Socialism Doesn't Work

ON BUSINESS IN JAMAICA

Jamaica, besides being strikingly beautiful, is really an outcrop of bauxite sticking out of the ocean. Bauxite is the main ore in aluminum. If you haven't noticed, over the last decade, we have been, until lately, in a commodity boom.

Naturally, Jamaica is an exporter of bauxite - the fifth largest in the world as a matter of fact. You would think that over the recent years, the Jamaican government would have a large sovereign wealth fund squirreled away from bauxite production. It is 60% of their GDP by the way.

Unfortunately that is not the case; as you see, the Bauxite producers are state owned. This causes huge inefficiencies in the system. The industry was also used as a jobs producer. Their cost of production is now thirty percent more than the price of bauxite on the open market.

I have seen with my own eyes the cost of this system - the economy is barely growing here and has been that way for a long time. This is going to be a very severe downturn for this island. It is not a pretty picture here as they face massive job losses - with the government running out of money themselves.

This reminds me of the failing economy of the Soviet Union.

I guess the trick is to manage capitalism so that its worst excesses are prevented.

More on that another time.