sales have fallen off visibly, in some cases by as much as 40 percent and workers, deprived of catch-up pay increases, are being caught in a squeeze.
For Jason R, a 48-year-old blue-collar worker (many Jamaicans are loathe to use their full names in print, for fear of losing patronage jobs), the dilemma is acute. The gaunt father of six earns $40 a week at his full-time job. But he must spend $30 for food alone, $10 a week for rent, $5 for transportation and $10 for lunches for his school-age youngsters.
For now, Jason R. is eking out a living by dipping into a small nest egg the family accrued when his wife worked as a domestic in the United States a few years ago. But in two weeks, that money will be gone, and Mr. R's visa expired in the interim. "We buy a lot less of everything," he says. "One pound of flour instead of two, half of what we used to before."
Lascelles Beckford, labor chief of the opposition-allied Bustamante Industrial Trade Union, says such pinching has become commonplace for Jamaica's poorer workers, many of whom still earn the national minimum wage of $24 a week. "You try to write down a typical family's budget," he says," and you just look at the figures and crumple up the paper. But it's true."
Moreover, the squeeze is so bad it's even hitting the middle class, many of whom are simply giving up and emigrating to Miami. Alvin B., a 29-year-old bank manager, is planning now for just such a move as soon as he can arrange it. "It's really hitting like hell," he says. "We just can't enjoy the same standard of living we had before.
Not surprisingly, union leaders have protested the government's nwe wage ceiling, which is preventing workers from keeping up with the new rise in prices. Even the Manley-affiliated National Workers' Union is criticizing the prime minister's policies. Says the NWU's president, Carlise Dunkley: "What we're saying is, 'What assurances can you give us on prices?' And they can't."
Business leaders also are upset. Bruce Rickards, a director of Grace-Kennedy & Co., a major food distributor here, complains that "many items have now been priced out of the reach of ordinary citizens. We're facing problems we've never had before," he says. "The whole thing is turning out to be diminished returns to the very government that needs it. It's a disaster."
Still, despite te widespread hardship, there's been relatively little criticism of the IMF. A nationwide public opinion poll published last week by Carl Stone of the Kingston-based University of the West Indies showed 46 percent of Jamaicans in favor of the IMF loan deal, and 40 percent opposed - not a had plurality in the island's volatile political structure.
If anything, most of the blame is being laid squarely on Manley. Says the NWU's Dunkley, usually an ally of the prime minister's: "Sure it was a tough deal. But when you go to a bank, you have to do what they tell you. The fact is that Jamaka for too long has delayed the actions needed to restore financial stability. So now, you might say, the chickens are coming home to roost."
To many observers, the immediate question is whether the government can keep the lid on wages - an elemant most Jamaican economists regard as the key to the program's success. Although unions and employers are obligated to obey the guidelines, Manley might have to loosen them if opposition intensifies. So far, protests have been perfunctory. But things could heat up if prices rise more.
There also are longer-range problems. As a finance ministry official explains it, the strategy of the IMF team was th use "a short, hopefully temporary jolt of inflation to help dampen workers' buying power and bring consumption into line with production. The problem was solved as it had to be - with a crunch," he says. "It's a novel approach, but we think it will work."
The dilemma is, dampening consumption is only half of what Jamaican have to do. The other side is to begin spurring production. And on this, Jamaica may well be in an economic Catch 22: To help eliminate its payments deficit, the government must crimp the economy to curtail consumption. But that in turn makes it more difficult to resume production. So, where does the cycle end?
Was the IMF, then, too tough on Jamaica? By a wide majority, both government officials and private-sector spokesmen insisst it was not. "The negotiations were tough, but the IMF people weren't unfair," says Richard Fletcher, the No. 2 man at Jamaica's embattled finance ministry. "There was only one technical matter on which we disagreed. For the rest, we made the key decisions ourselves."
Another top official puts it more candidly: "Just look at the alternatives," he says. "Bilateral aid is a possibility when you have sympathetic men in the State Department, but otherwise I really prefer international organizations. And the big multinational bank boys are nice guys - when you don't need them. When you're in a bind, they just disappear . . ."