Underground economy could threaten Government’s prosperity agenda
SIGNS SHOWING the Jamaican economy is gaining growth momentum could be dashed if Government fails to adequately curtail the exploding underground economy, says Robin Levy, the deputy generalmanager of the Jamaica Stock Exchange.
Levy, speaking at a recent Rotary Club of New Kingston breakfast meeting, said that the ‘black economy’ is a real challenge that is undermining the efforts of the Government as it tries to move the country into positive, sustained growth. “The underground economy, which, of course, includes scamming, drug dealing and extortion, smuggling and trafficking in illicit materials and in persons, is a very real thing,” Levy said. “It certainly has an impact on the ‘above economy’, as while it takes away from it, in terms of much-needed revenues, through taxes and other service charges, it also feeds back into it at some level through consumption.” He noted that the by-product could be a country that is hampered in its official capacity to fund projects, service debts and pay civil servants.
Jamaica, he reasoned, has seen marginal to no growth over the last 30 years, adding that it was due in part, to a high net interest rate policy perpetuated through the financial-services sector charges.
“They (financial-services sector) are not rewarding investors. They are paying fairly low interest rates and they are lending at much higher rates and making a huge margin in the middle,” he said.
“We know that the financial services have a high cost, which is true, but the superprofits are hard to bear on top of a flat economy. So what you have is a thriving, vibrant financial sector sitting on top of an economy which is not growing at all,” Levy said.
According to Levy, the Economic Growth Council’s goal of growing the economy at five per cent in four years is achievable, but that it will mean picking the “low hanging fruits.
“There are some areas that we can look towards to tweak, but this is really a structural problem.
The expectation of the financial-services sector needs to be lowered. It can’t continue expecting superprofits every year on the back of a struggling economy which needs to grow,” said Levy.
“We know that the financial services have a high cost, which is true, but the superprofits are hard to bear on top of a flat economy. So what you have is a thriving, vibrant financial sector sitting on top of an economy which is not growing at all.”