Why the Caribbean region continually fails to develop economically?
This is a paraphrased question in a paper which my son was writing for one of his university courses; it was on Jamaica. It was a question that intrigued me. The issues which confronted the Caribbean in the 1970s when I was much younger, we are still dealing with today. The challenge is that the world is a very different place compared to where it was at that time.
Back then, Caribbean integration was a hot topic; it was called CARIFTA. There was more inter-regional trade as a result of the Caribbean multilateral trading mechanism, and the economies were perhaps more linked than they are now. Jamaica and Trinidad were the stronger economies in the region – Trinidad because of its oil revenues and Jamaica through its bauxite. Regional economies were more diversified; in Barbados, it was light manufacturing, commercial agriculture in the form of sugar production, and tourism.
What happened between that period and now? Well, economists in the region determined that our savings rate was too low. Low savings leads to lack of resources for investment. The reason for this may lie in the region, as one for primary agricultural production. The profits derived from this were exported to the metro-pole, in this case England, and according to the Eric Williams’ work ‘Capitalism & Slavery’, these profits helped fuel Britain’s industrial revolution.
If we can fuel development in other countries why can’t we do the same here in the region? Some argue that it may be a lack of self belief amongst our people. This may be true to some extent; however, I offer a different view. This region, I believe, has been and still is subject to the hostile intentions of the more developed regions of the world. This fact was mentioned by Sir Arthur Lewis in his suggestion to the British that the West Indies become industrialized. In examining my son’s paper, I realized that Jamaica’s long and tortuous existence under the International Monetary Fund (IMF) may have been due to machinations of foreign governments, whose hostility to Jamaica’s experiments in socialism at that time is well known, as well as Jamaica’s failure to properly execute its own development strategy.
Trinidad & Tobago’s case is similar; when oil prices are high, its economy performs well. However, the oil shock of the early 1980s led to the devaluation of the Trinidad dollar and the eventual liberalization of the country’s capital account, i.e., it floated its currency. This also occurred in Jamaica and Guyana. This has not yet occurred in Barbados. We too entered IMF programmes in 1982 and 1992 and are currently with such an arrangement, although the programme is home grown. The point is that the larger regional economies and some of the smaller ones have had, at one time or another, been under the auspices of the IMF.
Since World War II, the international economic environment has been created and dictated by the victors of that conflict. The rest of the world must comply with the rules they set. These rules may not be in the best interest of everyone else; we in this region must comply with these rules which have been to our disadvantage. How can it foster long-term economic growth and development, when our respective economies may be in crisis every few years?
Our policymakers face a serious dilemma. They exist as crisis managers most of the time, entering standby arrangements, and extended fund facility programmes with the IMF. These programmes restrict their ability to create strategies for long-term economic growth. Without such arrangements we cannot get loans from the World Bank, Inter-American Development Bank or approach the International Capital Markets to sell our sovereign debt. In other words, our ability to develop is being stymied.
Determining our own path to sustainable development may require sacrifices our policymakers and people may be unwilling to make. South East Asian nations, known as the newly industrialized economies (Asian tigers) were able to emerge from a low growth, low savings rate trap in the 1950s and 1960s. They were able to do this through the use of command economies, whose political directorate channelled the countries savings into areas of high growth potential, heavy industry and car manufacturing, for example, and in the last generation, into knowledge-based industries. Anyone with a Samsung product can bear testament to this fact.
Therefore, do we go the route of the Asian Tigers, or can we develop a set of development theories via which we can foster our region’s sustainable development? Such thinking may require that we in the Caribbean region change the way we consume. Most of what we purchase comes from outside the region. It has been that way from the time these islands were first colonized. We may have to find strategies that allow those in our societies with the creative and entrepreneurial skills to invest, in order to develop goods and services that can effectively compete with those from outside the region. In doing so, we must find a way for our capital markets to become more innovative. In Barbados, for example, commercial banks have had to deal with excess liquidity for years. This speaks to a lack of attractive investment vehicles to channel this excess liquidity for productive purposes.
Edward Hunte is an attorney-at-law who holds an MBA with concentrations in economics and finance; He was also an economist in the Economic Affairs Division of the Ministry of Finance.