The failure of economic development in Jamaica
INTRODUCTION
I recently read that Jamaica is now the fourth most indebted nation in the world. Furthermore, in a 2009 speech on the Jamaican economy, Mr. Bruce Golding (former Prime Minister) said that Jamaica’s Gross Domestic Product (total amount of goods and services) was J$560 billion and that after pay the interest on the debts there were only J$ $70 billion left; barely enough for development projects, capital accumulation or to pay other obligations. Therefore, the shortfall must be made up each year with more loans at very high interest rates, and debt builds on debt.
All of this makes one wonder how Jamaica got into this sorry situation. Who was responsible? Or was it simply unavoidable once we had chosen to follow a path to independence on our own? If we look back at our history over the last fifty years, we will see that at the time of independence in 1962, Jamaica made 2 fundamental mistakes that had detrimental consequences. The first was secession from the Federation of the West Indies in 1961 and the second was the policy of successive governments after independence to industrialize the economy and neglect agriculture.
II. SECESSION OF THE FEDERATION OF THE ANTILLES
Jamaica’s secession from the Federation of the West Indies was the result of a referendum to decide Jamaica’s future in the Federation in 1961. Bustamante, the opposition leader who had originally supported the Federation, unluckily lost the election. generals from 1959 and with a new set of leaders attached (Tavares, Lightboune, a former federal MP, and Seaga) suddenly turned against the Federation, made it a problem, and used it to attack Norman Manley’s government. They launched a campaign against the Federation arguing to voters that it was a form of slavery while JLP loudspeaker cars bellowed across the island with cries of “freedom, freedom.” Manley succumbed, called a referendum, and the people voted against it. Jamaica tied and the Federation finished.
Jamaica’s withdrawal was a serious mistake because Jamaica is too small in terms of geography and population and too poor in resources to isolate itself. The formation of Caricom shortly after the fall of the Federation testifies to the need for some form of union. Caricom was formed to provide an economic link between the English-speaking countries of the Caribbean. We also now have a common law school and a court of appeal (although Jamaica has not yet joined the court). A federated Caribbean would have been a stronger regional bloc with enormous potential, especially if we could have added Guyana (large, resource-rich, and sparsely populated), the Bahamas (large tourist industry), and Bermuda (very high per capita income). And yes, the French and Dutch Antilles; many diverse cultures and languages, but so are the countries that make up the European Economic Community. The federation would have served us well, especially now that regionalism is spreading around the world as it becomes more apparent that globalization primarily benefits rich countries.
third THE STEP TOWARDS INDUSTRIALIZATION
The second fundamental mistake was made in 1962, the year of independence. The newly elected JLP government headed by Bustamante decided to turn Jamaica from an agricultural country into an industrial one based on a strategy of import substitution manufacturing, tourism and bauxite. The government considered that, in the tradition of developed countries, development necessarily implied a transition from an agricultural economy to industrialization. Consequently, the government invited foreign companies to invest in Jamaica with the lure of cheap labor and 3-5 year tax breaks. Sir Arthur Lewis called it “industrialization by invitation” (Industrialization of the British West Indies).
Industrialization had limited success. Beginning in the 1960s, foreign direct investment expanded, but it only led to greater reliance on technology, raw materials, and capital from abroad. In addition, the companies were mostly foreign, so the profits were sent abroad. Another problem was that as soon as the tax holidays ended, companies packed up and left, taking everything with them and leaving no trained staff behind.
With industrialization, foreign companies operated under license. Their products were inferior and uncompetitive, as illustrated by locally made Good Year razor blades, shoes, and tires in the 1970s. The Good Year factory in St. Thomas closed in 1997 due to “intense market pressure.” low-cost producers.
Instead of reducing unemployment as it was supposed to, industrialization destroyed jobs. According to the law of ‘economies of scale’, a small producer cannot compete with a large factory that mass-produces goods. Thus, producers in small cottage industries were replaced by new competition and this caused a flight of the newly displaced workers from the land to urban areas where they joined the ranks of the unemployed. Unemployment rates, especially among the young, hovered around 25% between 1975 and 1985. And while in 1960 34% of the population was urban, in 1982 it rose to 48% as a result of diminishing opportunities in rural areas. (US Library of Congress).
IV. THE DECLINE OF AGRICULTURE
Agriculture is vital to the Jamaican economy as it provides food, employment and foreign exchange surplus for investment in industry. Over the years, successive governments have neglected agriculture as they have reduced investment in agricultural programs and infrastructure. This neglect was characterized by a decline in the agricultural share of GDP in the 1980s; for instance. from 1980 to 1987, agriculture as a percentage of GDP fell from 8.3% to 5.7% (US Library of Congress).
The decline of agriculture is illustrated by the rise in imported food that had to be paid for with vital foreign exchange and more loans. The loss of agricultural production resulted in more urban unemployment and crime. A recent report by the World Bank and the United Nations Office on Drugs and Crime states that Jamaica has the highest murder rate in the world and the Caribbean the highest crime rate in the world.
The decline in agricultural production and the limited success of the industrial sector in replacing it as the engine of economic growth left a large foreign debt in the 1970s and 1980s, so that by the end of 1986 the debt was US$3.5 billion, one one of the highest per capita debts in the world (US Library of Congress).
The economic failures have not all been the government’s fault. External factors have also played a role. The decline in sugar production since 1965 was due to mechanization and competition from beet sugar in Europe. The decline in demand for bauxite was due to the introduction of synthetic materials, so that by the mid-1980s bauxite comprised only 30% of aluminum. Rising world oil prices helped create double-digit inflation in the mid-1970s, and volatility in tourism was due in part to increased competition from other countries.
CONCLUSION V
The main argument of this paper can be summed up in the following quote: “The messages from the 1960s are clear. There can be no massive industrialization of Jamaica to absorb (long-term) structural unemployment. The bauxite industry will provide capital and export earnings that must be properly used for labour-intensive development.The secret of success, if there is to be success, will be in the countryside, not in the cities…Jamaica will have to become self-sufficient in food to eliminate food imports, modernize and rationalize agricultural production, diversify beyond sugar and create more than 100,000 jobs on the land or in processing or related jobs Jamaica cannot solve its ‘internal security’ problem without a mobilization of its resources and, above all, of its people”. Violence and Politics in Jamaica 1960-1970, by Terry Lacey.
Tourism, bauxite and sugar are vital for employment and as a source of foreign exchange. And so are our small cottage industries. But any development plan that provides economic growth must prioritize agriculture because industry has not proven to be an adequate replacement as a growth generator.
It is through agriculture that Jamaica will be able to mobilize its idle land and people. First of all, we need to revolutionize our educational system, that is, agriculture must be included in the curricula of primary and secondary schools. We also need to support agricultural businesses and provide them with rewards for their successes. For these purposes, great use can be made of information technology, such as the Internet. Second, land and people can be put to productive use through the “usufruct” system. This dates back to Emperor Gaius in Ancient Rome and is used today with great success in some developing countries like Cuba. The people are given the use of the land; they don’t have to pay for it as long as they make productive use of it.
One last point. I think we need to stop looking north to the richest countries for help. We have more common interests with our neighbors in the Caribbean and the Americas. We should try to develop closer regional ties with them.
I hope my analysis has helped answer the questions I posed at the beginning of this article. Yet a look at our economic history raises more questions about us as a people than it answers.
By Victor A. Dixon
November 6, 2011