I. Introduction
I recently read that Jamaica is now the 4th most indebted country in the world. Also, 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 after paying interest on the debt there was only J$70 billion left; barely enough for development projects, capital accumulation or to pay other obligations. Therefore, the shortfall must be compensated annually by more borrowing at very high interest rates with debt piling up on top of debt.
All of this makes one ask how did Jamaica get into this sad situation? Who is in charge? Or is it inevitable once we choose to follow the path to our own independence? 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 disastrous consequences. The first was the secession of the West Indies Federation in 1961 and the second was the policy of successive governments after independence to industrialize the economy and neglect agriculture.
II. SEXY FROM THE FEDERATION OF WEST INDIES
The separation of Jamaica 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 Leader of the Opposition who initially supported the Federation, was badly defeated in the General elections in 1959 and with a new set of Deputy Leaders (Tavares, Lightboune- former federal lawmaker and Seaga) suddenly turned against the Federation, created trouble and used it to attack Norman Manley’s government. They launched a campaign against the Federation arguing to voters it was a form of slavery as JLP loudspeakers roared across the island with cries of “freedom, freedom”. Manley surrendered, called a referendum and people voted against it. Jamaica withdrew and the Federation ended.
Jamaica’s withdrawal was a grave mistake because Jamaica was too small in terms of geographic size and population and too resource-poor to be isolated. The formation of Caricom soon after the fall of the Federation proved the need for some form of union. Caricom was formed to provide economic links between the English-speaking Caribbean countries. Now we also have a public law school and a court of Appeals (though Jamaica has not yet joined the court). A federation of the Caribbean would be a more powerful regional bloc with enormous potential especially if we could add Guyana (large, rich in resources and sparsely populated), Bahamas (extensive tourism industry) and Bermuda (very high income per capita) . And yes, the French and Dutch West Indies; many cultures and languages are diverse but so are the countries that make up the European Economic Community. The federation will serve us well, especially now that regionalism is spreading around the world as it is becoming clearer that globalization has largely benefited rich countries.
I, I, I. MOVE TO INDUSTRIALIZATION
The second fundamental mistake was made in 1962, the year of independence. The newly elected JLP government led by Bustamante decided to transform Jamaica from an agrarian to an industrialized nation based on a strategy of import substitution manufacturing, tourism and bauxite. The government felt that, in the tradition of developed countries, development should involve a transition from an agricultural economy to an industrialization. To that end, the government invites foreign companies to invest in Jamaica with the lure of cheap labor and a tax holiday of 3 to 5 years. Sir Arthur Lewis called it “industrialization by invitation” (Industrialization of the British West Indies).
Industrialization had limited success. Since the 1960s foreign direct investment has expanded but has only led to a greater dependence on technology, raw materials and foreign capital. Moreover, most of these companies are foreign, so the profits are sent abroad. Another problem is that as soon as the tax holidays are over, companies pack up and leave, taking everything with them and leaving no trained personnel behind.
With industrialization, foreign companies operate under license. Their products are inferior and uncompetitive as illustrated by the locally made Good Year razors, shoes and tires in the 1970s. The Good Year factory in St. Thomas closed in 1997 due to ‘strong pressure from low-cost producers’.
Instead of reducing unemployment as it should, industrialization destroys jobs. According to the law of ‘economy of scale’, small producers cannot compete with large factories that produce goods in bulk. So the producers in the small cottage industry were replaced by new competition and this led to the flight from the land of the newly relocated workers to the urban areas where they joined the ranks of the unemployed. The unemployment rate, especially among youth, hovered around 25% between 1975 and 1985. And in 1960 34% of the population was urban, in 1982 it rose to 48% as a result of declining opportunities in rural areas (US Library of Congress).
IV. AGRICULTURE DECREASE
Agriculture is very important to Jamaica’s economy as it provides food, jobs and a foreign exchange surplus for investment in industry. Successive governments over the years have neglected agriculture because they have reduced investment in agricultural programs and infrastructure. This neglect was marked by the decline in agriculture’s share of GDP in the 1980s; For example. from 1980 to 1987 agriculture as a share of GDP fell from 8.3% to 5.7% (U.S. Congressional Library).
The decline in agriculture is illustrated by increased imports of food to be paid for in vital foreign currency and more borrowing. Loss of agricultural production resulted in more urban unemployment and crime. Recent reports from the World Bank and the United Nations Office on Drugs and Crime state that Jamaica has the highest homicide rate in the world and the Caribbean the highest crime rate in the world.
The decline in agricultural output and the limited success of the industrial sector to replace it as an engine of economic growth left large foreign debts in the 1970s and 1980s so that by the end of 1986 the debt was at US$ 3.5 billion, one of the highest debts per capita. in the world (US Library of Congress).
The economic failure is not entirely the government’s fault. External factors also have an effect. The decline in sugar production since 1965 is due to mechanization and competition from sugar beet in Europe. The decline in bauxite demand was due to the entry of synthetic materials so that in the mid-1980s bauxite consisted of only 30% aluminum. Rising world oil prices helped create double-digit inflation in the mid-1970s and the instability of tourism was partly due to increased competition from other countries.
V. CONCLUSION
The main argument of this paper can be summarized by the following quote: “The message from the 1960s was very clear. There is no massive industrialization in Jamaica to absorb (long-term) structural unemployment. The bauxite industry will provide capital and export earnings which must be used properly. for labor-intensive development The secret to success, if it is to be successful, will be in the countryside – not in the cities… Jamaica must become self-sufficient in food to eliminate food imports, modernize and rationalize agricultural production, diversify sugar and create over 100,000 jobs on land or in processing or related work. Jamaica cannot solve its ‘internal security’ problems without mobilizing its resources and, above all, its people.” Violence and Politics in Jamaica 1960-1970, by Terry Lacey.
Tourism, bauxite and sugar are very important for employment and as a foreign exchange earner. Likewise our small home industry. However, any development plan to provide economic growth must prioritize agriculture because industry has not been proven to be an adequate substitute as a growth generator.
It is through agriculture that Jamaica will be able to mobilize the land and its unemployed people. First, we need to revolutionize our education system i.e. agriculture should be included in the primary and secondary school curricula. We also need to support agricultural companies and reward them for their success. For this purpose great use can be made of information technology such as the Internet. Second, land and people can be used productively through a “benefit-to-use” system. It dates back to Emperor Gaius in Ancient Rome and is used with great success today in some developing countries such as Cuba. People are given land use; they don’t have to pay for it as long as they use it productively.
One last point. I think we need to stop seeking aid north to rich countries. We have more interests in common with our neighbors in the Caribbean and America. We should try to develop closer regional relations with them.
I hope that my analysis has helped answer the questions I raised at the start of this paper. However, looking at our economic history raises more questions about us as humans than the answers.
By Victor A. Dixon
November 6, 2011