In hopes that economic managers would care to focus on growth and later, possibly, development, this article spells out “how” that could be done.
From the outset, many economic decisions, even though agreed with the IMF, need to be halted or reversed.
Let’s start with some simple arithmetic and a comparison.
The US economy grew at a 3.2 per cent annualised rate in the fourth quarter of 2013, while the population grew by 0.71 per cent, which means that the per capita income grew by around 2.5 per cent.
The Jordanian economy grew for the second year in a row at 3 per cent in real terms. Given that the population growth rate in Jordan is 2.5 per cent, the per capita income should have grown by 0.5 per cent. But this was not the case.
According to official figures, the influx of Syrian refugees contributed an additional population of around 6 per cent in 2013.
Based on the government’s assumption that the refugees work and compete with Jordanians and consume at the same level, the per capita income in Jordan was a negative 5.5 per cent in 2013.
This simply means that incomes of those living in Jordan decreased by 5.5 per cent in real terms (after accounting also for inflation).
In other words, the incomes of Jordanians have been falling in real terms, and for the second year.
So what should a government that seeks stability and expanding the welfare of its people do?
Simple: make the economy grow.
How does that happen?
Keynes says, and the majority of economists would agree, that at least in the short run, government spending can expand the economy.
Many economists would also agree that raising taxes would shrink the economy as it reduces people’s spending power. So, before talking about fixes, let us remove the “harms”; i.e., refrain from raising taxes (withdraw the draft tax law from Parliament) and refrain from further energy price increases, at least for the coming year.
But how could a government whose debt at JD20 billion has reached 80 per cent of the GDP spend more?
Again, the answer is simple: the government has already the equivalent of $2 billion in grants from the GCC; the money has been sitting there for the past two years and only $300 million has been spent.
This money has to be spent.
There may be no capacity. The answer is also simple, the very donors and international organisations that typically help Jordan can quickly help it boost capacity by providing staff and consultants to draft terms of reference and issue tenders.
I know this should be done with domestic capacity, but this is an emergency measure and we can raise capacity in a sustainable manner later.
Note that this amount and the rest of the $5 billion committed by the GCC has the potential to draw in another $25 billion as the government uses the funds to create business ventures that help the infrastructure and the business environment.
In other words, Jordan can generate $30 billion worth of investment and create an unsurpassed recovery that benefits both the government and people.
This is a win-win solution. Economic relations need not be a zero sum game or even a negative sum game as the case is now.
