The Failure Of Economic Development In Jamaica

The Failure Of Economic Development In Jamaica




I. INTRODUCTION

I read recently that Jamaica is now the 4th most indebted nation in the world. Also, in a speech in 2009 about the Jamaican economy Mr. Bruce Golding (former chief Minister) said that Jamaica’s Gross Domestic Product (total amount of goods and sets) was J$ 560 billion and that after paying interest on debts there was only J$70 billion left; hardly enough for development projects, capital accumulation or to pay for other obligations. The shortfall has consequently to be made up every year by more borrowing at very high interest rates with debt piling up on top of debt.

All of this makes one ask how Jamaica got into this sorry situation? Who was responsible? Or was it just unavoidable once we had chosen to follow a path to independence on our own? If we look back at our history for the past fifty years we will see that at the time of independence in 1962 Jamaica made 2 basic mistakes which had detrimental consequences. The first was the secession from the West Indies Federation in 1961 and the second was the policy of subsequent governments after independence to industrialize the economy and neglect agriculture.

II. SECESSION FROM THE WEST INDIES FEDERATION

Jamaica’s secession from the West Indies Federation was the consequence of a referendum to decide Jamaica’s future in the Federation in 1961. Bustamante, the Leader of the Opposition who had originally supported the Federation, badly lost the General election in 1959 and with a new set of Deputy Leaders (Tavares, Lightboune- a former federal MP and Seaga) suddenly turned against the Federation, made an issue out of it and used it to attack the Norman Manley government. They launched a campaign against the Federation arguing to the voters that it was a form of slavery as JLP loudspeaker cars bellowed across the island with cries of “freedom, freedom”. Manley succumbed, called a referendum and the people voted against it. Jamaica withdrew and the Federation ended.

Jamaica’s withdrawal was a grave mistake because Jamaica is too small in terms of geographical and population size and too poor in resources to isolate. The formation of Caricom soon after the fall of the Federation testifies to the need for some form of union. Caricom was formed to provide an economic linkage between the English-speaking countries of the Caribbean. Now we also have a shared law school and allurement court (though Jamaica has not however joined the court). A federated Caribbean would have been a stronger regional bloc with enormous possible especially if we could have additional Guyana (large, high in resources and underpopulated), the Bahamas (great tourist industry) and Bermuda (very high per capita income). And yes, the French and Dutch West Indies; many different cultures and languages but so too are the countries that comprise the European Economic Community. Federation would have served us well, especially now that regionalism is spreading across the world as it becomes more apparent that globalization mostly benefits the high countries.

III. THE MOVE TO INDUSTRIALIZATION

The second basic mistake was made in 1962, the year of independence. The newly elected JLP government led by Bustamante decided to transform Jamaica from an agricultural country into an industrial one based on a strategy of import- substitution manufacturing, tourism and bauxite. The government felt that, in the tradition of the developed countries, development necessarily involved a change from an agricultural economy to industrialization. consequently, the government invited foreign companies to invest in Jamaica with the lure of cheap labor and tax holidays of 3 to 5 years. Sir Arthur Lewis called it “industrialization by invitation” (Industrialization of the British West Indies).

Industrialization had limited success. From the 1960’s direct foreign investment expanded but it only led to more dependency on technology, raw materials and capital from oversea. Furthermore, the companies were mainly foreign so the profits were sent oversea. Another problem was that as soon as the tax holidays ran out the companies packed up and left, taking everything with them and leaving no trained personnel behind.

With industrialization, the foreign companies were operating under license. Their products were inferior and uncompetitive as was illustrated by the local made razor blades, shoes and Good Year tires in the 1970’s. The Good Year factory in St.Thomas closed in 1997 because of ‘ intense pressure from lower cost producers’.

Instead of reducing unemployment as it was supposed to do, industrialization destroyed jobs. According to the law of ‘economies of extent’, a small producer cannot compete with a large factory that mass produces goods. So producers in small cottage industries were replaced by the new competition and this led to a flight from the land of the newly displaced workers to the urban areas where they joined the ranks of the unemployed. Unemployment rates especially among the youth hovered in the vicinity of 25% between 1975 and 1985. And while in 1960 34% of the population was urban, by 1982 it increased to 48% as a consequence of declining opportunities in rural areas (US Library of Congress).

IV. THE DECLINE OF AGRICULTURE

Agriculture is vital to the Jamaican economy because it provides food, employment and foreign exchange surplus for investment in industry. subsequent governments over the years have neglected agriculture as they have reduced investment in agricultural programs and infrastructure. This neglect was marked by a decline in the agricultural proportion of GDP in the 1980’s; for example. from 1980 to 1987 agriculture as a proportion of GDP dropped from 8.3 % to 5.7 % (US Library of Congress).

The decline in agriculture is illustrated by the increase in imported food which had to be paid for with vital foreign money and more borrowing. The loss of agricultural production resulted in more urban unemployment and crime. A recent Report from the World Bank and the UN Office of 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 fall of agricultural output and the limited success of the industrial sector to replace it as an engine of economic growth left a large external debt in the 1970’s and 1980’s so that by the end of 1986 the debt was US$ 3.5 billion, one of the highest per capita debts in the world ( US Library of Congress).

The economic failures have not been all the fault of government. External factors have had an impact in addition. The decline of sugar production since 1965 was due to mechanization and competition from beet sugar in Europe. The lowering of need for bauxite was due to the introduction of synthetics so that by the mid 1980’s bauxite only comprised 30% of aluminum. The increase in world oil prices helped to create double – digit inflation in the mid 1970’s and the volatility of tourism was in part due to increased competition from other countries.

V. CONCLUSION

The main argument of this paper can be summarized by the following quote: “The messages from the 1960’s are plain. There can be no enormous industrialization of Jamaica to absorb structural (long term) unemployment. The bauxite industry will provide capital and export earnings which must be used correctly for labor-intensive development. The secret of success, if there is to be success, will be in the countryside – not in the towns… Jamaica will have to become self-sufficient in food to eliminate food imports, modernize and rationalize agricultural production, diversify away from sugar and create over 100,000 jobs on the land or in processing or related work. Jamaica cannot solve her ‘internal security’ problem without a mobilization of her resources and, above all, of her people.” Violence and Politics in Jamaica 1960- 1970, by Terry Lacey.

Tourism, bauxite and sugar are vital for employment and as foreign exchange earners. And so too are our small cottage industries. But any development plan to provide economic growth must give priority to agriculture because industry has not proven to be an adequate substitute as a generator of growth.

It is by agriculture that Jamaica will be able to mobilize its idle land and people. Firstly, we need to revolutionize our education system i.e. agriculture must be included into the dominant and secondary schools’ curricula. Also we need to sustain agricultural enterprises and provide rewards for their successes. To these ends great use can be made of information technology such as the Internet. Secondly, land and people can be brought into productive use by the system of “usufruct”. This dates back to the Emperor Gaius in Ancient Rome and is used with great success today in some developing countries like Cuba. People are given the use of land; they do not have to pay for it provided they make productive use of it.

One last point. I think we need to stop looking North to the richer countries for aid. We have more shared interests with our neighbors in the Caribbean and the Americas. We should try to develop closer regional ties with them.

I hope that my examination has helped to answer the questions I posed at the beginning of this paper. However, a look at our economic history raises more questions about us as a people than it answers.

By Victor A. Dixon

November 6, 2011




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