Caribbean Recovery Hobbled by “Strings” on International Aid

A very long time ago, when Hugh Shearer was Prime Minister of Jamaica, a government official told me that the island was sometimes reluctant to accept international aid because of the strings attached. He listed such handicaps as a provision requiring the island to purchase materials from nations funding the aid, and “austerity” conditions imposed by the World Bank and IMF.

jamaicaI could understand why the Jamaican government would have misgivings about aid money that has to be spent on materials from specific countries. Often, the materials from those countries (especially the United States) cost a lot more than the same products from other suppliers, which meant the impact of the aid money was considerably watered down. But I was puzzled by the resistance to the conditions imposed by the IMF. Accepted economic dogma supported the imposition of “austerity measures” to get a faltering economy back on track. After all, who could forget what happened in Argentina when Eva Peron let her emotions overpower her common sense?  Everybody knew that tough times require “belt tightening” – higher taxes and reduced government services (especially “welfare”).

Now, these assumptions are being challenged. With the G20 countries calling for more – not less- government spending as a cure for the global economic collapse, it may be time for the World Bank and the IMF to revise policies that have not worked in the past and probably will not work in the future.

In today’s Jamaica Observer newspaper, columnist Sir Ronald Sanders noted that the Caribbean has been hit hard by the global financial meltdown, and he deplored the lack of attention the islands received at the recent G20 conference. Here’s how he put it:

Throughout the Caribbean the effects of the global financial meltdown are being seen in a human face – people are losing jobs, many are in danger of losing their homes from unpaid mortgages, and the income support that some received from relatives abroad is dwindling. There is fear and anxiety. Naturally, therefore, some hope was pinned on the meeting in London on April 2nd of the so-called G20 countries.

Sir Ronald noted that the conference produced nothing to comfort small economies such as those in the Caribbean. He charged that the $1.1-trillion aid package promised by the G20 to revive the world’s economy “reveals more promises than guarantees.” And he added:

For a start, $500 billion goes to the IMF to be shared by all the countries of the world. But there was no insistence – even in the present dire circumstances – for the usual harsh IMF conditions to be set aside.

Those “harsh conditions” include mandatory tax increases and curtailed government programs – the traditional “belt tightening” demanded in exchange for international financial aid. So much for accepted economic dogma. It seems that – in Sir Ronald’s view, at any rate – international aid does not have to be accompanied by the imposition of “draconian” measures. Sir Ronald points out that at the Summit of the Americas in Port of Spain later this month, Caribbean leaders will meet with representatives of G20 countries. And he advises:

(The Caribbean leaders) should tell (G20 representatives) that the G20 Summit gave them no cause for hope and no message of relief for their peoples. They should also refuse to be at the margins of history and on the floorboards of global decision-making with no place at the table.

I hope that the leaders of Caribbean countries will heed his advice. And I am optimistic about the results – if for no other reason than the fact that U.S. President Barack Obama will be at the Summit of the Americas.

Photo above shows how some of Jamaica’s people live.