Manley, Gonsalves and Caricom

7/31/2019 Manley, Gonsalves and Caricom

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THE CARICOM:MDCs & LDCs:WHICH DO BETTER & WHY?JAMAICA(MDC)and ST. VINCENT & THE GRENADINES (LDC)

6/27/2012

MAIS 750 ASSIGNMENT 2

JOHN ALAN SUTHERLAND 2980775

ATHABASCA UNIVERSITY

DR PAUL KELLOGG


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Since the establishment of the CARICOM (Caribbean Common Market) its member

states have taken very divergent development paths to build their economies with both positive

and negative results. In general the region as a whole has declined in relative economic

significance and now accounts for a mere 0.3 per cent in hemispheric trade (Levitt, 2005).

While we can attribute some of these economic results to global trade liberalization which has

widened disparities and degraded the social environment in the Caribbean, there are many other

contributing factors. Domestic industries have collapsed, small farmers are threatened by the

import of cheap and subsidized foods, migration continues to deprive the region of skilled

labour, and crime is on the increase throughout the area (p. xxiv). These conditions threaten to

worsen unless solutions are found to chronic poverty and unemployment in the region especially

among young people and women. It has often been said that the economic aspirations of

Caribbean nations and their citizens have been beyond the reach of the islands small scale

economies. Influenced by the demonstration effect of the United States, the Caribbean people

have naturally wanted the same standards. (Pastor & Fletcher, 1991) as Americans.

On the positive side of the Caribbean economy, CARICOM has achieved: the creation

of the Regional Negotiating Machinery; the start of implementation of CARICOM Single Market

and Economy (CSME); the addition of new members such as Suriname and Haiti; and the

establishment of the Association of Caribbean States. But its main achievement could be the

sustaining and advancement of the larger vision of the entire Caribbean as a region with a

distinct geographical, historical and cultural shared identity (p. xxiii). This coincides with the

views of William Demas who conceived, nurtured and guided the Caribbean community. Demas

observed that the case for regional integration does not ultimately rest on any economic


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prepositions concerning benefits of scale, but on the sense of West Indian nationhood (p. xxiv).

Has that ever existed?

Why have there been such economic disparities in economic results between

CARICOM members? CARICOM as a regional economic trade association has always been

unable to fully integrate its members into one common political and economic unit because of its

internal divisions into two distinct groups of sovereign states: the more developed countries

(MDCs) and the less developed countries (LDCs). The MDCs such as Jamaica, Trinidad and

Tobago and the Barbados have been characterized by their more developed post colonial

political institutions and economic structures. They have used this advantage to dominate the

workings of the CARICOM. From its beginning its policies have been shaped largely by the

MDCs without whose support any implementation would be impossible. MDCs have either fully

supported policies if these are in accordance with their national goals or if not they have refused

to implement them within their sovereign jurisdictions. Consequently CARICOM initiatives

have been justifiably criticized as benefitting the MDCs at the expense of the LDCs.

In the interests of self preservation the LDCs of the Eastern Caribbean, many of whom

are small islands , have formed their own Organization of Eastern Caribbean States (OECS).

This has allowed them to take actions for their own mutual benefit without being dominated by

the MDCs. By doing this small LDCs like St. Vincent and the Grenadines have been able to

benefit from a single eastern Caribbean currency union and obtain financial assistance through

the Eastern Caribbean Central Bank (Gonsalves, Interview, 2009) to further their development.

The eventual goal of these countries has been to enter into a full economic union between the

members of the OECS (Gonsalves). This was done in 2011 between the six LDCs which form

the OECS. The prospect of such an economic union would be extremely unlikely within the


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larger CARICOM as evidenced by the slow progress to date toward CSME implementation by

CARICOM members.

What part then has CARICOM played in the economic development of its members?

This paper will examine that question from the perspective of two of its member countries

representing the two groups within the association. Jamaica is an MDC and St. Vincent and the

Grenadines is an LDC. While the colonial histories of both have similarities this paper will show

that political and social factors rather than trade and economic factors have been the most

important causes of each nations current economic development or lack thereof.

It is important to keep in mind that the origins of these classifications of MDCs and

LDCs within CARICIOM are based largely on the state of their development that existed in the

late 1950s. This was when the British government forced their colonies in the Caribbean into

becoming parties to the Federation of the West Indies. In 1958 a federal system was thought to

be a good solution to Britains problems of having to administer thirteen separate colonial units

which were seen as no longerpolitically and economically profitable (Levitt, 2005) spread

across the wide expanse of the Caribbean Sea . However little attention was paid by Westminster

to the aspirations of the citizens of the various island units. The larger colonies such as Jamaica,

Trinidad and Tobago and Barbados already had achieved internal self government (Manley,

1982) and were seeking independence from Britain. These islands were not interested in being

grouped with smaller entities such as St. Vincent and the Grenadines which were still crown

colonies with little progress towards self governing ability. The political parties in these MDCs

were more interested in the type of government that their own island would have after

independence rather than supporting a federal governing body over all the islands. Jamaican

nationalism proved too strong for the federal principle (1970, p. 103). There was a wide belief


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in Jamaica that that country, as the wealthiest member(at that time), would be burdened by

poorer and smaller territories (Levitt, p. xii).With such disparity of development among

members there was little likelihood of the Federation being successful.

The economic legacy left by colonialism in all the Caribbean islands was one of

importing everything and exporting everything, given that virtually all agricultural products

produced in the islands such as sugar, coffee, and bananas were grown for the export market. As

well much of the surplus of capital was exported abroad to the foreign owners of the land and

businesses used for production (Manley, p. 25) leaving little to put into local enterprises. Post

colonial exports in the case of Jamaica averaged only 78% of imports (p. 36). Colonialism also

left a society with an educated middle class of brown people: the bastard but free offspring of

slave owners (p. 27) and their female slaves to rule over (after the departure of the British) a

large population descendant from slaves. In the case of post independence Jamaica:

unemployment was over 24% (p. 33); 85% had no post secondary education (p. 34); 40% were

functionally illiterate (p. 34); and there was a need for housing of 15,000 units per year (p. 34).

It is important to any discussion of the economic development of MDCs and LDCs

to recognize that economic policies within each member state have been greatly influenced by

the dominant personalities of national political leaders. This is particularly true in the case of

Jamaica where politics since independence have often been reduced to struggles between strong

leaders with deep philosophical differences which have affected the direction of economic plans.

The political decolonization of Jamaica began with its independence from Britain on

August 6th 1962 under the leadership of Prime Minister Alexander Bustamante and his Jamaican

Labour Party(JLP). The JLP had won the election leading to sovereignty over the Peoples


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National Party (PNP) led by Norman Manley. Jamaica voted herself out of(the) federation and

without Jamaica the Federation collapsed (1970, p. 103). The JLP was the more conservative of

the two political parties and governed Jamaica from the right of the political spectrum for the

next ten years. With political decolonization came economic decolonization marked by national

development planning which attracted the best and brightest economists to public service

(Levitt, 2005) within these new governments.

During that period of time following independence national governments of MDCs like

Jamaica supported economic policies which focused on seeking to attract foreign capital by

continuing to provide cheap labour, low taxes on businesses and absolute security for investment

with the right to ship profits abroad to pay off the investment in a shorter period of time. This

was commonly referred to as the Puerto Rico Model for development which sought capital

from abroad to build local industry. Subsequent studies have shown that there is no relationship

between growth and openness (Levitt, p. xi) to foreign investment. These policies offering best

terms to attract foreign investment led to the expansion of the bauxite industry in Jamaica by

foreign owned companies which paid a minimal royalty to the Jamaican government for bauxite

and alumina production. However unlike Puerto Rico where government deficits of that new

entity could be subsidized by the U.S. Federal government in Washington, Jamaica had to cover

all its government overhead out of the revenues it received from these foreign companies. In

direct contrast to the Puerto Rico model the export success of Asian countries (such as South

Korea and Singapore) was based on high rates of domestic savings and investment rather than

Foreign Direct Investment (p. xi) . While the ruling brown class in Jamaica controlled much of

the local wealth they were relatively small in number and could not fund large scale economic

growth on their own.


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A change to the left for Jamaicas economic decolonization in the form of

democratic socialismcame with the election of the Peoples National Party (PNP) under

Michael Manley in 1972. Michael, who wasNorman Manleys son, had been exposed to the

political thoughts of the North while serving in the RCAF during the Second World War

(Ameringer, 1991) and then taking his degrees at the London School of Economics (Manley,

1974). Both he and his father along with many in the PNP were impressed by Fabian socialism

as enunciated by that wing of the British Labour Party (Kaufman, 1985). Michael had returned to

Jamaica in 1951 to become involved as associate editor of the weekly paper Public Opinion

(Manley, 1975) which had been formed in 1937 to be nationalist, progressive and anti-

Establishment (p. 21). Michaels political activist interests soon turned to the newly formed

National Workers Union which was formed to change the working conditions for the bulk of

Jamaicas working population who were living in extreme poverty.

In 1968 when his father at the age of seventy-five decided to give up the leadership of

the PNP Michael took over as party leader. The challenge the father gave to his son was to

complete the mission of tackling the job of reconstructing the social and economic society and

life of Jamaica (1982, p. 6). As a Jamaican brown man he (Michael) understood the divided

political roles his ascribed group had played on both sides of the ideological spectrum

(Beckles, 2002) as a connecting force between white masters and black slaves. He was a mixture

of the enlightened rationalist and the subversive romantic (p. 34). Rationalist in the sense that

he believed without reservation in the idea of social transformation and democratic progress, and

with a kind of messianic religiosity associated with present day believers in the scientific validity

of Strategic Plans (p. 34).


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The economic structure of Jamaica that Manley and the PNP inherited in 1972 had key

features which would turn out to be major obstacles to his economic and development plans.

While bauxite was the most important export earner of foreign exchange for Jamaica the

government revenue from it was quite small. Foreign ownership and an international market

made revenues from bauxite and alumina production susceptible to dramatic price fluctuations.

Tourism was mostly in the hands of foreign companies. It required high import costs in order to

provide for foreign visitor needs. Agriculture was a disaster. Large amounts of land had been

allocated to the aluminum industry and tourism. Much of the arable land was owned by wealthy

Jamaicans who preferred to leave the land idle until the prices of agricultural exports such as

sugar and bananas rose to higher levels. Failure to use more land for domestic food production

led to rising food prices and a flight by agricultural workers from the country into the city

(Kaufman, p. 40) resulting in overcrowded urban slums. The financial sector was largely in

foreign hands which meant that investment decisions including the flow of capital to the country

were controlled from outside Jamaica. There was a growing reliance by government to seek

developmental aid, loans from international agencies and foreign governments to meet

government deficits. In short capitalisms strength and depth as a mode of production were

extremely limited in Jamaica.

In his leadership of the PNP Michael Manley brought with him his personal philosophy

ofpolitics as being a means to achieve equality. He believed that since the purpose of society is

to ensure the survival of every individual then everyone in society must have equal opportunities

(Manley, 1974). To him social organization exists to serve everybody or it has no moral

foundation (p. 18). To him this egalitarian society would only be achieved when every single

member feels instinctively, unhesitatingly and unreservedly that his or her essential worth is


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recognized and that there is a foundation of rights upon which his or her interests can safely rest

(p. 38). In the election of 1972 Manley had appealed to Jamaican nationalism (Kaufman, p. 2)

actually winning a majority of support from the middle and upper class (p. 74) along with the

private business sector all of whom were disenchanted with the slow progress toward economic

progress under the JLP. The bulk of the black population that did not support him were not

totally enamored at that point with this brown man who appeared to them to represent the

ruling classes left behind when the British departed.

Upon his partys election to government in 1972 Michael Manley was determined to

bring change to Jamaica to move the country towards the goal of equality for all citizens. Power

for the people if they need it; Power for the people let them have it (Kaufman, p. 72) was one of

his political slogans. That goal of equality was to be achieved based on a four point plan (p. 39)

which included: the economy was to be made more independent of foreign control; the

government would work towards the achieving of this egalitarian society; the ideal was to

develop a truly democratic society; and the country would be encouraged to retrace the history of

its people and their heritage back to their African roots not to the colonial powers. The

production of sugar which was still the main agricultural commodity and tied into reliance on

international market prices and quotas with reliance on first Europe and then the United States

was to be controlled by a state marketing agency and sugar cooperatives were to be set up to put

profits in the hands of workers. Industry that was foreign owned and deemed essential services

would in some cases be nationalized with fair market compensation paid (p. 42). Revenues from

bauxite and alumina production would be increased through the imposition of an increased levy

and the organization of a cartel with the other producing countries in the Caribbean, Guyana and

Suriname. The government would take steps to create a commercial banking system in Jamaica


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to stimulate investment within the country. A program of land reform and land redistribution

would occur to attract people back to the rural areas from the urban ghettos. Greater worker

participation within the economy would be encouraged. The government would institute a wealth

tax on the wealthy to enhance government revenues (pp. 42-44).

It was essential to Manleys vision of building a strong economy for Jamaica that the

nations of the Caribbean build a strong regional association to promote their economies (Manley,

1970). He recognized that Jamaica had an important role to play as a member of the Third World

which was now marking its transition from an age of apology to one of assertiveness (1970, p.

100). While the Third world was experiencing the new taste of nationalism and political

independence (1970, p. 101) it still had a need for external capital. Above all the Third World in

its dealings with the industrialized nations needed the strength that can come from regional

economic groupings: and more generally, the development of a common economic diplomacy

(1970, p. 101). Manley believed that national survival of each Caribbean nation was like

business survival ,..a matter of margins and that regionalism can provide the framework in which

internal markets are increased, external bargaining power enhanced and international recognition

maximized (1970, p. 106). He believed that the greatest threat to the sovereignty of each of the

Caribbean nations was the overpowering power of the developed economies of the metropolitan

world as opposed to the less developed economies of the third world (1970, p. 109). It was

important that each of the Caribbean nations realize that regionalism was important to their

individual development because it is the natural avenue through which it can enter and

influence the stream of third-world politics (1970, p. 109).

Despite Manleys efforts to build an independent economy for Jamaica along social

democratic lines a shortage of investment capital caused partly by internal consumption


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pressures forced his government to seek a substantial IMF loan in 1978 which involved harsh

terms, including holding back incomes against any increase in production, a limit on other

foreign borrowing, big public spending cuts, and a devaluation of the Jamaican dollar by 32.25

per cent. As a result, prices of consumer goods rose by 30 to 50 per cent as did inflation and

unemployment. Jamaicas external debt in September of 1978 stood at $877 million and foreign

exchange reserves totaled $47 million. (Manley, North-South Dialogue, 1979). On the foreign

affairs scene Jamaicas moral support of Cuba and its intervention in Angola led to the United

States pressures on the IMF and the World Bank to withhold further loans to the Jamaican

government which increased hardships on the poor.

In the late 70s Jamaica was overcome by violence bordering on civil war, with charges

and countercharges of external intervention by the U.S., C.I.A. the collapse of tourism, capital

flight (by the wealthy and middle class), and the exodus of professional Jamaicans brought the

country to near bankruptcy (Levitt, p. xv).

In the Jamaican election of 1980 Manley and the PNP were defeated by the JLP. In

retrospect Manley stated his great error had been in grossly overestimating what the state could

do, how I could use the state as an economic machine, as a form of shortcut to development. I

learned that I was wrong The other thing I did was to fail to make an adequate

connection between perceptional problems arising from the ideology of concern for the masses,

for poverty, equality, and foreign policy and its effect on the mind of the private sector. When

working with the private sector , I am almost begging them to invest and produce and I am

assuring them that we see them as a critical part of the engine of development. But they looked at

the state activity and saw a threat. They looked at the egalitarian ideology and saw a threat. They


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looked at the foreign policy and perceived a threat. And so they became part of the problem

instead of part of the solution (Manley, 1993).

As a test case for the viability of a left of centre social democratic program Jamaica seemed

to have had all the right ingredients for success: functioning parliamentary system; strong trade

union movement; a history of state economic intervention; and a high degree of literacy by third

world standards (Kaufman, 1985). But there were many roadblocks to change as sought by such

a program promoted by the PNP. Many of these were local such as the fears by the brown

aristocracy for their assets, power and position within a democratic socialist state. Many were

also external led chiefly by the anti-communist rhetoric of the United States and its local

Jamaican supporters who could point to Manleys close friendship with Castros Cuba as a sign

that Jamaica was coming under the communist sphere of influence.

The apparent inability to prevent the defection of elements of the capitalist class

as well as the middle class from the all class alliance on which democratic socialism was

premised proved to be a fundamental tactical error (Benn, 2002).

After the 1980 election there were massive loans by the World Bank (under pressure by

the United States) to the JLP government under its new leader Edward Seaga over the next nine

years. Yet there was little improvement in economic growth in Jamaica to show in tangible

terms (Levitt, p. xviii) . The result of this stagnant economy was that Manley was returned in the

election of 1989 but with a changed outlook on his part as to what he could accomplish. His

views had now shifted to the right and he appeared as a born again capitalist with his programs

for social equality placed on hold. By 1993 he had resigned as prime minister of Jamaica and had

been appointed as a sort of Ambassador Extraordinary (Manley, 1993) for CARICOM. He


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now saw the role ofthe association as a means of creating this wider area of economic

cooperation, leading to capacity to survive in a globalizing economy and with NAFTA

(Manley, 1993). By this time he was dying of cancer but he had not wavered in his belief that the

ultimate answer to Jamaicas problems was democratic socialism. There has to be a place for

human aspiration expressed in terms that incorporate everybody in mankinds dream. And the

concept that there has to be a politics of activism for the realizing of our dreamthat cannot die,

will never die. (Manley, 1993)

The succeeding years and governments in Jamaica have never solved the problems of

inequality in Jamaican society which Manley had unsuccessfully tackled. The currency has been

devalued (now standing at $82J to the Canadian dollar), interest rates were sent soaring and are

still high , the economys growth has been curtailed, inflation has skyrocketed, wage increases in

the public service and social programs have been financed by more borrowing within and from

foreign sources, the PNP and the JLP have traded places as the government without any real

change, and 50% of government revenues go to service the public debt. The situation could have

been far worse without remittances from Jamaicans abroad many of whom left during the

Manley years.

In the 1970s Dr. Ralph Gonsalves, who currently holds the position of prime minister of

St. Vincent and the Grenadines, was in Uganda doing research for his doctoral dissertation at the

University of Manchester. While walking on a university campus there he was stopped by

soldiers because he was wearing a beard and had allowed his hair to grow long. A sure sign of a

radical! Both of these were forbidden by Ugandan law. Questioned menacingly by these soldiers


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as to where he was from and unable to make them aware of the location of his own country he

finally blurted out Jamaica. Upon hearing this the soldiers uttered approvingly, Michael

Manley,and Bob Marley (Gonsalves, p. 56). While the incident highlighted the fact that

Jamaica is known worldwide for its reggae music epitomized byit favorite son, Bob Marley it

also attested to the legacy that Michael Manleys public voice constituted Jamaica as a site

where intense contests over the use and ownership of resources and the meanings of sovereignty

were played out before a world audience whose imagination was captured by his ideological

persuasiveness and depth of commitment (Phillips, 2002).

Perhaps Dr. Gonsalves remembered the lessons from the trials and tribulations

experienced by Jamaica under Michael Manley. More likely he has been helped by the fact that

St. Vincent was and still is a middle-income country, with a per capita GDP of EC $19,323

(Grenadines) with a much smaller population spread over a number of islands. Like Jamaica it

has similar economic restraints: geographically close to the USA with citizens who have highly

sophisticated and expensive consumer tastes resulting in a very high level of expenditure on

imported goods and services; negative economic growth but hovering just below no growth

(Grenadines); heavy reliance on tourism; declining performance and production in agriculture

(Thoumi, 1989); declining GDP; and in general a small resource-challenged, structurally-

dependent, open economy, which is prone to natural disasters such as hurricanes (Grenadines).

What it does have which Jamaica lacks is a civil service which is amenable to accepting wage-

and-salary restraint and a historical development where because of its size and history there was

neither a well entrenched ruling class nor a large working class (Bobrow & Jinkins, 1985) with a

wide spread of inequality between the two. While the percent of the population at the general

level of poverty is high-30.2%- the level of the population living at extreme poverty has dropped


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between 2001-08 to 2.9 % as a result of government programs focusing on poverty reduction

policies (Grenadines). These have been helped by a decline in the birth rate and an increase in

net migration. The Public Debt as of September 2011 was $1,221.70 Billion with a total debt

service for 2012 is estimated to be $131.8 million or 26 percent of Current Revenue (Grenadines)

which is approximately one-half of Jamaicas. Economic union among the six independent

member countries of the OECS was signed in 2011 but the Economic Union Protocols are

currently being worked on between the signatories (Grenadines). Currently with the help of

foreign capital it is constructing an international airport on St. Vincent to bring in direct flights

from Europe and North America.

What then are the answers to why LDCs have in many cases outperformed the MDCs in

economic performance? If we compare Jamaica and St. Vincent and the Grenadines we see that

in the latter social cohesion has not been destroyed to the same extent as in Jamaica. (Levitt, p.

359). In other words personal relations between people in these smaller societies have not (as

yet) been impoverished by a style of development which sanctions selfishness and greed by

social approval in the form of monetary reward (p. 359). In these LDCs civil society is

sufficiently strong enough to prevent the use of economic and political power to exploit the weak

and the powerless. In the LDCs there is a social compact and the explicit and implicit

negotiation between government, labour and the ruling elites, which have defended the national

interest from external destabilization (p. xxii). On the other hand in Jamaica the real social

contract is between the political and economic elites and excludes the laboring classes illustrated

by mutually beneficial debt financing at the expense of the general population (p. xxii) and this

as Manley found was an obstacle too strong to change..


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Manley, Gonsalves and Caricom

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