Garth Rattray | Jamaica’s economic dichotomy
At this time of the year, Jamaica’s economic status and plans are made public. Only a minuscule number of citizens understands what is being said, some have a passing acquaintance with the narrative, and most have absolutely no idea about what the various terms and words mean. The majority of citizens get a sense of our economic status from the parliamentary speeches and debates, from mainstream media, social media, and from discussions among and with relatives, friends, and acquaintances.
Terms like “financial markets”, “gross domestic product”, “gross national product”, “economic growth”, and “economic security”, among others, do not mean much to the average person. Interest rate and inflation usually strike a chord. Although they do not know the economic term, people are aware of, and therefore understand their “spending power”. Spending power is the amount of money that people have to spend on products and services. Everybody knows that our spending power diminishes month by month, year by year.
Most of us earn in Jamaican dollars, but buy many products that are tagged directly or indirectly to United States dollars. There is always a huge gap caused by the exchange rate. However, the effect of the gap depends on how people are paid (in Jamaican or United States dollars) and also on the business in which people engage. For example, merchants who purchase their goods in United States dollars factor in anticipated replacement costs, then convert the cost into Jamaican dollars, add their overhead costs and mandatory taxes/deductions, and profit margin.
The problem arises for the citizens who do not earn or purchase based on United States dollars; those people live on the Jamaican-dollar side of the economy. They buy products in Jamaican dollars, that have already been converted from United States dollars to Jamaican dollars and had the usual additions before they are made available for retail. The difference in salaries earned in United States dollars and those earned in Jamaican dollars is phenomenal.
It is easy to see that, whenever Jamaicans must buy stuff that is priced based on the American dollar, but earn in Jamaican dollars, there is going to be a double whammy. They don’t earn in the equivalent of American dollars, but they often spend in the of equivalent American dollars with added import taxes, the taxes and deductions accrued by the merchant, the operating costs of the merchant, and the mark up of the merchant.
Some items do not appear to depend on American dollars, but they do. An example of this is found within the agriculture industry. Farm equipment, including transport vehicles, must be imported, the fuel is imported, the maintenance and repair necessities are all imported. Other modern farm equipment are imported. These include office equipment, computers and communication devices, even farming apparel are imported. Then, of course, fertiliser is imported, so are pesticides and the equipment needed to use both. So when we are told to eat what we grow, a large portion of the cost is incurred based on the American dollar. In fact, the least expensive component of the cost comes from local labour.
The cost of almost anything that we produce has roots in the American dollar. Recently, we were asked to purchase a bun and cheese and a ‘box’ juice for someone doing a job for us. I am not familiar with the prices of these items, so it came as a shock to me when the bill came up to about $800! I thought that one of those little spiced buns, a piece of processed cheese and a small box juice might cost around $300. I must be living in a different century!
In my opinion, the greatest evidence of our rapidly decreasing spending power can be seen in the supermarkets. I will be candid in telling you that I avoid supermarket shopping because I find the huge bills for a few items to be a very shocking, demoralising, and scary experience. Aside from fuel prices at the pumps, supermarkets afford us an unfiltered look into our true economic status. No amount of fancy speeches, mellifluous statements, or confounding economic terms can assuage the pain at the pumps and at the supermarket cash registers. When citizens struggle to buy basic food items, we will experience serious social problems of one kind or the other.
The shock effect of the economic disparity between earning and spending is felt in many spheres of Jamaican life. And, when banks give little or no interest on your savings, but offer high rates on loans, the spread is devastating and stifling. Despite possible interest accrued, the same money that you banked one year ago, cannot purchase the same things this year. Many of our citizens try to migrate legally or illegally just so they can own a motor car and a home. When circumstances force the majority of citizens to forget about self-actualisation and they must struggle to satisfy their very basic needs, there will be trouble … and this usually manifests as criminality.
Only a very few Jamaicans earn totally or partially in United States dollars. Their income is commensurate with achieving certain goals and securities in life. The rest earn by the teaspoonful, but spend by the shovelful. Perhaps if the powers that be examine the spending power available to individuals they can formulate a better economic strategy for Jamaica.
Garth A. Rattray is a medical doctor with a family practice. Send feedback to email@example.com and firstname.lastname@example.org.