The Monetary Policy Report of the Central Bank and the comments on aspects of it by the bank’s governor are sending the not-too-early signals that we seem intent once again on allowing the foreign exchange bonanza from the gas and oil receipts “to flow through our system like a dose of salts,” the quote being an approximation of the sneering, cynical but oh so true observation of Jamaica’s Prime Minister Michael Manley during the oil boom of the 1970s early 1980s.

Then, at the end of the proverbial seven-year feast came the famine: IMF structural adjustment programmes; retrenchment in the public sector and the infamous 10 per cent cut; a receivership meltdown in the private sector; brutal poverty for people on the margin; the rise in violence against women, as men lost their jobs and turned on their wives and women.

These were the results of spending the foreign exchange surplus in every imaginable non-productive manner, while the economy remained in its historical state—dependent on one crop.

One economist remarked then that the “whole country was on Dewd”—Government’s programme of political patronage.

The calypsonians observed we were going to “Panama” to spend the oil bread that was flowing “free sheet,” that it was “madness,” and yet another bard sang “that everybody was smoking something.”

There are those who point out that the nature and conditions of the gas and oil bonanza are different this time around, that oil and gas prices are likely to remain high into the future, and that we now have the possibility to utilise the natural gas and the revenues to develop downstream productive industries.

Indeed, Governor Williams is sure that the economy is far better structured in 2006 to make better use of the energy revenues. And a balance report would note that there have been a few local companies that have logged into the structure of natural gas production and usage. But the potential remains just that—potential.

The IMF has in the last 12 months warned about non-productive spending and even if the Fund does not fully appreciate the far longer-time horizon for gas and oil revenues, as pointed out by the managers of the economy, the untransformed nature of the economy continues to stare us in the face.

All it would mean in 2006, if the economy continues to leak US$1 billion annually on consumer items and services, spend $800 million on programmes to purchase political patronage without those programmes contributing to production, is a longer time frame for the “good times.” But the end result will be the same: an excruciating famine at the end of the period of plenty.

The data of the Central Bank tell the story of increasing profligacy. For the first five months of 2006, the Central Bank sold US$494 million to the commercial banks to meet the high demand. More importantly, 26 per cent of the foreign exchange expenditure went to meeting consumer purchases: motor vehicles (last time there was the inefficient motor vehicle assembly industry); telecommunications equipment doubtless to purchase instruments for the largely unproductive cell phone craze; a range of consumer items and, according to the governor, another 18 per cent of the foreign exchange sales going to pay off the debts run up on credit card purchases made abroad in foreign currency.

The five-month sales figure is even more frightening if you consider that it is three times the quantity sold to the banks for the same period in 2005. The governor is projecting the foreign exchange sales to the banks amounting to US$1 billion by the end of the year.

As pointed out by the governor, even larger sums of foreign exchange are going to be utilised in Government’s capital investment programme when it comes on stream. However, utilisation of the foreign exchange in such capital projects, once the feasibilities, planning and marketing have been insightful, can result in productive export-oriented ventures that will return a surplus of foreign currency and stimulate the transformation required.

One of the ministers in the Ministry of Finance, Christine Sahadeo, has even said that the foreign investor partners will be walking with their hard currency and so will not lean on the country’s foreign reserves.

However, two elections are due over the next 18 months and the very nature of electoral politics will determine that election spending will flow to buying votes—it’s as crude as that. With the already established tastes for imported products and services attached to a fairly narrow productive base, with cash in the hands of people who also want to enjoy the “good life” they see being demonstrated before them, even larger quantities will go to purchasing consumer items, from more vehicles to block the roadways to every form of imported sweet biscuits in the supermarkets. The trading sector will experience a boon of their lives.

In addition to the election spending, trade unions in the public and state sector have already signalled their intention to demand their pound of flesh for their workers. And who could blame them? After all, working people also want to enjoy the lifestyle they see through the conspicuous consumption of the middle and upper classes.

The Central Bank cites the two challenges as dampening consumer credit —with the export of foreign exchange as a core element of it—and containing of inflation.

Fiscal restraint, states the Central Bank, is a responsibility of the Government; tightening monetary policy, the responsibility of the bank; and wage containment, one presumes to be the responsibility of trade unions and employers.

As previously stated, governments are too trapped by the desire to retain power to be expected to act with fiscal responsibility in the lead-up to an election period.

Tightening monetary policy, such as measures to take increasing sums of money out of the system and its consequent pushing up of interest rates, will have some effect. However, the sheer volume of revenues projected could neutralise the monetary measures.

The trade unions will use the very well known electoral survival instinct of politicians to press for wage demands.

Already, the Government has agreed to rethink the system for making awards in the daily-paid sector. The rest of the sector and those unions representing workers in the private sector are looking on with interest.

Nothing short of a reorientation of consumer consciousness, the expansion of the local productive sector, including the export of services, will save us from another fall.