6 Responses to “Restoring Export-Led Growth in the Caribbean, Victor Bulmer-Thomas”

• Norman Girvan on September 18th, 2012 at 5:01 pm

  Victor makes a compelling case for refreshing export-led growth through non-traditional service exports to non-traditional extra-regional markets. I agree with this and with the need to upgrade education and labour productivity. My main points of non-coincidence with his paper, briefly, are:

  - In my view the case for widening Caricom is weak. The competitiveness of Caricom exports in non-Caricom Caribbean markets cannot be assumed, especially as the dependent territories source their imports duty-free from their respective metropoles, and the DR from the US (under CAFTA) and from the EU (under the EPA). The bulk of intra-Caricom and intra-Caribbean exports originates with Trinidad and Tobago (over 80% of intra-Caricom exports). Even if T&T can compete with imports from the metropoles in the dependent territories (and this is not self-evident) the reproduction of concentrated trade in a wider regional setting is not likely to be attractive to other Caricom members. The majority of Caricom members have little they can export to the rest of the Caribbean. Intra-regional tourism has potential but it isn’t necessary to widen Caricom to in order to expand this. The admission of the DR to Caricom will likely simply mean that two major countries, rather than one, will dominate intra-regional trade.

  - I have seen many papers on the export potential of non-traditional services (NTS) over the years but I haven’t seen any that shows an employment impact that is sufficiently large to make a real dent on un- and unemployment and poverty reduction in the larger countries. While I agree that NTS need to be vigorously pushed, I favour an approach that embraces this plus agricultural diversification for domestic and regional import displacement in food (imports of which are running at over US $3 billion/year) plus backward linkages from tourism to agriculture and SMES. I am somewhat skeptical of the ability of NTS by itself to be the new growth driver of Caribbean economies (the WB has been pushing this at least since the 1990s), insofar as such an approach implies a relative neglect of agriculture (especially domestic agriculture) and manufacturing (especially SMEs).

  - I also think that a successful transformation strategy will necessarily involve a more pro-active state role, a stronger Caricom (as presently constituted, at least for the medium term), and debt restructuring. The last however will need to be tied to a credible transformation strategy, not to allow business as usual.

  – I agree with Victor on the necessity for a long-term consensual strategy–the five-year time horizon of policy makers and the 3-year horizon of IMF programmes are clearly inadequate.
  Norman

• Mervyn Claxton 26 Septemberber 20120 on September 26th, 2012 at 9:17 am

  Courtenay,

  The third tripod in that “cycle of loans and debts” is Aid. I agree with you that the idea of “sustainable development” does not enter the prevailing Northern lending paradigms, but why did the majority of countries in the South choose to base their development on Northern paradigms? That is a conundrum. The countries that made that choice now find themselves stuck in a vicious cycle which perpetuates their underdevelopment. The handful of countries which refused that diabolic choice – Singapore, South Korea, Taiwan – now outperform North America and Europe by most development criteria. The S.E. Asian Tigers rejected the Northern development paradigm and chose a state-led development model instead of a private sector capitalist one. According to Northern economic theory, state-led development does not work well but that development model worked admirably with the S.E Asian Tigers because it was in total harmony with their cultural heritage and values. See the example of Singapore below.

  The Ivory Coast is a text book case study of a country, whose choice of Northern development paradigms has trapped it in a vicious cycle of loans, debt and Aid. West African farmers had developed small-scale peasant farming into a highly productive agricultural system that was ideally suitable to their countries’ socio-economic, geophysical, climatological circumstances, and indigenous culture. In 1911, an English colonial official in Northern Nigeria acknowledged the great expertise of Nigerian peasant farmers: “There is little we can teach the Kano farmer…They have acquired the necessary precise knowledge as to the time to prepare the land for sowing; when and how to sow; how long to let the land be fallow; what soils suit certain crops; what varieties of the same crop will succeed in some localities and what varieties in others…how to ensure rotation; when to arrange with Fulani herdsmen to pasture their cattle upon the lands.” (E. D. Morel, “Nigeria: Its People and its Problems”, 1911).

  In 1991, eight decades later, a World Bank publication described West African plantain and banana production, based on small farms and traditional methods, as “one of the most productive food production systems known.” (“Agricultural Technology in Sub-Saharan Africa”). Almost 70% of the Ivory Coast population are engaged in some form of farming, the vast majority of whom are small-holder farmers. The country’s small-holder cocoa producers were so productive that, by 1980 (20 years after independence) the Ivory Coast had quadrupled its cocoa production, becoming the world’s largest producer of cocoa and, subsequently, the world’s third largest producer of coffee.

  The Ivory Coast was the most prosperous non-oil exporting country in West Africa. During the first two decades following Independence, it experienced very rapid GDP growth – 82% in the 1960s, peaking at 360% of GDP in the 1970s. But, in the 1980s, GDP fell by 28% and by a further 22% in the 1990s. By 2003, the country’s GDP, in real terms, was back to where it was at Independence in 1960. That sharp GDP fall in the 1980′s was accompanied by a 300% increase in external debt. In the two-year period (1989-1991) alone, Ivory Coast’s external debt increased by almost 70% – from 132.4% of GDP to 210.8% of GDP. (Robert Naiman and Neil Watkins, “A Survey of IMF Structural Adjustment in Africa: Growth, Social Spending and Debt Relief,” 1999).

  Debt servicing accounted for 42% of the country’s budget in 2011. The IMF issued the following press release on 26 June this year: “The International Monetary Fund (IMF) and the World Bank’s International Development Association (IDA) approved US$3.1 billion in debt relief for Côte d’Ivoire under the Heavily Indebted Poor Countries (HIPC) Initiative, representing a 24 per cent reduction of its external debt, plus a further US$1.3 billion dollars of debt relief under the Multilateral Debt Relief Initiative (MDRI)” What a stunning change from the prosperous times of the 1960s-1970s!

  What went wrong? World prices for agricultural produce fell sharply in the late 1970s and 1980s but, more importantly, the Ivory Coast government unwisely abandoned its highly productive agriculture development model, based on labour-intensive small farms which its farmers had fully mastered, in launching capital-intensive industrial-scale sugar production in the mid-seventies, with World Bank financing. It was an ambitious, integrated programme of large-scale sugar production and refining, based on six large ultra-modern sugar refineries employing the most sophisticated Northern technology available. By the end of the 1970s, Ivory Coast’s accumulated investments in its sugar development programme amounted to just under 5.8 billion francs (approx. U.S 1.2 billion dollars at 1980 prices) which, in 1979, exceeded the government’s total investments in the rest of the agricultural sector, by a large margin.

  The debt burden of such a heavy investment, combined with the Ivory Coast’s inability to amortize it because sugar prices on the international market were lower than production costs, and because the ultra-modern refineries, which needed to be run at near maximum capacity to be profitable, were operating at well below full capacity. The Ivory Coast did not possess the managerial skills required to optimize production. The industrialized sugar production programme was an absolute failure and it was one of the main causes of the Ivory Coast’s galloping debt from 1979 onwards, which compelled the government, in 1981, to turn to the IMF. Because of the state of the country’s finances, the World Bank compelled the Ivory Coast, in 1983, to shut down three of the six refining complexes which had, at the time, practically never functioned. Nonetheless, the huge capital investment in the three closed refineries still had to be repaid, without any sugar production from them to contribute to that repayment.

  Guy Hunter, the British agronomist, has the best description I have yet seen of the inappropriateness of Northern technology for the technological needs and circumstances of the largely agricultural countries of the South at Independence. “A technology often unsuited to their needs – designed for large-scale production when their markets are small, requiring both capital and sophisticated skills, of which they are short; economical in labour of which they have a surplus, and often ill-adapted to their climate, their land tenure, their social pattern.” (“Modernizing Peasant Societies: A Comparative Study in Asia and Africa,” 1969).

  Singapore is perhaps the most striking example of a country in the South which, in its development efforts, has successfully exploited the potential of its people and its indigenous cultural resources in an imaginative, inventive way. When it became independent in 1965, Singapore was so resource poor that it even had to import its water supplies from Malaysia. The government requested the United Nations to send a mission to advise it on the country’s economic development. In its report, the UN mission declared that Singapore was not economically viable. Disregarding that advice, Singapore proceeded to disprove the UN mission’s dire assessment of its future by transforming itself from a poor country to a wealthy one within a single generation. In 1994, just 29 years after its independence, Singapore overtook its former colonizer, Britain, in per capita GDP. It has maintained, and even increased, that lead ever since. Compare that outstanding achievement with Caricom, whose two most important regional programmes – food security and climate change – require external Aid (including Aid from Britain via the EU) just to get off the ground.

  Singapore is now one of the most advanced countries in the world by any measure of development (economic or human). See pages 5-8 of the following article for a revealing analytical account of Singapore’s astonishing development achievements. “Towards a South Cosmology and Theory of Society”
  http://www.normangirvan.info/3-towards-a-south-cosmology-and-theory-of-society-by-mervyn-claxton/

  See pages 5-8 of the following document for a comparative analysis of India’s successful use of its cultural resources in its development efforts, and Africa’s failure to make use of its own cultural resources. “Haitian culture is Haiti’s most important development resource”
  http://www.normangirvan.info/wp-content/uploads/2010/02/claxton-haitian-culture.pdf

• Courtenay Barnett on September 27th, 2012 at 9:02 pm

  @ Mervyn,
  “The Ivory Coast is a text book case study of a country, whose choice of Northern development paradigms has trapped it in a vicious cycle of loans, debt and Aid.”
  It is self-evident that the Washington agenda along with its IMF/World Bank lending is not, and never has been, designed for the benefit of the country borrowing the funds. Should you doubt me, just listen to this insider speak:-
  http://www.youtube.com/watch?v=yTbdnNgqfs8
  http://www.youtube.com/watch?v=29GhXsx7-Rs&feature=relmfu
  It is the corporations, owning the lobbyists, which dictate the policies that get translated into the lending terms and the ultimate dependency syndrome that most of the Caribbean finds itself trapped in.
  If Jamaica now defaults and tells the IMF that the dog simply has tried but has discovered that it can’t catch its tail – we then are in the type of power struggle we find unfolding in places like Greece and Spain. The cycle has moved from them up North to us and now back to them – moving upwards from Southern Europe into Northern Europe.
  The crisis has only just begun, when one weighs:-
  The West is in the process of experiencing a decline in the average living standards.
  There are inflationary pressures on the currencies in the West and a contraction of job opportunities.
  Income is moving away from the middle to the upper echelons and increasingly skewed income distribution is the order ( read “dis-order”) of the day.
  Jobs have migrated overseas and will not be coming back.
  This period of financial distress is not likely to abate anytime in the immediate future.
  America is fighting wars costing trillions of dollars, and can only sustain this process by ensuring that the dollar remains the world’s reserve currency. To do this, the resource and other wars must continue.
  The foregoing is stated to say that the Caribbean is but a sub-set of the disintegrating global “dis-order”.
  The Caribbean political directorates will not be working with any new templates – they will continue to catch their tails and the results will be… you guess…

• Courtenay Barnett on September 28th, 2012 at 8:43 am

  @Mervyn,
  Stated in another way, I actually am concerned that a set of small islands with natural resources, arable land, and favouravble climate located in one of the most geographically attractive regions on planet earth, find themselves in the Caribbean, bogged down in the quagmire of debt, crime, violence and want of daily needs in modern societies that easily should render to the populace opportunities to actualise the basics of human need, to a pretty high standard.
  I do not wish to make light of the plight that the islands face, but maybe a simple example will serve well to make the point.
  You would have heard the song with the line “ There is a hole in the bucket dear Lisa…”. Now, the song, in a quite amusing way takes the listener around in a line of logically reasoned consequences of realising that there are certain deficiencies that serve to defeat the purpose of patching the hole. The song then goes full circle through each potential solution and ends where the song started –with the hole in the bucket. Should we then juxtaposed the economic woes of the Caribbean, in terms of deficits, want of jobs, need for diversified investments coupled with having both vertical and horizontal linkages in the economies for sustainability – then we can sensibly say that the economic holes should be patched. Yet, we start with deficits and to address recurrent budgetary shortfalls some nations turn to the IMF. The medicine then becomes the toxic poison. So – with what shall we patch it ( i.e. the economy)? With loans dear Minister, with loans. But the loans increase deficit …so borrow more to patch it… and the deficit gets larger…so borrow more dear Minister …borrow more.
  There are those on this well respected blog themselves persons of the highest academic accomplishments, within whose league I do not classify myself. My background is undergrad studies in economics and political science, followed by some studies in international and sets of qualifications in law in Britain and the Caribbean. I am, and have been all my professional life – a lawyer – not a practising or professional economist. I accept my limitations. But even with my want of other technical competencies in the areas of economics and finance, I still proclaim – there is a hole in the budget, dear Minister… a hole.

• Courtenay Barnett on September 28th, 2012 at 6:23 pm

  Actually not “There is a hole in the bucket dear Lisa”….but it is dear Liza.
  As in… an imaginary exchange in song between a Caribbean Finance Minister and the Grand Vizier ( i.e. the chief officer or minister of state in the Ottoman Empire and other Muslim countries).

  There’s a hole in the budget, Grand Vizier, Grand Vizier,
  There’s a hole in the budget, Grand Vizier, a hole.
  Then fix it, dear Minister, dear Minister, dear Minister,
  Then fix it, dear Minister, dear Minister , fix it,
  With what shall I fix it, Grand Vizier, Grand Vizier?
  With what shall I fix it, Grand Vizier, with what?
  With IMF money, dear Minister, dear Minister, dear Minister,
  With IMF money, a loan, dear Minister, dear Minister, with IMF money, a loan.
  The terms are too strong, Grand Vizier, Grand Vizier,
  The terms are too strong, Grand Vizier, too strong,
  Then change them, dear Minister, dear Minister,
  Then change them, dear Minister, dear Minister, change them.
  With what shall I change them, Grand Vizier, Grand Vizier?
  With what shall I change them, Grand Vizier, with what?
  With social strife, dear Minister, dear Minister, dear Minister,
  With social strife , dear Minister, with social strife.
  The strife is too dull, Grand Vizier , Grand Vizier,
  The strife is too dull, Grand Vizier , too dull.
  Then increase it, dear Minister, dear Minister, dear Minister
  Then increase it, dear Minister, dear Minister , increase it.
  With what shall I increase it, Grand Vizier, Grand Vizier?
  With what shall I increase it, Grand Vizier, with what?
  With rhetoric, dear Minister, dear Minister,
  With rhetoric, dear Minister , dear Minister, rhetoric.
  The rhetoric is too dry, Grand Vizier , Grand Vizier,
  The rhetoric is too dry, Grand Vizier, too dry.
  Well spirit it, dear Minister ,dear Minister, dear Minister,
  Well sprit it, dear Minister, dear Minister , spirit it.
  With what shall I spirit it, Grand Vizier, Grand Vizier?
  With what shall I steam it, Grand Vizier, with what?
  try words, dear Minister ,dear Minister ,dear Minister,
  try words ,dear Minister, dear Minister, words.
  And how shall I state it, Grand Vizier , Grand Vizier?
  And how shall I state it, Grand Vizier, and how?
  With your mouth, dear Minister, dear Minister, dear Minister ,
  With your mouth, dear Minister, dear Minister, your mouth
  With my mouth I say there’s a hole in the budget, Grand Vizier , Grand Vizier,
  There’s a hole in the budget, Grand Vizier, a hole.
  Use your head, then! dear Minister, dear Minister, dear Minister,
  Use your head, then! dear Minister, dear Minister , use your head!
  But my head’s not strong – with loans that last long – and there’s a hole in the budget…a hole.

• Jon on September 29th, 2012 at 3:23 am

  Mervyn Claxton – “What went wrong? World prices for agricultural produce fell sharply in the late 1970s and 1980s but, more importantly, the Ivory Coast government unwisely abandoned its highly productive agriculture development model, based on labour-intensive small farms which its farmers had fully mastered, in launching capital-intensive industrial-scale sugar production in the mid-seventies, with World Bank financing. It was an ambitious, integrated programme of large-scale sugar production and refining, based on six large ultra-modern sugar refineries employing the most sophisticated Northern technology available.”

  This has struck me as being one of the major problems with Jamaican (and generally West Indian) productivity. I find it rather amusing that the Jamaican Manufacturing Association which had once lobbied for Jamaica to join CARIFTA now rails against CARICOM and calls for protection when it is quite evident that they are not using an economic model which can work in the environment Jamaica now finds itself. They still cling to the the idea of Manufacturing with the use of heavy, modern capital-intensive machinery (which requires a lot of energy as well) instead of focusing on Services which are labour-intensive. It is quite revealing that in Guyana they seem to have gotten the picture and they have a Guyanese Manufacturing and Services Association and not just a Guyanese Manufacturing Association. Why the JMA and Jamaican businesses in general seem so intent on such a model is beyond me when our specific situation (a relatively large labour force within the the CARICOM region; no fossil fuel supplies and high fuel costs; relatively low wages; and with a fair amount of urbanization) should point us towards the kind of model which would be good at: small scale labour-intensive manufacturing and low-energy, labour-intensive services such as accountancy services and call centres and online educational services. I believe it might be because too many Jamaican businesses (as represented by those in the JMA in particular) are stuck (mentally speaking) in the 1950s and 1960s before the Oil Shock of the 1970s put an end to to the period of relatively low and stable fuel prices. Instead of adapting to the world as it has been since 1973 though many seem to think we can manufacture a bubble around ourselves to put us back in an environment just like what pertained in the “good ol’ days”.

  P.S. @ Courtenay. Your web link in your name doesn’t work (at least for me). Is the site down?