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Randolph-Macon Woman's College Expanded Academic ASAP |
Journal of Economic Issues, March 2002
v36 i1 p79(28)
A tale of four CARICOM countries. Winston H. Griffith. Full Text: COPYRIGHT 2002 Association for Evolutionary Economics
Less developed countries depend to a great extent on the more developed countries for growth and development. They depend on the more developed countries to purchase most of the output of their principal products and services--sugar and bananas, for example, the two principal CARICOM (Caribbean Community) (1) agricultural commodity exports, are produced primarily for sale in preferential markets of the more developed countries--and also for inflows of foreign direct investment. This dependence is due not only to structural characteristics, such as the smallness of their economies, but also to the path dependence of colonial institutions that ensured colonies produced goods the colonizing countries could not produce at home.
But products and services demanded by the more developed countries today may not be demanded by them tomorrow, the global trading environment may change, and the conditions that make a country attractive to the foreign investor today may make the same country unattractive tomorrow. As the environment changes, less developed countries must adjust their production structures and supportive institutions to ensure continued growth and development. Thorstein Veblen (1899, 133) said, "Institutions are products of the past process, are adapted to past circumstances, and are therefore never in full accord with the requirements of the present." He was implying that, unless they change to suit the new environment, institutions will slow the process of economic growth and development. John Dunning (2000, 27) said that "determinants such as the quality and cost of natural resources and semi-skilled labor are being replaced by factors such as the availability of a supportive and sophisticated physical and human infrastru cture." Hence, less developed countries that created institutions for an earlier period to attract foreign direct investment when natural resources and unskilled labor played an important role in production processes will have great difficulty attracting foreign manufacturing firms in the new global environment if those institutions created in an earlier period do not change to suit the new environment.
Institutions may be defined as "prescribed patterns of correlated behavior" and, as Walter Neale (1987, 1195) noted, they are not independent of one another. As one changes, others must also change. Dunning's observation thus suggests that less developed countries that depend on foreign manufacturing firms to help promote growth and development must, in addition to other things, create a pool of highly skilled labor to attract such foreign manufacturing firms. They will also need highly skilled labor to ensure that their indigenous manufacturing industries are competitive now that other less developed countries are liberalizing their trade regimes. To create a pool of highly skilled labor, governments in less developed countries will have to restructure their educational systems and place a greater emphasis on mathematics, engineering, the natural sciences, and computer science. Furthermore, given the ease with which capital in the new global economy can move to locations where skilled and unskilled labor ar e available at competitive prices, trade unions in less developed countries will be forced to adopt a less confrontational approach in their dealings with foreign firms whose workers they have organized.
If institutions adjust quickly to a changing environment, growth and development will occur more rapidly than if institutions adjust slowly. However, C. E. Ayres (1962) reminded us that the speed at which institutions adjust depends on the strength of ceremonialism. Ceremonialism is present in all societies, but it is more strongly rooted in less developed countries than in more developed countries. In any society some activities carry more status than others, although they possess no technological competence, and by their very character they are unable to promote structural transformation. But they carry such an aura of respectability, which members of society seek, and they are so embedded in the national conscience that any policy that has the consequence of lowering their status is fiercely resisted. The struggle between ceremonialism and the forces promoting economic and social transformation is present in all societies, and the development of a society depends on whether the forces of economic and soci al transformation can overcome ceremonialism.
This article examines the economic performances of four CARICOM countries from about 1970 to 1997. It does not seek to explain the performances of these countries by showing how economies did or did not behave according to some postulate based on given assumptions. It argues that, if they change one of their major institutions to achieve a certain policy objective, governments must also change supportive institutions or they will not attain their objective. The article also argues that the better economic performance of the Barbadian economy was due to its ability to exploit economic opportunities that emerged in a changing global environment when its leading traditional export industry was facing an uncertain future. Moreover, Barbadian trade unions entered into an alliance with the government and supported its austerity measures during the country's deepest post--World War II recession. This alliance helped the government to successfully resist the demands of the International Monetary Fund (IMF) to devalu e the currency, which, given the characteristics of the Barbadian economy, would have worsened economic and social conditions, as happened in CARICOM countries that devalued their currencies.
The article begins by discussing the production structure of CARICOM countries. It then seeks to explain why Barbados had a better economic performance than the other countries.
Production Structure
The present-day production structure of CARICOM countries is a continuation of the production structure imposed on colonies by colonizing countries. Colonizing countries ensured that the colonial production structure was complementary to theirs. (2) As a result, agricultural resources in CARICOM countries were virtually used for producing commodities for export to colonizing countries while CARICOM countries were forced to import most of their food from the colonizing countries. Colonial industrial production was neglected and so were the financial and educational systems necessary to support industrial production. And as a result, colonizing countries supplied their colonies with most of the manufactures the latter demanded. Colonial production did not create many backward and forward linkages, the foreign investor provided much of the capital for colonial investment, and an indigenous technological capability was markedly absent. These features of colonial economies--weak agricultural and manufacturing sect ors, heavy dependence on the foreign investor, and reliance on extra-regional sources for a preponderance of food and manufactured goods--persist in post-colonial CARICOM. CARICOM is not among that small group of countries that have been able to break out of the retarding influence of path dependence created by colonial institutions.
As table 1 shows, agriculture's contribution to gross domestic product (GDP) in CARICOM countries is low except in Guyana, where its contribution was about 36.4 percent in 1997. In the other three countries it is less than 10 percent. Sugar and bananas are the principal agricultural commodities produced in the region. (3) They are produced primarily for export under preferential arrangements to the markets of the more developed countries. Protecting an industry may sometimes redound to the long-run benefit of a country, but it may also be harmful. Veblen warned that
If any portion or class of society is sheltered from the action of the environment in any essential respect, that portion of the community, or that class, will adapt its views and scheme of life more tardily to the altered general situation; it will in so far tend to retard the process of social transformation. (1899, 134)
Existing preferential trading arrangements between CARICOM countries and the more developed countries reinforce the debilitating path dependence created by colonial institutions, and they have slowed the transformation of CARICOM agriculture. Assured a market for their exports, CARICOM sugar and banana producers have not shown much inclination to diversify production by introducing new crops, which can lead to the emergence of agro-based industries and the creation of greater backward and forward linkages. Furthermore, they receive for their exports to preferential markets prices much higher than those on the world market, and this is a disincentive to try to achieve price competitiveness. According to Sir Alister McIntyre (October 24, 2000), the average cost of producing sugar in the Caribbean is US$535 per tonne compared with US$266 in the Pacific and US$340 in Africa. He also said that the average cost of producing bananas in Jamaica is about US$391, whereas it is US$291 in Colombia, US$179 in Costa Rica, and US$161 in Ecuador.
Some government policies, too, intended to help the traditional agricultural export sector, have the unintended consequence of reinforcing the path dependence that slows the transformation of CARICOM agriculture. Prime Minister Owen Arthur of Barbados, in an exchange with the host of a Barbadian call-in radio talk show, "Guttaperk," said, "[T]he Government [of Barbados] this year is under a commitment to pay BD$ 19.5 million to service the debt of the sugar industry. If we do not pay the sugar industry's bill ..., the industry will collapse" [Weekend Nation 1999, 3].(4) One reason the government of Barbados gives subvention to an inefficient sugar industry is that the sugar industry employs about 4,000 workers; and, in a small nation with strong democratic traditions, the sudden unemployment of such a large number of persons may create much social and political unrest and bring about the downfall of the government.
Another reason the government gives subvention to the sugar industry is that sugar exports are an important source of foreign exchange. For example, the value of sugar exports in 1998 was about US$28.6 million (Central Bank of Barbados 1999, 174). The government of Barbados sometimes sells the entire sugar output in the European Union (EU) market and imports sugar. (5) Governments whose countries depend heavily on banana production for growth and development are forced to support their inefficient banana industries for similar reasons. But since they know that they can depend on governments to give them subvention, CARICOM sugar and banana producers will have less incentive to try to achieve competitiveness.
CARICOM countries have an agricultural sub-sector consisting of food crops, fruit, and livestock. Guyana produces rice, an important staple and source of income for small farmers. CARICOM countries export some of the output of their agricultural sub-sector, as in the case of Jamaica and Trinidad and Tobago, which export various agricultural commodities and agro-industrial products to countries within and without the region. However, much of the production in this sub-sector is for subsistence and domestic markets.
The manufacturing sector differs from country to country in its size and in its composition. In Barbados it is a vestige of its former self when the country was home to a large number of foreign manufacturing firms that produced for the extra-regional market. Today most of the manufacturing firms in Barbados produce for local and regional markets. Although it produces a variety of manufactured products, Guyana has never had a large manufacturing sector--the contribution of manufacturing to the GDP of that country in 1997 was about 3.1 percent (table 1). Jamaica and Trinidad and Tobago have a more diverse manufacturing sector than Barbados and Guyana. Trinidad and Tobago manufactures steel and, like Jamaica, produces some chemicals.
The mining sector in CARICOM, consisting primarily of petroleum, bauxite, and natural gas, makes an important contribution to the GDP of some countries. In Barbados it consists mainly of petroleum. The sector's contribution to the GDP of Barbados in 1997 was about 0.5 percent (table 1). Petroleum output is usually less than domestic demand. Between 1978 and 1997 domestic crude oil production exceeded 50 percent of domestic needs only twice (Barbados Ministry of Finance and Economic Affairs 1999, A32). According to Larry Rother (1998, C1), Trinidad and Tobago produces about 130,000 barrels of petroleum a day and has proven natural gas reserves of about 21 trillion cubic feet. The mining sector in Trinidad and Tobago has played an important role in the country's growth and development. Petroleum alone contributed about 28.3 percent to GDP in 1997 (table 1). Mining in Guyana contributed about 14.6 percent to GDP in 1997 (table 1). Both Guyana and Jamaica have large quantities of bauxite. Guyana also produces gol d and diamonds of which reserves are yet undetermined but believed to be significant. Most of the mining output is exported to the more developed countries.
Export tourism is the biggest industry in the Caribbean. It is the principal generator of employment and growth in many countries, and it is also an important earner of foreign exchange. The Caribbean Tourism Organization (CTO) reported that the Caribbean tourism industry employed about 578,000 persons in 1995 and tourist expenditures were about US$12,683 billion (CTO 1995). In Barbados tourism has long surpassed sugar as the leading industry, and its contribution to GDP is not insignificant. (7) Tourism expenditure in Jamaica was about 23.5 percent of GDP in 1995 (table 1). Like other major CARICOM export commodities and products, CARICOM tourism exports go mainly to the more developed countries. The tourist industry in Guyana and Trinidad and Tobago is not so developed as it is in Barbados and Jamaica, and it thus plays a smaller role in the growth of these two economies. Tourism expenditure in Guyana was about 9.2 percent of GDP in 1995, and in Trinidad and Tobago it was about 1.7 percent in 1994 (table 1 ).
The preceding paragraphs described the production structure of CARICOM countries, which has not changed fundamentally since colonial times. The production structure has had a retarding effect on the structural transformation of CARICOM economies. Resources are geared primarily to export production; the level of food production is low; backward and forward linkages are minimal; and the foreign investor still plays an important role in the production of goods and services in many countries. I shall now try to explain why Barbados had a better economic performance than the other three countries.
Government Intervention and the Market
In order to meet the aspirations of their peoples that had not too long ago attained political independence--all four countries gained their political independence from Britain in the 1960s--CARICOM governments enacted policies in the early 1970s to remove the path dependence that resulted from more than 300 years of colonial rule and that blocked economic development. One manifestation of the path dependence that blocked economic development was the relative absence of national ownership of national resources. Economists such as Norman Girvan (1971), George Beckford (1972), and those working at the Commonwealth Caribbean Regional Secretariat (1972) were some of the leading proponents of this view. The Commonwealth Caribbean Regional Secretariat said,
[T]oo much control of the economies has been exercised from abroad... particularly by the international corporations in the form of direct foreign investment. Too much reliance for economic expansion has been placed on foreign private investment ... the historical prime mover in the economies in the Region. Thus ... at least up to the last three years... large parts of the economies of the Region have been dominated by foreign investment: Sugar (except in Barbados); Minerals (Oil and bauxite); a large part of the manufacturing sector; a large part of the tourist sector; the banking and financial system; and in some cases even the mass media. In many of the smaller countries, large areas of land have been alienated on a freehold basis to foreigners in connection with tourist, real estate and residential development. (1972, 13)
It was argued that foreign ownership of CARICOM resources meant that national resources were used not for the promotion of national development but for the development of those countries whose nationals controlled CARICOM resources. Raw materials such as bauxite and petroleum were not used to manufacture products within the region but were exported unprocessed. Thus secondary and tertiary incomes were lost to local economies and minimal backward and forward linkages were generated. There was a continual outflow of profits that, had they been invested within local economies, would have helped to alleviate poverty and promote development. The implication of these arguments was that foreign ownership of national resources contributed to underdevelopment in the region and that a prerequisite for development was that national resources should be nationally owned.
Persuaded by such arguments, and in an effort to mollify nationalist sentiment, the governments of Guyana, Jamaica, and Trinidad and Tobago adopted development strategies in the 1970s that reduced the role of the private sector and dramatically increased that of government in the provisioning of goods and services. Guyana became a socialist co-operative Republic in 1970, and the government of Jamaica led by Michael Manley--1972-1980--adopted democratic socialism. Both governments sought greater control of "the commanding heights" of the economy because, as Manley said, "political independence and foreign economic domination of strategic sectors of the economy are mutually exclusive concepts" (1974, 104). The "commanding heights" of the economy were considered communal property--the presence of common property resources provides a justification for government intervention--and nationalizations were necessary to prevent tragedies of the commons. His government took over the public utilities; about half of the major hotels; foreign-owned sugar estates; Barclay's Bank, a British multinational bank; and the cement factory. It set up the Jamaica State Trading Corporation, which was responsible for the importation of all goods crucial to the country's development, and it purchased 50 percent of the bauxite mining operations and land (Manley 1982).
The government of Guyana took control not only of sugarcane production and bauxite-alumina production but also of "retail distribution outlets, drug manufacture, alcohol production, shipping, cable and wireless communications, foundries and small-scale ship yards...." (Thomas 1983, 30). Furthermore, it established several companies under the control of the Guyana State Corporation (GUYSTAC). Its External Trade Bureau controlled all imports and exports. By 1976 the government of Guyana controlled 80 percent of the economy.
The government of Trinidad and Tobago, too, increased the role of the state relative to that of the private sector in the provisioning of goods and services. It entered into joint partnerships with foreign multinational companies, and by the early 1980s it had built at Point Lisas an iron and steel plant, two ammonia plants, a urea plant, and a methanol plant and it owned some sixty-seven companies.
The governments of these three countries reversed their policies in the l980s. Edward Seaga became prime minister of Jamaica in October 1980 and soon began to sell off state-owned enterprises (SOEs) and liberalize Jamaica's trade regime (Ambursley 1983, 96). Seaga said, "We have to structurally adjust the direction of the economy, so that instead of continuing to be protected by various devices such as quantitative restrictions and other barriers, it will be mobilized for the external market" (Francis-Hinds 1982, 6). (8) Likewise, when he became president of Guyana upon the death of Forbes Burnham in 1985, Desmond Hoyte began to adopt a more market-oriented approach to development. According to Caribbean Contact (1989, 6), "Hoyte ... took the initiative and began to dismantle the rigidities of the state stranglehold by divesting those government-owned companies that produced negative returns." Prime Minister A. N. R. Robinson said in 1987 that his government had no alternative but to restructure some of the sixty-seven state-owned enterprises that were losing large sums of money or shut them down (Mackoon, 1987a, 2).
Although the governments of Guyana, Jamaica, and Trinidad and Tobago adopted free market policies, economic conditions in their countries did not materially improve. Table 2 shows that Guyana's real annual average growth of gross national product (GNP) per capita was zero during 1970-79 and shrank during the period 1980-90 but that it improved significantly between 1990 and 1997-12.9 percent. (9) Jamaica's real average annual growth of GNP per capita shrank during 1970-79 and 1980-90 and grew less than 1 percent during 1990-97. Trinidad and Tobago had a real average annual growth of GNP per capita of 4.5 percent during the period 1970-1979, owing in great measure to the steep oil prices of that decade. However, falling oil prices during the 1980s adversely affected the country's economic performance. The real average growth of GNP per capita shrank 6.0 percent during the period 1980-90 and 1.4 percent during 1990-97.
Compared with the governments of the other CARICOM countries, the government of Barbados did not significantly expand its role in the provisioning of non-public goods. Barbados does not possess traditional natural resources, and Barbadians have for a very long time owned the country's agricultural resources. Consequently, an anti-foreign-investment sentiment that might have forced the government to acquire foreign assets that it did not have the technical and human resources to manage never really took hold in the country. Also, unable to rely on the export of traditional natural resources, Barbadian governments sought to develop new exports like tourism. In addition, the country attracted foreign direct investment, partly because of its stable political and social environment. Many international firms such as Intel set up operations in Barbados and helped the economy to grow. Between 1970-79 and 1980-90, the country's real annual average growth rate of GNP per capita increased by 2.1 and 1.4 percent respect ively; but between 1990 and 1997, it shrank by 0.9 percent (table 2). (10) Between 1972 and 1997 the real GNP per capita of Barbados increased eightfold from US$800 to US$6,590; and by 1997 it was eight times greater than that of Guyana, four times greater than that of Jamaica, and one and a half times greater than that of Trinidad and Tobago (figure 1). As table 3 shows, other indicators of development were generally just as, or more, favorable in Barbados than in the other three countries.
An institutionalist approach to development can help explain why some CARICOM countries did not have the economic performance that some had expected. Institutional change is central to economic growth, but institutions are interrelated and as one changes so must the others. However, some institutions are very slow to change or may not change and they thus slow down the process of economic and social transformation. The rules surrounding the provisioning of goods and services underwent radical change in some CARICOM countries, but the rules of the supportive institutions that were necessary to make the policy successful hardly changed.
If foreign investors must be replaced because they are responsible for underdevelopment, there must be a national manufacturing entrepreneurial class to take their place. CARICOM governments implicitly assumed the existence of a national manufacturing class or, if they did not, thought that such a class would quickly emerge to exploit the new opportunities created by nationalization and import-substitution industrialization. But the colonial system discouraged the development of manufacturing because it was competitive with metropolitan manufacturing. Eric Williams (1970, 173) said, "The colonial system placed particular emphasis on the prohibition of colonial manufactures." Likewise, D. K. Fieldhouse (1981, 68) stated that colonial "industrial production was virtually ignored... [and] that the duty of government was to keep the peace, and not to stimulate [colonial] industrial development or indigenous enterprise." The attempt to keep colonial industrial production to a minimum meant that the indigenous manufacturing class in former colonies would be underdeveloped.
Because the pattern of education was formed many centuries before the modern technological revolution occurred, most education systems give too little weight to the natural sciences and technology, whether at primary, secondary or higher levels so that a surfeit of persons trained in literary studies side by side with an acute shortage of persons trained in scientific, biological or mechanical arts, is a feature of several countries. (1961, 114)
The lack of emphasis in the school curricula on subjects that can help to promote the growth of an indigenous manufacturing class is a direct consequence of the colonial experience. Fieldhouse (1982, 69) said, "Colonial officials seldom came from industrial or commercial backgrounds and tended to despise these activities as ungentlemanly." They designed the colonial educational systems, and they made sure that they were consistent with the dominant values in metropolitan countries. Most former colonial subjects, especially those that have received a secondary or tertiary education, have internalized these negative values toward industrial production. Thus, if given the opportunity to take silk or become an industrial entrepreneur, few CARICOM students will pursue the latter. Such ceremonialism helps to stifle the growth of an indigenous manufacturing class.
Another element stifling the growth of an indigenous manufacturing class has been the banking system. Many commercial banks are subsidiaries of metropolitan multinational corporations, and they cater primarily to the import-export trade. They are also reluctant to lend to non-European manufacturers that wish to undertake manufacturing production. Commercial banks in CARICOM show a strong preference for self-liquidating loans, and they direct most of their loans to the distributive trades category and the personal loan category-mainly for the purchase of consumer goods. The bias in commercial bank lending toward the distributive trades and personal loans was a feature of colonial banking, but it continues in the post-colonial period although many commercial banks have been nationalized or localized. Undoubtedly these sectors help economies to grow, but they contribute little to structural transformation. The merchant classes do not revolutionize the means of production because they can make a profit irrespecti ve of the mode of production. They are usually opposed to the development of manufacturing because they consider its development a threat to their economic and political power.
The relative absence of an entrepreneurial class adversely affected not only import-substitution industrialization but also nationalized bauxite industries as few nationals had the expertise to manage them. Between 1970 and 1979 bauxite production in Guyana declined from 3,082 million tonnes to 1,626 million tones, and alumina production declined during the same period from 312,000 tonnes to 160,000 tonnes (Central Bank of Barbados 1996, 222). In Jamaica, the nationalization of bauxite and the levy that went into effect May 15, 1974, contributed to a decline in bauxite production. (11) Bauxite production, which was about 15.3 million tonnes in 1974, fell to about 12 million tonnes in 1980; and alumina production, which was about 2.8 million tonnes in 1974, fell to 2.4 million tonnes in 1980 (cited in Manley 1987, 61). Another element contributing to production declines was that bauxite companies, which engage in much intra-firm trade, were able to increase bauxite production in other countries such as Guinea , whose taxes on bauxite exports were about 50 percent lower than the levies imposed by Caribbean countries (Manley 1980, 80) (12) The policies of CARICOM governments, which induced bauxite companies to change their production strategies, contributed to declines in bauxite production. Nevertheless, it cannot be denied that a lack of technology and entrepreneurship also played a part. And since bauxite was a prime mover of the economies of Guyana and Jamaica, declines in production adversely affected their economic growth.
Production in the other major export industries of Guyana and Jamaica also declined, although the declines cannot be completely attributed to a lack of entrepreneurial skills. Sugar output fell in both countries. Rice production in Guyana fluctuated because of low prices set by the government, shortages of inputs, a neglected infrastructure, and a ban on rice exports to Cuba (Baber and Jeffrey 1986, 147; Latin American Bureau 1984, 47). Tourism exports from Jamaica declined because of social unrest--the government was forced to declare a state of emergency in 1976 because of the extreme deterioration of the social and political climate--and the ensuing negative coverage the country received in the financial press of its main tourism-export markets. The year after the government declared a state of emergency, tourist arrivals in Jamaica fell by 67,000; and in 1980, the year of national elections, they fell by 30,000 (Central Bank of Barbados 1996, 215).
The decline in the output of the leading export industries resulted in a loss of foreign exchange earnings. In addition, some countries experienced capital flight. Michael Kaufman (1985, 123) said that about US$200 million illegally left Jamaica between 1975 and 1976. The loss of foreign-exchange earnings and heavy capital outflows reduced the country's ability to import the many inputs needed for production, further contributing to falling output. The manufacturing sector, which depended heavily on a variety of imported inputs, was adversely affected, and manufacturing exports from Jamaica fell during the second half of the 1970s.
Trinidad and Tobago enjoyed a favorable external marker for its principal export during the 1970s. An oil-producing country, Trinidad and Tobago benefited from the steep rise in oil prices of that decade. During the period 1974-83, the government of Trinidad and Tobago received about US$10 billion in oil revenues (Farrell 1986, 8). As I have mentioned, the state entered into joint partnerships with some foreign multinational companies and established an iron and steel complex at Point Lisas, which was to be the catalyst for industrial development by using local hydrocarbon resources. The then prime minister, Dr. Eric Williams, justified the construction of the iron and steel complex on the grounds that "the production of steel, possibly of all man-made products, has been for many years and will continue in the future to be a bench mark for industrial development and any form of serious industrialization." (1981, 83).
During the decade of the 1980s, however, with the demand for oil falling and its oil revenues drying up, the economy of Trinidad and Tobago, like those of Guyana and Jamaica, contracted. Real GNP per capita, which in 1982 was US$6,920, fell to US$3,400 in 1989. Moreover, the SOEs did not turn out to be the force for development that many had expected. The SOEs were asking for financial assistance to the amount of $2.7 billion in 1987 (Mackoon 1987a, 2), the Iron and Steel Company (ISCOTT) was reported to be losing US$5 million a day, and the state-owned Caroni Ltd, the country's only sugar factory, was said to be a drain on the Treasury (Mackoon, 1987b, 2). Like Guyana and Jamaica, Trinidad and Tobago experienced foreign exchange difficulties with severe economic and social consequences. Mackoon (1989, 5) wrote that "[h]arsh foreign exchange problems have led to shortages like cheese and powdered milk. Businesses have been hit hard by cuts in foreign exchange allocations and some have had to close because of a shortage of raw materials."
CARICOM countries encouraged import-substitution industrialization to help transform their economies. A successful import-industrialization program will result in higher levels of employment, the creation of forward and backward linkages within local economies, the saving of scarce foreign exchange, and the promotion of growth and development. An important ingredient in the success of the program is to get consumers to switch from foreign products to domestic substitutes. CARICOM countries, however, suffer from a debilitating path dependence in consumption patterns that have contributed to the slow economic transformation in Caribbean countries (Commonwealth Caribbean Regional Secretariat 1972, 21). For example, the government of Guyana wanted to replace imported wheaten flour with domestic rice flour, but the policy met with strong opposition. Colin Baber and Henry Jeffrey (1986, 137) labeled the policy absurd because "from time immemorial [wheaten flour] has been an intrinsic part of the daily diet of the vast majority of the people and they resent the Government's restriction. The authors were obviously using the phrase "from time immemorial" to mean from the time the institution of colonialism was imposed on Guyana because, before colonization, the indigenous people of that country did not import wheaten flour. (13) The authors ignored a very important fact in the development of a country: a country using domestic resources to produce goods for domestic consumption will enjoy a higher level of growth and development than if it imports substitutes for consumption. In addition, if other Caribbean governments had been able to get their citizens to consume rice flour instead of wheaten flour, the rice industry in Guyana and related industries might have received a significant boost, thus helping that country's development and strengthening regional economic integration. The authors, however, seemed to be suggesting that, in trying to effect economic and social transformation, governments should make no effort to change ceremonial patterns of consumption. This is a clear instance where the forces of ceremonialism were much stronger than the forces promoting economic and social transformation.
CARICOM governments that tried to transform their economies by nationalizing foreign assets or by promoting import-substitution industrialization underestimated the negative impact of path dependence and ceremonialism on the development of an indigenous entrepreneurial class, which is indispensable to transformation. They changed the rules of production, but the rules of supportive institutions remained virtually unchanged and thus the level of economic development declined. Unable to undermine ceremonialism and eliminate the debilitating path dependence inherited from colonial rule, some CARICOM governments were not successful in using market or directed policies to move their economies to higher levels of development.
Natural Resources
According to the staple theory of growth, a country discovering a primary commodity in which it has a comparative advantage, and which it exports, will realize high rates of economic growth and per capita income, lower underemployment and unemployment, higher rates of saving and investment, and greater backward and forward linkages (Meier 1984, 491). Skeptics, however, are not so sure that countries with natural resources will always reap such benefits (Ranis 1981; Passell 1995, D2; McShane 1995, 40; Phillips 2000, A1), partly because institutional elements may block change.
Gustav Ranis (1981) argued that the relative abundance of natural resources in Latin America allowed countries of that region to continue to rely on the exportation of traditional raw materials and pursue inefficient import-substitution industrialization behind high tariff walls. The exportation of traditional raw materials benefited the politically powerful agricultural classes, and inefficient import-substitution industrialization benefited urban workers and entrepreneurs. Those benefiting from the existing production structure opposed changes to the system and permitted "the system to continue on its old tracks, thus avoiding the political and, at least short-term, economic pain of having to move to a different policy package" (180). Ranis, therefore, implied that a relative abundance of natural resources, given certain institutional features, can block the structural transformation of some economies.
Natural resources can also be detrimental to some countries because of the "Dutch Disease"(14)--Ranis (1981, 180) used the term "Kuwait Effect" to describe a similar phenomenon that occurred in Kuwait. As production of the natural resource increases, production in the traded manufacturing sector tends to decline--a Rybcznski effect seems to be at work. (15) The increased demand for labor and capital in the natural-resource sector will cause wages and interest rates to rise, thus attracting labor and capital from the traded manufacturing sector. Higher costs of production will cause the traded manufacturing sector to contract. Moreover, assuming flexible exchange rates, the national currency will appreciate in foreign-exchange markets, making exports from the traded manufacturing sector less competitive.
The "Dutch Disease" cannot explain the poor economic performance of Jamaica, Guyana, and Trinidad and Tobago relative to that of Barbados. The data suggest that the output of their natural resources did not experience any significant expansion (Central Bank of Barbados 1999, 228). Moreover, the capital-intensive character of extractive industries does not lead to much employment creation. It is therefore highly unlikely that the mining sector attracted labor and capital away from the traded manufacturing sector, or from other export sectors, thus causing production costs in those sectors to rise and their exports to become less competitive. Besides, CARICOM resource-endowed countries experienced high levels of unemployment and, instead of currency appreciation, as the "Dutch Disease" predicts, their currencies were devalued steeply.
Less developed countries with natural resources tend to experience much corruption, with some elected leaders allegedly siphoning off for themselves and their families vast amounts of wealth that should be used for improving the economic and social conditions of the population. Such an allegation was made against some elected officials in Indonesia, Nigeria, and Zaire, now renamed Democratic Republic of Congo. These three countries are resource rich, but their social development is among the lowest of all countries. (16) Likewise, some of the most virulent allegations of corruption in CARICOM were made against the governments of countries blessed with natural resources. Larry Rother (1998, C1) alleged that during the oil bonanza in Trinidad and Tobago billions of oil profits were squandered or pilfered. On the other hand, Barbados, with few known natural resources, distinguished itself among CARICOM nations "in providing good government free of the corruption [found] elsewhere in the region" (Singh 1987, 6). Rickey Singh obviously did not mean to suggest that no corruption existed among elected officials in Barbados but that the level of corruption in Barbados was negligible compared with its CARICOM neighbors.
Less developed countries that are endowed with natural resources may not be blessed for another very important reason--the character of production processes is changing dramatically. In the new industrial order, natural resources are not so important an element in the production process as, for example, in the heyday of pre-World War II industrialization. The United Nations (1990, 150-5), noting the developments occurring in the new materials technology, said that new materials "will reduce the growth of demand for such traditional materials as copper, zinc, tin, bauxite and aluminium." Competitive pressures, also, are forcing scientists to turn away "from mechanical systems requiring heavy metals, combustion, and petroleum to seek solutions that use minimal inputs, lower temperatures, and enzymatic reactions" (Hawken et al. 1999, 15). Moreover, some governments in the more developed countries, the principal markets for traditional natural resources from less developed countries, have committed to pursuing F actor Four (a 75 percent reduction in energy and materials intensity) and Factor Ten (a 90 percent reduction) efficiencies (11-12).
Human investment skills have displaced natural resources as the main inputs in many production processes, and countries that have an abundance of human investment skills will be more prosperous than countries that have scanty human investment skills. Singapore, excluding its geographical location, has no natural resources, but it is abundant in human skills that it uses to continually transform its economy. This may be one reason that its real GNP per capita is higher than those of many countries that are well endowed with natural resources.
Evolutionary Economic Change
To focus solely on developments in the new materials technology, human investment skills, and changing business practices in the more developed countries may not completely explain why CARICOM countries with natural resources did not perform very well economically over the last two decades or so. Owing partly to a shortage of technical and manufacturing entrepreneurial skills and partly to the commercial policies of the more developed countries, which tend to be biased against manufactures from less developed countries with a high natural-resource content, CARICOM countries have never developed any significant manufacturing industries through indigenous effort based on their natural resources. Consequently, they have tended to depend more on exporting their natural resources than on exporting manufactured products derived from their natural resources. In the process a psychology has developed that downturns in natural-resource exports resulting from external elements are temporary and that conditions will so on return to their former equilibrium. It becomes difficult to appreciate the fact that capitalism is an evolutionary system and that a new environment is emerging in which some traditional natural resources will play a diminished role in production processes or in fact will be completely replaced. The failure to understand the evolutionary character of capitalism to which CARICOM industries must continually adapt has helped to contribute to a lack of institutional dynamism. And the lack of institutional dynamism, in addition to other things, has slowed the process of structural transformation in CARICOM.
Ranis' explanation of why resource-rich Latin American countries have performed poorly compared with resource-poor East Asian countries may help to explain why Barbados had a better economic performance than other CARICOM countries. Having no traditional natural resources such as bauxite and oil reserves on which to rely for economic growth, Barbados exploited some of the changes occurring in the global environment that permitted it to use its natural resources to good advantage. Successive governments realized that the global market for international tourism was becoming favorable. The advent of jet travel, rising incomes in the more developed countries, the wide-bodied jet that carried a large number of passengers and allowed airlines to realize economies of scale and reduce airfares, the closure of the Cuban tourist plant during the Cold War, and the emergence of tour operators all helped tourism exports from the English-speaking CARICOM to grow. Governments were also acutely aware that, unlike commodity exports, rent-seekers in tourism-importing countries do not emerge demanding protection from tourism imports and that very few countries impose travel bans on their citizens. Consequently, they allocated more and more resources to the development of the tourist industry.
Tourism in Barbados was initially a luxury export, undertaken principally by foreign-owned luxury hotels. But as the average tourist became less wealthy, the Barbadian tourist plant changed to accommodate less affluent tourists without neglecting the more affluent ones. Thus by the late 1980s, small and medium-sized hotels provided some 80 percent of the hotel beds in Barbados, and, because they were owned mainly by Barbadians, they had the greatest potential for retention of earnings and creation of local employment (Government of Barbados 1988, 99). Barbadians benefited in other ways from tourism expansion. For example, most of the taxis and hired cars in Barbados cater to tourists and so do the traditional handicraft industries. In addition, domestic agriculture, which is dominated by small producers, has benefited as tourists have shown a strong preference for local foods. And as governments ensured that Barbadians had access to the same amenities as the tourists--for example, all beaches in Barbados are open to the public--minimal conflict between tourists and nationals ensued. The relatively good relationship between tourists and locals, a stable social and political climate, and a reputation as a country not hostile to visitors have helped to create an environment favorable to tourism expansion and have enabled Barbados to have a high percentage of repeat visitors. (17)
Some CARICOM governments did not take advantage of the changes in the international environment that favored the expansion of regional tourism. For example, the government of Trinidad and Tobago did not encourage export tourism. When he was head of the Economic Planning Division of the government of Trinidad and Tobago, William Demas (1965, 59-60) wrote: "It is true that tourism is highly income-elastic, but it depends so largely on whim and fashion that it would not be prudent in countries where it is possible to develop manufactures to place hope entirely or largely on this industry." He argued that tourism did not have the capacity to transform economies, although it might be appropriate for countries that had the natural advantages for tourism but little potential for manufacturing. (18) Guyana has never been attractive to "sun-lust" tourists. Nor did the government of Guyana, despite that country's natural advantages, try to promote eco-tourism, partly because of a relatively underdeveloped infrastructu re. Jamaica benefited from the expansion of regional tourism; but the continuing unfavorable reporting in the financial press of that country's main tourism export markets (Jamaica Gleaner, April 23, 2001) has prevented its tourist industry from reaching its full economic potential.
It may be instructive to contrast the economic responses of the governments of Barbados and Trinidad and Tobago to an evolving global environment. The government of Trinidad and Tobago, hamstrung by a pre--World War II view of the role of traditional resources in the process of economic development, could not free itself from the belief that heavy industry based on steel would continue to play the role it played in early industrialization. On the other hand, the government of Barbados encouraged the development of the tourist industry, an industry with high income elasticities of demand and high growth prospects. (19) They did not cling to the view of foreign advisers that it was difficult to create employment off the land (Hagelberg 1985, 29), that is, outside the sugar industry. Indeed, they could not rely on the sugar industry to earn increasing amounts of foreign exchange as cane sugar was facing an uncertain future because of intense competition from artificial sweeteners, high fructose corn syrup, and beet sugar, and because of trade restrictions in some markets of the more developed countries, As I have mentioned, sugar had ceased to be the leading generator of income. Barbadian governments exploited the country's natural advantages in tourism and maintained a stable political and social environment, which is necessary for the growth of tourism exports. Caribbean export tourism has been the subject of much criticism, much of it focusing on the social costs that have accompanied its growth (Kempadoo 1999). (20) But by the mid 1980s Barbados tourism exports had become the country's leading foreign exchange earner and a significant employer of labor. (21) Barbados' better economic performance was partly due to an absence of traditional raw materials, which forced its governments to allocate increasing amounts of resources to the promotion of export tourism in order to earn foreign exchange and create additional jobs.
Trade Unions
Trade unions have played an important role in the economic, political, and social development of CARICOM countries. They have been able to get governments to pass legislation that resulted in better working conditions, a shorter workweek, maternity leave, minimum wages, paid vacations, paid sick leave, and severance pay, partly because of their long association with the leading political parties, which have traditionally depended on them for electoral and financial support. (22) Many of their leaders have sat in parliament, and some of them have held the highest elected office in their country.
In order to achieve their objectives, trade unions in CARICOM have frequently resorted to strikes. Baber and Jeffrey (1986, 112) said 653 strikes took place in Guyana in 1982. Work stoppages in the mining sector of Jamaica rose from nine in 1974 to sixty-one in 1975 but fell to twenty-four in 1976 (cited in Kaufman 1985, 106). Table 4 shows that during the period 1985-95 Guyana had the most strikes and lockouts, followed by Trinidad and Tobago and Barbados. And table 5 shows Guyana had the most workdays not worked and Barbados had the fewest. Since Barbados had the fewest strikes and lockouts, and the fewest workdays not worked, it might be reasonable to suggest that the loss of output in Barbados from industrial unrest was lower than in the other countries that had more strikes and more workdays not worked. The data may also suggest that Barbados had a healthier industrial climate than the other countries and this may help to explain the country's better economic performance.
It is difficult to estimate the cost of industrial unrest to CARICOM economies. The cost must be measured not only in terms of lost output but also, in addition to other elements, in terms of lost potential investment, local and foreign. It cannot be known how much potential direct foreign investment was lost to the region because of industrial unrest. Nevertheless, it is safe to assume that industrial unrest may have dissuaded some investors from setting up plants in the region and induced others in the region to relocate. The potential and actual loss of investment would have helped contribute to slower economic growth.
Some of the industrial unrest that took place in CARICOM was due to workers protesting the deteriorating economic and social conditions arising from government policies. Governments reduced or eliminated subsidies on traditional basic foodstuffs and in some instances, as happened in Barbados, cut public sector wages. Shortages of certain basic food items, to which the populations were accustomed, led to price increases. Fitzroy Ambursley (1983, 85) said that after eight years of democratic socialism in Jamaica the cost of living had increased by 320 percent. The urban consumer price index in Guyana rose from 100 in 1970 to 196.5 in 1978 to 448.5 in 1983 (Faber and Jeffrey 1986, 115). Free-market policies did not have better results. Table 6 shows that the consumer price index in Jamaica rose from 100 in 1990 to 669.5 in 1996. Consequently, real wages fell and standards of living declined. In the deteriorating economic and social environment, workers went out on strike to bring to the attention of elected off icials their dissatisfaction with their lot.
Some members of the old institutionalist school (Veblen 1899) and the new institutionalist school (Olson 1982) sometimes assert that institutions may serve only their particular interests and by so doing work against the general good of society. Ranis' account of the role of the powerful agricultural classes, urban workers, and entrepreneurs in Latin American countries in resisting changes to the structure of production tends to support this assertion. The Commonwealth Caribbean Regional Secretariat (1972, 25), too, seemed to share this view, describing the institution of the Caribbean trade union as dysfunctional and a metropolitan import that is irrelevant to the realities of the peculiar CARICOM situation. But institutions sometimes modify their behavior in response to a changing environment, and they are also capable of sacrificing their particular interests for the good of the community.
Another change in the attitude of the trade union movement in Barbados occurred when the economy of Barbados experienced a deep recession from 1990-1992. Export earnings declined, foreign exchange reserves fell dramatically, the generous income tax allowances of earlier years resulted in huge fiscal deficits, and GDP fell an average of 4 percent annually. The government of Barbados responded to the economic crisis by introducing an economic stabilization program that included an incomes policy. The incomes policy sought, in addition to other things, "to restrain the rate of wage increases in order to keep prices down...[and] put in place a more appropriate process for wage settlements based on linkages to and changes in productivity" (Sandiford 1993, 10). Recognizing that the deep recession the country was experiencing required drastic measures, trade unions supported the government austerity program because they believed that a currency devaluation, as the IMF wanted the government to engage in, would have b rought similar undesirable economic and social consequences to Barbados as it had done to other CARICOM countries that had devalued their currencies. They joined employers and the government and signed a protocol in 1993 affirming their commitment to work together for the economic good of the country. They have since signed additional protocols; the most recent took place May Day 2000. (23) Senator LeRoy Trotman, general secretary of the Barbados Workers' Union and head of the Congress of Trade Unions and Staff Associations of Barbados, said that no other single act of governance has done more to facilitate the "mutual upliftment of the country" than the protocol and partnership arrangement (Barbados Nation, May 2, 2000).
With the exception of Trinidad and Tobago during the oil crisis of the 1970s, CARICOM countries have had low foreign reserve balances for a long time. Foreign reserves balances have sometimes been so critically low that countries have been forced to seek financial assistance from the IMF. Financial assistance from the IMF is usually given to countries on the condition that, in addition to adopting other policies, they devalue their currencies. Devaluation should make the country's exports more competitive and reduce imports. Net exports will therefore rise and so will the foreign reserves of the central bank. Domestic employment, also, will rise as domestic production rises to satisfy the increased domestic and foreign demand for the country's products and services.
CARICOM countries do not produce many products that can benefit from a devaluation. (24) The principal agricultural exports go mainly to the markets of the more developed countries. In theory, devaluation should cause the volume of exports to increase as goods become less expensive in terms of foreign currencies. But the principal CARICOM agricultural exports face formidable trade barriers in the more developed countries. Sugar and bananas are subject to quotas. The more significant manufactures are also subject to restricted trade in the markets of the more developed countries. Thus devaluation is of little help in causing the volume of the principal CARICOM export products to increase.
In addition to barriers to trade, supply elasticities in CARICOM are low. This is evident in the production of sugar where, as I have mentioned, some countries have had great difficulty meeting their quotas for sugar in EU markets. Low supply elasticities in the production of bauxite were also evident during the late 1970s. As Manley noted (1987, 77), "Following the massive devaluation upon which the IMF insisted, there was virtually no response in terms of bauxite exports-11,434,000 tonnes in 1977; 11,736,000 tonnes in 1978; 11, 505,000 tonnes in 1979; and 11,991,000 tonnes in 1980." Even apparel production, which has expanded rapidly in a country like Jamaica, has low supply elasticities. Foreign producers in that country undertake most of the apparel production for export and, should they relocate their plants to other locations, an insufficient number of local manufacturing entrepreneurs would mean a sudden and dramatic reduction in apparel output. CARICOM countries lack a basic ingredient to make devalua tion successful--they simply do not have the productive capacity to exploit the opportunities created by devaluation.
Without the productive capacity to exploit the opportunities created by devaluation, CARICOM countries will experience little expenditure switching and thus will not realize any significant reduction in the volume of imports. The prices of goods that are crucial to the development and daily functioning of economies will rise in terms of local currency because of the devaluation and lead to a higher rate of inflation. Devaluation will not reduce imports for another fundamental reason: consumption patterns in CARICOM imitate those of the more developed countries. CARICOM consumers have a strong preference for foreign goods and services from North America and Western Europe. This is due in part to "advertising as well as the images of affluence projected daily and nightly by the mass media (especially commercial television) as well as the influence of consumption patterns of tourists from affluent countries visiting the Region" (Caribbean Commonwealth Regional Secretariat 1972, 21). And since foreign goods are c onsidered superior to indigenous substitutes, "the failure to consume [them] in due quantity and quality becomes a mark of inferiority" (Veblen 1899, 64). If devaluation does not change the long-run demand and supply conditions, countries that devalue their currencies will experience inflation to the extent of the devaluation. Moreover, some investors will most likely believe that further devaluations will take place and move their funds out of the country. Thus, devaluation in CARICOM will have the perverse effect of contributing to an outflow, and not an inflow, of international reserves.
CARICOM countries that devalued their currencies, or allowed them to depreciate, had a poorer economic performance than Barbados, which kept its exchange rate fixed to the US dollar. For example, the Guyanese dollar has been worth US$0.01 cent for some time, but the low value of the Guyanese dollar in terms of the US dollar has not resulted in higher levels of Guyanese exports to the United States as theory would predict. Likewise, devaluation or depreciation has not resulted in an improvement in Jamaica's current account balance. The current account balances of countries that devalued their currencies were no healthier than those of Barbados, which did not devalue its currency. Barbados never devalued its currency even when urged to do so by the IMF during its deep recession of 1990-1992. The government was able to resist IMF pressure to devalue the Barbadian dollar because all political parties, trade unions, and "the vast majority of Barbadians at home and abroad have indicated that they do not want the pr esent rate parity of Bds. $2.00 to US$1.00 to be changed" (Sandiford 1993, 10). And despite the government's refusal to devalue the currency as the IMF had insisted was necessary to cure the foreign-exchange crisis that arose in the early 1990s, Barbados realized a surplus in the current account from 1992-6 (United Nations, 1998). In addition, over the period 1994-1998, Barbados was the only country whose current account surplus as a percentage of GDP was positive (Stotsky et al. 2000, 23). The fact that Barbados' current account was positive during the period 1994-1998 even though the government did not devalue the currency may suggest that exchange-rate flexibility is not always the decisive factor in determining a country's export performance. Furthermore, there seems to be a direct relationship between devaluation and inflation. Guyana devalued its currency more than Jamaica; Jamaica devalued its currency more than Trinidad and Tobago; and Barbados did not devalue its currency. Inflation was higher in Guy ana than in Jamaica between 1994 and 1998; both of these countries had higher rates of inflation than Trinidad and Tobago; and Guyana, Jamaica, and Trinidad and Tobago all had higher rates of inflation than Barbados.
Conclusion
Societies are continually changing, and therefore institutions must continually change if they are not to slow down the development process. But institutions are not independent, and as one changes so must others. CARICOM governments wish to transform their economies and they wish national manufacturers to play a greater role in the process. But transformation will be difficult to achieve if governments do not place more emphasis in their educational curricula on subjects that will lead to the emergence of nationals with an industrial entrepreneurial spirit or if they are unable to get financial institutions to play a more supportive role. An educational system that does not disdain industrial activity and that encourages risk taking will help to remove the social stigma attached to activities not associated with the professions. Furthermore, institutions must adapt to changes in the external environment. Foreign manufacturing firms are extremely mobile, and they seek out labor wherever they can find it at co mpetitive prices. CARICOM trade unions must therefore adapt to the new global reality and become less confrontational if the region is to be successful in attracting foreign manufacturing firms. Likewise, traditional products may experience a secular decline while new products or services are being demanded. Institutions that were appropriate for the old environment will not be appropriate for the new environment and slow down development. Countries whose institutions can adjust to a new environment will have a much better chance of experiencing a higher level of development than those whose institutions do not adjust quickly or fail to adjust.
Notes
(1.) CARICOM is a broad integration effort among mostly English-speaking Caribbean countries--Haiti and Suriname have been recently granted membership. The main elements of CARICOM are economic integration, functional integration, and co-ordination of foreign policies. The four countries examined are Barbados, Guyana, Jamaica, and Trinidad and Tobago, which are usually considered the moat developed in CARICOM.
(2.) See Williams 1970 and Fieldhouse 1981, chapter 2. Fieldhouse (15) also argues that institutions established in the past can influence the present level of development.
(3.) All four countries produce sugar. In addition, Jamaica produces bananas and coffee and Guyana has a large rice sector.
(4.) One Barbadian dollar is worth US$0.50 cents.
(5.) According to Festus Brotherson (1989, 7), Guyana imported sugar to free up stocks for export.
(6.) The United States and the EU have reached an accord on banana import rules (Edward Alden and Deborah Hargreaves, April 12, 2001). Caribbean countries will receive a smaller quota than was promised, but it is higher than current sales. However, EU countries and the European parliament have to approve the accord.
(7.) Although some analysts cast doubt on the reliability of the data, the government of Barbados (Development Plan 1969-1972, 7) reported that "tourist spending generated about 43 percent of national income in Barbados in 1967 ... about 30 percent of total tax revenue ... almost BD$17 million in wages ... [and about] BD$70-$80 million invested in accommodation." The plan also noted that "sugar [was] no longer able to perform its traditional function of [leading] income generator...." (Development Plan 1969-1972, 7).
(8.) When he recaptured the government in 1989, Manley expressed his commitment to the market-oriented approach to development and the party has not reverted to its socialist policies of the 1970s.
(9.) This impressive growth statistic might be attributed to the fact that the Guyanese economy was growing from a very low base.
(10.) The negative growth rate between 1990 and 1997 could be attributed in part to the deep recession from 1990 to 1992.
(11.) See Manley (1987, 50-54) for a full discussion of the bauxite levy.
(12.) Guyana and Jamaica were some of the countries that formed a cartel of bauxite-producing countries in 1974 with the purpose of improving their bargaining power with the bauxite multinational corporations.
(13.) Rice flour is a staple in the diet of a country such as Thailand, which has never been colonized.
(14.) The "Dutch Disease" occurs when a nation's currency appreciates because of a high foreign demand for a domestic natural resource and results in the loss of international competitiveness in other sectors. After the Netherlands developed its natural gas industry, the Dutch florin appreciated and caused the industrial sector of that country to lose its international competitiveness.
(15.) In a two-commodity, two-factor world, the Rybcznski theorem states that, assuming commodity prices remain constant, an increase in the supply of one factor (the supply of the other factor remaining unchanged) will result in an absolute increase in the output of the commodity that uses intensively the factor that has increased and an absolute decline in the output of the other commodity.
(16.) Of the 162 countries for which the United Nations Development Programme generated a human development index (HDI) in an attempt to measure a country's social development, Indonesia ranked 102nd, Nigeria 136th, and the Democratic Republic of Congo 142nd. The corresponding HDI values were 0.677, 0.455, and 0.429 respectively (United Nations Development Programme 2001).
(17.) About 38 percent of long-stay visitors to Barbados return within five years. (This information was provided by the Caribbean Tourism Organization, Barbados).
(18.) Demas' view of tourism may help to explain why Trinidad and Tobago, whose resource base is considered mote conducive to the development of heavy industry than that of Barbados, did not try to encourage export tourism. It may also help to explain why that country built an industrial complex at Point Lisas.
(19.) See Economist, "Travel and Tourism: A Survey," January 10, 1998, for a discussion of global tourism.
(20.) Eric Fischl's "A Visit To/A Visit From/The Island" portrays the negative side of Caribbean tourism. The painter shows "sun-lust' tourists blissfully unaware of the struggles many of the black population face in trying to earn a living. The two halves of the diptych are linked by the storm clouds that bring destruction to the island natives.
(21.) In 1998, the tourism sector provided direct and indirect employment for about 31,800 persons, or 27 percent of all employment; long-stay visitor expenditure was US$690 million, or 54 percent of all exports of goods and services; and tourism contributed about US$154 million to government revenue, or 20 percent of all government revenues. (This information was provided by the Caribbean Tourism Association, Barbados.)
(22.) An exception to the party-cum-union relationship in the Caribbean is the People's National Movement in Trinidad and Tobago, founded by Dr Eric Williams (Wallace 1977).
(23.) See Codrington 1999 for a discussion of the three protocols signed by the public sector, the private sector, and the trades unions.
(24.) The following paragraphs draw on Griffith 1994, 43-44.
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The author is in the Department of Economic, Bucknell University, Lewisburg, Pennsylvania, USA. An earlier version of this article was presented at the Eleventh Annual Convention of the Congress of Political Economists, Imperial College, London, England, August 6-12, 2000. The author wishes to thank two referees for their helpful comments. | |||
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