Four years ago, Jamaican Prime Minister Edward Seaga was the first foreign head of state to be received by a freshly inaugurated Ronald Reagan. At lunch in the White House, the two leaders made toasts to their faith in the power of free enterprise.
Reagan later designated Jamaica the jewel of his Caribbean Basin Initiative, a program intended to revive sickly island economies with the "magic of the marketplace."
But the magic so far has eluded this island 550 miles south of Miami.
After one promising year, Jamaica under Seaga has wandered into an economic malaise of large foreign debt, collapse of the key bauxite industry, record currency devaluation, anemic American investment, high unemployment, high inflation and almost no growth. Doubling or tripling of prices for necessities such as food, electricity and fuel has squeezed wage earners in an economy where the per capita income last year was $932.
A government-imposed 21 percent increase in oil prices sent the poor into the streets two weeks ago, ending four years of relative calm. Demonstrations closed down parts of the island for two days, claimed seven lives, and frightened away some American tourists and their needed dollars.
Four years ago, Reagan said Seaga's commitment to "free people, a democracy, and free enterprise" -- as buttressed by financial assistance from the United States -- would enable the prime minister to "fulfill the trust that is placed in you by your country and embody the hope of all free people."
Yet Jamaica's economic ills have given Seaga's arch-rival, former prime minister Michael Manley, a political opening. Manley, a socialist whose past amiable relations with Fidel Castro's Cuba make him anathema to Washington, has launched a campaign to force Seaga to call a national election. Unless the economy stops biting poor Jamaicans, many observers here say, more violence is likely.
This has happened despite U.S. aid that in 1984 made Jamaica the third largest recipient in the Western Hemisphere, behind El Salvador and Costa Rica. Other assistance came in a U.S. effort to grease the skids for business to invest here; an estimated $500 million yearly in loans from the United States, the World Bank and the International Monetary Fund; a concessionary trading agreement under the Caribbean Basin Initiative that gives Jamaican businesses duty-free access to most U.S. markets.
According to a wide range of economists, businessmen and government officials, both here and in the United States, this picture-postcard resort island has not been amenable to the "magic of the marketplace" because of bad luck, the fragility of the economy and the profligate consuming tastes of the Jamaican middle class.
Seaga was elected in 1980 because he promised he could manage the economy better than Manley. Manley had presided over seven years of economic decline. His socialist policies frightened away about 30 percent of the islands professional and managerial talent. Seaga was seen as a free-market capitalist who would counter Manley's socialism run amok.
As it has turned out, Seaga has been quite willing to use his government to both goad and prop up Jamaica's economy. He imposed rent controls and developed a feeding program that will give food to nearly 1 million of the 2.3 million people. In the past year, Seaga's government has all but cut off the ability of the middle class to import consumer goods.
In an interview, Seaga said his free-enterprise convictions have not been tempered by the poor performance of the economy. But he added, "We are not a country that has large-scale capital resources that can indulge in a totally free economy. We never have been and I doubt that we ever can be."
Rex Nettleford, a prominent political scientist and sociologist here, says Seaga's chumminess with Reagan and his praise of free enterprise was "a tactical move" to insure U.S. financial support. "All this magic of the marketplace stuff doesn't make any sense in Jamaica and Seaga knows it. The prime minister has no choice but to see himself as being the guiding hand of the economy."
The most severe blow to the Jamaican economy in the past four years -- the collapse of the bauxite industry -- would have occurred no matter whose hand was guiding the economy. Sale of bauxite, the claylike ore from which aluminum is obtained, has been Jamaica's primary source of hard currency for decades.
Worldwide recession, a glut of aluminum and cheaper sources of the ore elsewhere combined in the past four years to cut the island's bauxite exports by one-third. Seaga says it will take at least five more years before bauxite sales could return to pre-recession levels. Even then, according to aluminum industry officials, Jamaican bauxite may not be competitive with ore from Africa and Australia.
According to a World Bank official, the bauxite collapse reduced foreign-exchange earnings and weakened the economy to the point where it is now hostage to its $2.8 billion foreign debt. Payment on that debt, which is higher on a per capita basis than the debts of Mexico or Brazil, now eats up 40 percent of everything Jamaica earns in foreign exchange, the official said.
The failure of the bauxite industry has been accompanied by a reluctance on the part of large American corporations to invest in Jamaica. At Reagan's request, David Rockefeller, then chairman of Chase Manhattan Bank, organized a group of Fortune 500 businessmen in 1982 to scout out Jamaican investment opportunities. The Overseas Private Investment Corp., an independent federal agency, also took two groups to tour Jamaica.
The result of these presidentially encouraged tours, however, has been "disappointing," said Noel Lyon, head of the Jamaica National Development Bank. U.S. investment here since 1981 totals less than $100 million, according to the Commerce Department. American business leaders are put off by Jamaican red tape, a U.S. government official says.
The failure of the bauxite industry and the lack of a substitute industry have constricted the flow of foreign exchange into Jamaica.
There is one Jamaican growth industry that Seaga does not brag about: marijuana, or ganja as it is called here. The U.S. Drug Enforcement Administration estimated that in 1983 Jamaican exported to the United States 1,750 metric tons of marijuana -- 14 percent of the U.S. total -- with a wholesale value of about $2.3 billion. Seaga, however, whose administration is embarrassed by the continued growth of the ganja trade, claims that pot brings in "nothing" in foreign exchange for Jamaica.
With or without ganja, foreign exchange to buy raw materials and equipment has become so scarce that Seaga has been forced to restrict the ways in which Jamaicans can spend their money outside the island. Businesses are forced to compete against each other to "buy" foreign exchange. Twice each week, the government puts up several million dollars for sale. Businessmen who offer the highest bids can obtain the U.S. currency they need to run their businesses. Others do without.
Seaga also has imposed credit restrictions that prevent all but the richest Jamaicans from buying imported luxuries.
This blow to middle-class consumption collides with the tastes of a highly visible segment of the Jamaican population. There is a joke in Kingston that every good Jamaican needs "the three Vs": a Volvo, a video-tape player and a Visa card.
Of the island's middle class, which constitutes about 20 percent of the population, sociologist Nettleford says, "We consume more than we produce. We are totally committed to the consumption patterns of the North Atlantic. We wear nice clothes, we love to drive the latest cars, our houses all have the latest gadgets."
Seaga did not, however, impose severe credit restrictions until last January. Until then, according to a World Bank official, "there had been a conspicuous increase in the presence of these consumer goods under Mr. Seaga's regime."
This seeming abundance of goods for those who could afford them occurred even as Seaga was calling for continued sacrifice by Jamaica's poor. Shortage of foreign exchange and demands from the World Bank and the IMF to make Jamaica's products more competitive had forced Seaga to devalue the Jamaican dollar. This has had the greatest impact on the poor, who have absorbed repeated increases with no increases in income.
As Jamaica's large urban unskilled labor pool continues to bear the brunt of the austerity programs, Jamaica shows some signs that it can recover. Tourism is booming, up 50 percent in three years, and there is some growth in manufacturing and agriculture. A World Bank official said Jamaica is building a "firm foundation for the future" and added that Seaga has "shown more courage than most Third World leaders" in disciplining his nation's economy.