Prime Minister Bruce Golding (right) and Commissioner of Police Rear Admiral Hardley Lewin are seen here November 23, 2008, at a memorial service for police officers who died in the line of duty. Golding last month announced a $28 billion or more economic stimulus package for Jamaica, as businesses prayed for assistance to weather the economic downturn. - Ricardo Makyn/Staff Photographer

Comparative advantage dominates discussion of trade and economic policy. It translates to the notion that dissimilarity among countries accounts for trade patterns.

The reasoning? If a country produces something more efficiently and cheaper than another, it will trade those products.

The insight comes from David Ricardo, buttressed by Heckscher and Ohlin, sensitising us to 'factor proportions' - the intensity with which labour and capital provide vital inputs to production.

We need no greater detail save to say that even in the age of globalisation, purely comparative advantage-predicted trade patterns don't fit much of world trade.

Paul Krugman's Nobel Prize-winning work in economics incorporated scale economies and location of production creating the 'New Trade Theory'.

Cross trading similar products

It explains cross trading of very similar products - Volvos to Germany cross with BMWs to Sweden.

It pays attention to consumer choice and the value they place on variety, explaining an apparent disconnect.

What does this have to do with Jamaica? I think much because we in Jamaica are persuaded the way to anchor our policies rests with comparative advantage, paying little attention to scale economies.

In the 1950s, Lewis told us English as native language, coupled with legislative similarity to the economic giant to the north, positioned us uniquely for an industrialisation spurt that should take us beyond the realm of mere sufficiency to prosperity.

Yet we failed in this endeavour. Mind you, Lewis' visions, prescription, architectural drawings, so to speak, were abandoned as we implemented industrialisation.

The time for that strategy now seems long past.

No cheap, abundant labour

We have no cheap, abundant labour required by outsourcing US companies nor do we have the mathematics, physics, software-trained graduates like India, for some of the new outsourced operations.

Vulnerability and need for support of the multilateral agencies force us into adherence to liberalisation even in full face of powerful protective devices Europe and the US deploy - embedded farm subsidies of all sorts.

Our recent shift to the EPA with Europe represents perhaps the culmination of our buy-in to this conception of how trade is generated and ought to be organised.

We forget, for instance, that sugar has been the most politicised commodity in the history of the world.

We are neither China nor India, so the feeling is that we have no choice.

We have no bargaining chips, no need to worry about the domino communism effect, no special place in the US sphere of influence for us.

We've got to get developed on our own. Bauxite and gypsum will take us so far.

Hit by recession

While we adhere to the trade principles of liberalisation and non-subsidy for our farmers advocated by Washington, we are hit by the great recession. Where does this leave us?

This leaves us two things, innovative economic policy and our people. Clawing our way out of Jamaica's mid-1990s meltdown was assisted by few - no IMF, no Washington and USAID.

If, therefore, we were to say we need to stimulate demand locally to save some jobs and halt decline into poverty by many, there should not be too much of a howl against it.

And we need to do this because government's support for stimulus, whether it takes the form of money spent or money forgone as incentive, will find a partial channel into imports and foreign-exchange demand.

The recession will definitely reduce inflows of remittances.

Could exceed prediction

Impacts are likely to exceed those predicted as the amount of de-leveraging seemingly required has been underestimated.

United States Treasury Secretary Paulson and the banks he bailed out with no strings attached seem to have no answers for us.

Moneys have been used but no end is in sight for underwater homeowners and Detroit workers whose demand and confidence or lack of fear, ironically, is what eventually will assist in halting the downturn as fear recedes.

So to the people, the tremendous drive among Jamaicans evident to first-time visitors from sister Caribbean shores.

They marvel at the land, the energy of the people. They find nothing accidental in this land, culture and 'Babylon', creating Bob Marley and Usain Bolt.

Nor Blue Mountain coffee, cocoa used as a blending raw material for some of the best chocolates and other good things.

The issue for us is: Why do potential gains from our periods of prosperity not filter down to a larger proportion of the population? Why is the middle class not bulging, creating demand, having greater access to high quality education and other services that a government ought to provide in a thrust to development? Is it that the ratio of taxes to true income is wrong? Is it that government expenditure is inefficient? Is it that somehow work is done and redone with no eye to quality and the longer run? What is it that must be done to create a tide of economic prosperity that lifts all boats?

The generalised overarching answer is simple.

It requires educated, motivated, innovative people with capital thrown in to convert innovative ideas to production. It needs a system that allows wealth holders to believe their capital stake will grow in safety.

Somehow we are unable to achieve this nice confluence of circumstances.

But we need to think what it is that government is able to guarantee, to provide and what it is that the people contribute. Are supermarkets a Jamaican innovation, the forklift, KFC? No. But they are ubiquitous.

Are jerk chicken, reggae and push carts? Yes.

Is there something in this to be investigated? To be harnessed? Take downtown and Half-Way Tree as starting points.

The number of traders is amazing. There is a constant hustle and effort to survive. 'Informal' economic operators of all kinds multiply across the island.

The people who sell in Coronation Market fight all odds. Perhaps we need to reflect on these things, see where the stimulus needs to be placed.

It's like finding the best point for the transfusion.

wilbe65@yahoo.com

Wilberne Persaud