Life and Debt

 

1.  Do most tourists visit Montego or Kingston? Montego Why? Because Montego is an insulated destination designed for tourists. Kingston is a gritty metropolis where crime, poverty and wealth intermingle.

 

2. What is the IMF?  International Monetary Fund When was it formed? 1944 What is its purpose? “To make globalization work for the benefit of all.” To create a bank for short-term lending to “serve short-term trading interests” of winners of WWII.

 

3. What is the World Bank? Financial institution formed at the same time as IMF.  When was it formed?  1944 What is its purpose? Its initial purpose was to provide capital for rebuilding of European countries and economies.

 

4. How did the oil embargo of 1973 affect Jamaica? Oil price increases increased the cost of economic activity and government services in Jamaica. So, the Jamaican government sought loans from private banks. Private banks denied the request, which forced the Jamaican government to cut services to cut government spending.  Then, Jamaica went to IMF to get loans to fund government services.

 

5. What restrictions did the IMF impose on Jamaica?  Why? How is this similar to the plantation economy?

Restrictions: short term time frame, high interest rates (19% or 23%), privatization, limited social spending, expand exports, devalue Jamaican currency (Increased cost of imports in Jamaica).

External forces (IMF) determine how loaned money is spent.  External forces (IMF) profit from interest rates.

 

6. Why didn't the IMF emphasize food production for domestic markets and consumption?

The IMF does not believe countries can grow their economies by means of self-sufficiency.  Instead the IMF believes economic growth comes from free trade in global markets. Jamaica’s agricultural economy included protected production for domestic markets.  Protection was provided by trade barriers such as import tariffs.  The IMF requires borrowing countries to eliminate protective barriers so that trade is “free”. The IMF supported export agriculture so that Jamaica would earn foreign currency to repay their debt.

 

7. "Can machete compete with machine?"

 

8. What was the relationship between the IMF, World Bank and Inter-American Development Bank?  How did their policies influence Jamaica?

In 1992 Jamaican government borrowed $50 million from Inter-American Development Bank (IADB) to support agriculture and manufacturing.  The IADB) required Jamaica to eliminate subsidies and make imports of dairy products tariff-free. Inter-American Development Bank is a regional component of World Bank. All 3 lenders have to approve loans.  This is called “cross-conditionality”.  It severely restricts borrowers. Jamaican dairy farmers were forced to compete on a “level playing field,” which did not include government protection of domestic agriculture.

 

9. How did US subsidies affect the Jamaican dairy industry?

The US government protects US dairy farmers with subsidies.  One major US dairy export is milk powder, which with US subsidies and the elimination of Jamaican import tariffs made US-produced powdered milk cheaper than fresh milk produced in Jamaica. Jamaican dairy farmers went out of business or converted to beef production.

 

 

 

 

 

10. Why was the WTO against the agreements that determined/protected markets for Jamaican bananas?

The WTO was against the agreements because they protected Jamaican banana producers by guaranteeing them a tariff-free market in the UK, and thereby violated the principles of free trade.  The whole issue blew up because of a complaint by the US government on behalf of US-owned corporations like Dole and Chiquita.

 

 

11. What is the Kingston Free Zone?  An export processing zone. When did it begin? 1980s What was the US role? The US created the Caribbean Basin Initiative to provide light manufacturing jobs in the Caribbean.

International banks provided loans to build factories.

 

12.  How did Jamaica attract investment?

1. The free zone is not liable for local controls (duties or taxes).

2. Cheap labor.

3. Promises that workers would not unionize.

 

13. What happened?

Wages were only ½ of Jamaica’s minimum wage and were not paid in US$.  Workers protested against exploitation. Asian managers brought in Asian workers were who were treated better. Some factories closed down and moved to lower wage areas in other poor countries. This exacerbated unemployment, which the Kingston Free Trade Zone was supposed to alleviate.