The SALISES Working Paper Series, SALISES Working Paper Number 1

Jamaica’s Debt-Propelled Economy: A Failed Economic Strategy and Its Aftermath

Donald Harris

Abstract


Jamaica now faces the critical issue of how to pull the economy out of the ditch it finds itself in and the painful adjustments that process will undoubtedly require. It is necessary to examine how exactly the country got itself into this situation. The purpose of this exercise is not to assign blame. Rather, it is an essential prerequisite for understanding
how to get out of the ditch and to move forward. Accordingly, in this paper, I seek (a) to draw out some of the crucial lessons to be learned from the experience of economic policies actually pursued in the period since 1990, and (b) to derive from this analysis some constructive proposals for action now.

Starting in the early '90s, concerted efforts were made to design a new economic growth strategy, the National Industrial Policy.1 This Policy (NIP) was officially adopted by the government in 1996. The basic point of the analysis presented here is that the core economic strategy actually pursued by the government, when examined in its totality,
was very different from the announced strategy. The strategy actually pursued I call the strategy of a debt-propelled economy. The NIP was, instead, explicitly based on a strategy of export-led growth. I argue that the strategy pursued ultimately proved to be unsustainable, self-defeating, and undermined the very goals of the NIP. My proposals
for action follow directly from this basic finding.

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