Cedric Wilson, Guest ColumnistSINCE THE beginning of the millennium, the Jamaican economy has grown in every single year, including 2004 when it was hit by Hurricane Ivan. But the growth rate has been much too sluggish and far too low to inspire hope that economic transformation is on the horizon. It is a fact that the country is heavily indebted, but the problem is not fundamentally an issue of debt - it is a problem of growth.
Think about it, the country's external debt is now approximately US$4.8 billion and the amount of money that Jamaicans overseas sent home last year was about US$1.5 billion. This means that the accumulated external debt is a little more than three times the annual remittance level.
Simply put, if all of the remittance coming into the island was used to repay the external debt, all things remaining equal, in less than three years and three months, the country would be free of all its foreign debts. Yes, the Government has by words and deeds expressed commitment to the free market economy, but it does not seem to have a well-conceived model to bring about sustained growth. And that might just be the problem.
It is all well and good to have all of the ingredients to bake a cake but without a recipe God only knows what we may end up with. The central challenge we face is how to get the economy to grow, not by one per cent or two per cent, but by five per cent to 10 per cent. There is a need for a new paradigm of growth that is relevant and useful.
IMPORTANT THEORETICAL CONSTRUCTS
Undoubtedly, the two most important theoretical constructs that have influenced Caribbean economic policy over the last half of a century are W. Arthur Lewis' model of economic development with unlimited supply of labour, and the plantation economy model based on the work of George Beckford, Kari Levitt and Lloyd Best. However, the application of aspects of these two paradigms did not result in the kind, and quality, of growth required for the economy to take off.
W. Arthur Lewis, the Nobel Laureate who was born in St. Lucia, posited that the economy is dualistic in structure. It comprises a backward agricultural sector and a modern industrial sector. The backward sector is characterised by people living from hand to mouth, low-level technology and high levels of unemployment.
On the other hand, the modern sector is efficient and driven by the profit maximisation motive, and as such, represents the dynamo through which economic transformation can take place. According to Lewis, economic development and the reduction in unemployment would take place by the process transferring idle hands from the backward sector and the reinvestment of profit earned back into the modern sector. Back in the 1950s, Lewis recognised that there was a shortage of capital the Caribbean and considered it practical to encourage direct foreign investment which led to a policy of "industrialisation by invitation." The early development of the bauxite industry was guided by this policy.
SERIOUS WEAKNESS
However, by the end of the 1960s, it was clear that Lewis' model had serious weakness. Although there was economic growth, unemployment levels were still high and the divide between rich and poor was widening. The main failure of Lewis' model is that it ignores the history of the Caribbean and as a result the policies, overlooked the motivation of the domestic capitalist, ignored the orientation of multinational corporation, underestimated the appetite of the domestic economy for foreign goods and encouraged a neglect of agriculture.
The plantation economy model was the polar opposite to Lewis' model in its treatment of history. It investigates the evolution of the plantation, dissects its economic structure and assesses it in the context of European colonialism. Based on this analysis, it concludes that the sugar plantation, although it is no longer the force it was, has created a mold in which the economy still operates and this is the paramount cause for underdevelopment.
It is evident that Beckord, Levitt and Best were influenced by the Dependency school in Latin America which held the view that an economic battle line was drawn between north and south; between the centre and the periphery - hence development was only possible if the exploitative chain between the developed world and underdeveloped economies is broken. The plantation model, therefore, stressed self-reliance and a radical change in the prevailing economic relationship poor countries had with rich nations.
To some extent, the Manley regime introduced a number of policies in the 1970s which were shaped by the analysis of the plantation model. However, while there was a significant redistribution of income, the economy grew negatively from 1973 to 1981. The main failure in this case was the stifling of market forces and the implementation of inward-looking rather than export-oriented strategies.
THIRD PARADIGM
There is now a need for a third paradigm - a model that embraces the ruling economic orthodoxy but is radical in its approach to the treatment of the Caribbean identity; a construct that has the benefit of experiences learnt from both Lewis' model and the plantation economy analysis.
With the accelerating forces of economic globalisation, there are a number of features the third paradigm must have in order to have growth that is rapid and can be sustained.
First, it must be based on the principle of the free market and must reject the idea of withdrawal from the international economy.
Second, it must create and deepen the linkages between the agricultural, manufacturing, service and other sectors in the economy.
Third, it must emphasise the use of indigenous resources and strategies that lead to the reduction in unemployment. Fourth, it must take into account the sociology and the character of the Caribbean people with its framework.
And yet, having the right economic recipe is one thing but it takes some skill on the part of the chef for it to work. This is where political commitment comes in. But first things first the search for the third paradigm must begin.
Cedric Wilson is an economics consultant who specialises in market regulations. Send your comments to: conoswil@hotmail.com.
