Economic Transformation and Job Creation: The Caribbean Experience

By Trafford Publishing

The question of economic transformation is an immediate and practical one for the English-speaking Caribbean. In the postindependence period, Caribbean governments seemed blissfully unaware that the inability to transform their economies was leading to serious unemployment problems. The statistics are quite stark. Unemployment rates in the Caribbean range from 6% in the more prosperous states to 23% in the less prosperous ones.

This use of economic transformation and job creation continues to be a major challenge in the first decade of the twenty-first Century. This is the subject that is treated with impressive urgency in this volume entitled Economic Transformation and Job Creation: The Caribbean Experience.

• Language: English
• Publisher: Trafford Publishing
• Release date: Aug 12, 2013
• ISBN: 9781490707891

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© Copyright 2013 Kenneth Hall and Myrtle Chuck-A-Sang, Editors, The Integrationist.

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Contents

Introduction The Caribbean Experience: The Growth Debate N

Kenneth O. Hall

SECTION I

Overview

1 Report of Symposium on Economic Transformation and Job Creation: New Governance Challenges

2 Resetting the Caribbean Development Agenda: Independence and Epistemic Sovereignty

Kirk Meighoo

3 Responses to Economic and Social Ills: Focus on Two New Initiatives for the CARICOM Region

Rickey Singh

SECTION II

Policy Framework

4 Commentary on Learning from Past Policy Experience: Import Substitution and Light Manufacturing A Governance Perspective

Edwin Jones

5 A Development Banking Perspective on the Expectations of International investors and Entrepreneurs

William Clarke

6 Enhancing Democracy for Development in Jamaica: Key Issues and Strategies

Vanus James and Rosalea Hamilton

7 The Key to Prosperity in Jamaica

Douglas Orane

8 Economic Transformation and Job Creation: New Governance Challenges in an Uncertain Global Environment

Claude Robinson

9 Public Governance, Private Sector Growth and the Public Interest

Compton Bourne

SECTION III

Growth Sectors

10 Breaking down the barriers to Caribbean prosperity through a restructuring of the economic payoffs for innovation

Silburn Clarke

11 Manufacturing for efficient import substitution in Jamaica

William Lawrence

12 Current Options for Sustainable Job Creation: Internal Action

Grantley Stephenson

13 Stimulating the Flow of our Creative Potential

P. J. Patterson

14 Macroeconomic Stability and Growth with Equity

H. Leon and R. Smith1

15 Jamaica’s Underachievement in ICT: An Erosion of Application Effectiveness

Evan W. Duggan

SECTION IV

Education and Job Creation

16 University Ranking: Do they Matter?

Portia Simpson-Miller

17 How better to capitalise on the resources and output of tertiary education to drive competitive growth in the English Speaking Caribbean

E. Nigel Harris

18 Economic Sustainability Labour Markets and Competitiveness—The challenge of the Region: To create jobs and a sustainable livelihood for its people

Ancile Brewster

19 The Challenges of Education in the Contemporary Caribbean: Addressing Performance

Didacus Jules

20 Human Capital Development Imperatives

Jennifer E. Wynter-Palmer

21 Current Options for Economic Transformation and Sustainable Job Creation: Internal Action

Halden Morris

Conclusion

INTRODUCTION

The Caribbean Experience: The Growth Debate

Make no mistake about it. Our region is in the throes of the greatest crisis since Independence. The spectre of evolving into failed societies is no longer a subject of imagination. How our societies crawl out of this vicious vortex of persistent low growth, crippling debt, huge fiscal deficits and high unemployment is the single most important question facing us at this time.

THIS UN-NERVING PORTRAYAL of the Caribbean by one of the Prime Ministers, Dr. Kenny Anthony of St. Lucia, is in keeping with the prevailing literature on Caribbean economic growth and unemployment over the past four decades. An equally pessimistic portrayal has been provided by an IMF working paper entitled Caribbean Growth in an International Perspective: The Role of Tourism and Size. According to the authors Neta, Thacker et. al.,

Caribbean countries have experienced low growth since the 1980s, with the current global slowdown derailing the feeble recovery of the early 2000s. The region has been buffeted by a series of adverse exogenous shocks over time, including the erosion of trade preferences; the decline of official foreign assistance; and recessions in source countries that drive tourism and FDI in the region. The recent global slowdown has exacerbated the already declining trend in growth. As a result, average growth has dropped from 3.0% in the 1970s to 2.7% in the 2000s.

These alarming statistics have put the issue of growth at the top of the Caribbean agenda as it must be a matter of concern to the Caribbean people and their governments that the optimism that was associated with independence in Caribbean states has been replaced by pessimism about our future. Caribbean post Independence period has been associated more with economic difficulties, if not stagnation, than with robust growth and transformation. Unable to sustain meaningful growth, our societies have been plagued by persistent high levels of unemployment. Caribbean countries often present to the world the unflattering image of a region dominated by crime and the export of drugs.

Recent developments at the global level have shown that the Caribbean experience is not singular. High unemployment in Europe, North America and elsewhere has resulted in a call for dramatic changes in economic policies and even the structure of government. We have witnessed the inability of many democratically elected governments to manage the consequences of high unemployment and economic decline. In our own region there is credible evidence that economic difficulties associated with high debt, slow growth and high unemployment have resulted in changes of government in many countries.

What is perhaps most striking is the absence of clear policy options that have reasonable prospects of resolving these problems in the short run. Governments in our region are constrained to stimulate their economies through programmes of public investment and employment creation. Moreover programmes of austerity to cope with public debt and economic stagnation show every sign of worsening the situation. What is clearly needed is a new paradigm that could transform the economies to support sustained growth, create employment and resolve the governance dilemma that is now being experienced.

In an effort to address the concerns identified above, the Commonwealth Secretariat and the University of the West Indies convened a symposium on May 30—June 1 2012, at the University of the West Indies. It was the expectation of the conveners that such a symposium would put forward credible policy options for economic transformation and job creation while promoting good governance to assist the governments of the region. Many of the papers in this volume were presented at the symposium. Other papers have been added specifically for this publication because of their relevance to the themes of this book. The main policy recommendations emerging from this symposium are contained in Report of Symposium on Economic Transformation and Job Creation: New Governance Challenges which is included in section one of this volume.

The presenters of the papers as well as the participants were drawn from across the region and included government officials, private sector leaders, university scholars and researchers and members of the NGO community. It was the general consensus that all relevant sections of the society including governments, business, NGO communities, universities and colleges, churches and labour movements should be included in the search for a new strategic direction. The recommendations of the symposium and the papers are included in the Policy Dialogue document that emerged.

It was recommended that the following issues take centre stage in the various Governments and States of CARICOM with the aim of Economic Transformation and Job Creation in the Caribbean:

• The review and possible expansion of incentives for investors, ensuring that policy objectives (such as job creation or the generation of foreign exchange) are achieved in practice and that those distortions do not occur due to economically irrational interventions, such as through politics.

• The granting of investment incentives to all investors, embracing local investors, foreign investors, and investors from the Caribbean Diaspora.

• The entire economy of the Caribbean be brought up to dynamic levels, as opposed to concentrating dynamism and growth to enclaves of foreign investment, since the overall vibrancy of the economy may be more important than particular fiscal incentives in attracting foreign investment. Results-oriented reform of the public service be seen as central to creating this overall dynamic, rules-based environment needed to stimulate investment and create jobs.

• Issues of trust be placed at the forefront in this effort as well, between governments and citizens, between employers and employees, between the private sector and public sector, between town and country, between locals and foreigners, between ethnicities, classes, and genders, and between rival political parties. Perhaps, central to this is a need to identify a shared objective to which all—government, private sector, workers/unions and communities—can subscribe and be held accountable.

• Manufacturing be actively encouraged by government because of its demonstrable effects on the entire economy in terms of both growth and contraction.

• Knowledge Management be placed centre stage in the economic transformation process, from management, to production, to skills training, to economic planning, etc.

• Agriculture not be neglected in economic transformation and job creation, but be an integral part of the process.

• Build on the strengths of existing entrepreneurs.

• The strength of the Caribbean mining sectors, in bauxite and gold mining for example, be properly exploited and integrated with economic transformation much more fully and for the benefit of the Caribbean people.

• The very insightful and high-quality analyses and recommendations of the past with regard to transformation and job creation, be heeded and acted upon, rather than be simply paid lip-service. Human Resources Services and Skills Development be properly integrated into development planning, investment, and job creation programmes.

• Key transformational opportunities, such as the development of the Kingston harbour in order to take advantage of the Panama Canal expansion, be seized upon in a timely manner.

• The Tertiary Education Sector should play a role in training, research, development, and direct business generation and entrepreneurship itself in the context of economic transformation and job creation in the Caribbean.

• The National Industrial Policy of Jamaica be revisited along with a recognition of the importance of Public-Private Sector partnership, including:

Re-examination of the Financial Sector:

• Governance issues including need for a rules-based system to be applied fairly and predictably; transparency with predictable judicial underpinnings; and the need for strong anti-corruption machinery.

• More focused and co-ordinated policy initiatives with regard to the role of the Diaspora, in terms of investment, network building, innovation, and transformation.

These recommendations are consistent with the emerging consensus about the measures that will facilitate economic growth and job creation in Caribbean countries. It is noteworthy that at a recent Forum, jointly organised by the International Monetary Fund and the Caribbean Development Bank in Port of Spain Trinidad and Tobago to discuss the challenges of low growth and high debt facing the Caribbean, several of their recommendations were similar to those listed above. For example, they noted that low growth remains a key challenge for the region. In addressing the solutions the Forum recommended, inter alia, that countries with high debt ratios will need to pursue fiscal adjustment steadfastly; that protecting the poor and vulnerable groups should be central to reforms; the challenge to achieve sustainable growth in the region calls for a broad-based collective and collaborative approach.

One of the points of departure in the recommendations of the Policy Dialogue Document referred to earlier is the central role that universities and other tertiary education institutions are expected to play as entrepreneurial centres engaged in new businesses, leading innovation and creating knowledge driven jobs. What is being suggested is that universities should assume a new function in addition to their traditional role of teaching, research and public service. This is in keeping with the emergence of a new category of universities referred to as Entrepreneurial Universities.

Notice should also be taken of the focus on governance issues that would need to be addressed as part of the economic transformation leading to job creation. This is in keeping with the concept that the Caribbean countries must increasingly turn to their own resources, develop policies and institutions that will enable them to participate successfully in the global market place and provide acceptable livelihood for their populations.

Professor Sir Kenneth Hall

Honorary Distinguished Research Fellow

University of the West Indies, Mona

SECTION I

Overview

1

Report of Symposium on Economic Transformation and Job Creation: New Governance Challenges

THE UNIVERSITY OF the West Indies in collaboration with the Commonwealth Secretariat convened a Symposium entitled Economic Transformation and Job Creation: New Governance Challenges at the Regional Headquarters of the University of The West Indies from 30 May to 1 June 2012.

The Symposium was attended by representatives from the International Monetary Fund (IMF), Inter-American Development Bank (IDB), past and present political representatives from various CARICOM Member States, members of State Boards and Parastatal Organizations from CARICOM Governments, the University of the West Indies and other Tertiary Education Institutions, and Trade Unions in the Caribbean.

The Representatives addressed the central issue from a number of clearly defined yet interrelated perspectives. They first examined past experiences and what lessons could be learned from them. From there they went on to look at what were the successful platforms that had been created in the past and how best these could be built upon. Also examined was the role which tertiary institutions had played and whether or not this role could be reshaped and redefined to meet existing and new challenges. In addition, they examined what were the current options for economic transformation and job creation.

It was against this background that the representatives determined to advance some fundamental recommendations designed to form the basis of a policy Dialogue Paper for public dissemination and discussion of all the issues relevant to the economic transformation of the Caribbean region and the attendant issue of job creation.

In their analysis of past experiences the representatives took note of the fact that Governments in the region have in various ways been dealing with issues relative to job creation but only sporadically had these Governments been pre-occupied with resolving them.

A number of reasons were advanced for this. It was felt that the social and political milieu historically was neither youth oriented nor predisposed to training them to take advantage of technological advances that were impacting on the region’s economies. As low paying, labour intensive jobs were as a consequence replaced by high technology applications, this served to exacerbate an already difficult unemployment situation.

This advance in technology, often described as the Third Industrial Revolution, required new thinking within the larger forum of a collective enterprise rather than in the more narrow confines of separate government initiatives. In the absence of such new thinking within a larger framework comprising, for example, other Governments in an associated network of governance, national job creating endeavours such as import substitution and incentives programmes have proven difficult to be applied.

Such difficulties, it was noted, were significantly increased in the further absence of social capital and social trust. The Representatives were unanimous in their view that good governance was the key to effective economic transformation and consequently, to job creation. The quality of leadership mattered, they asserted, and ought not to be influenced by what was seen as a pervasive lax culture of implementing rules.

In addressing how best to build on the region’s successes the Representatives deliberately avoided attempting to catalogue such success. Instead, they took the view that the current age of information and technological advances demanded a new and different approach towards ensuring that any enterprise, private and government, was managed successfully.

Knowledge management was seen as the key to economic and social development. For success to be sustainable, to be competitive and to create a solid platform for growth it had to be rooted in sound management practices that were informed and driven by centres of knowledge excellence. In this context human capital became more extensively utilized with a consequential impact on job creation.

It was also in this context that the Representatives discussed the role which tertiary institutions and other centres for training as well as for research and development should play in the process of economic transformation and job creation. It was felt that while Universities should continue their current role of expanding intellectual horizons, they also needed to become more an integral part of society through a greater involvement in the regional development process, through curriculum changes and more seminars and symposia that directly address the practical aspects of regional economic transformation.

The representatives noted that an essential pillar for success was the aspect of Research and Development. R&D for too long has been regarded as an expendable budgetary item and omitted in situations of financial crisis. It was argued that it should now be considered a development issue very much as education and health have found recognition and acceptance as essential to national development.

As the representatives examined what were the available options for economic transformation and sustainable job creation they stressed the importance of forging a stronger government private sector partnership not only with respect to such issues as financing, but also in the area of skills and specialized training.

Concern was however expressed about the existence of a traditional wall of distrust between the two entities which had to be broken down. Even as the representatives recognized the traditional separateness in the perspectives of the two entities, they were of the view that both ultimately served the same ends. They reiterated the need to create a climate of trust and an hospitable environment for capital and investment and for enhancing the productivity of people. They further stressed the imperative for strengthening the anti-corruption machinery within agencies to ensure greater transparency—including predictable judicial underpinnings—and a rules-based system that was applied fairly and predictably.

The representatives were of the view that their deliberations and particularly the recommendations emanating therefrom could, with benefit, be an input into what should become a regional discourse on the question of economic transformation and job creation. They accordingly agreed to place these on record and requested the University of The West Indies to seek to advance the discussions at a wider level.

To this end, they have prepared a summary document entitled: Economic Transformation and Job Creation: Policy Dialogue as an input into these discussions.

2

Resetting the Caribbean Development Agenda: Independence and Epistemic Sovereignty

Kirk Meighoo

THE THEME OF this Symposium—Economic Governance and Job Creation—needs to be placed against the background of our Independence project for a number of reasons. 2012 marks the 50th year of the end of the West Indian Federation—the entity through which most of the English-speaking Caribbean was to attain independent nationhood—and the beginning of the independence of smaller units, beginning with Jamaica and Trinidad and Tobago in 1962.

Today, the region generally finds itself behind many other countries which were previously economically poorer than us in the 1960s—including Singapore, Malaysia, South Korea, Dubai, Qatar, and other countries of the Middle East. The independence experience of the Caribbean Community has not been uniform, of course—for example, Barbados has consistently performed significantly better than others for the past few decades while, on the other hand, Guyana and Jamaica have faced decades of deep structural problems. However, even CARICOM’s largest economy—petroleum-rich Trinidad and Tobago—faces serious, structural economic problems despite its long spurt of economic growth in the 1990s and 2000s. To be sure, the global economic collapse of 2008 has hit CARICOM hard, and the process of recovery—where it is occurring at all—is slow and difficult.

The process of economic rebuilding requires political and intellectual focus, and it is here, we argue, that the region—as a whole—is found lacking. This has not always been so, and it is important to argue the case why we believe this to be so.

One of the main problems in achieving our recovery (and, indeed, the structural changes we arguably need) is the ceding of our epistemic sovereignty to others, that is, giving up our responsibility to autonomously interpret the world from our own perspectives and priorities. Since the unravelling of the regional Black Power movement in the 1970s, the global recession of the 1980s, and the neo-liberal structural adjustment reaction to the strategies of the previous decades, the region has apparently lost its self-confidence to boldly define its problems for itself, except for a few scattered, heterodox voices.

It is important to note here that we are not arguing for any sort of parochialism or xenophobic nationalism with regard to the outside world. Indeed, the Caribbean—by its very nature as the first appendages in the European-dominated world-economy—has never been isolated from the wider world, and we do not ever think that it can (or should) be. Rather, this is an argument to take up the challenge once again to critically engage with the wider world, from our own valid perspectives and vantage points, with our own development at the forefront.

Arthur Lewis and the Beginnings of International Development Theory

St. Lucian-born winner of the 1979 Nobel Prize for Economics, Sir Arthur Lewis, has a special place in this story. Lewis was one of the pioneers of development economics and International Development Theory, honoured as such by the World Bank and others. He was part of that generation of colonial West Indians who, before World War II, went abroad to the UK to study and excelled there. Similar to many others, Lewis became involved in the Fabian socialist movement and had much interest in the many anti-colonial movements of the day, many of whose leaders were also educated and resident for a time in the UK.

Lewis wrote sympathetically about the Caribbean-wide Labour upheavals from 1935 to 1938 in his Labour in the West Indies: The Birth of a Workers’ Movement. In 1944, he wrote the important paper An Economic Plan for Jamaica, and in 1950, Industrialisation in the British West Indies. In those papers Lewis undertook a systematic empirical analysis of West Indian economy and advocated a purposeful industrial manufacturing strategy for the region, in opposition to the agricultural bias of the colonial international division of labour (which was supposedly the result of free market forces). In the process he turned British colonial economic policy on its head.

One of Lewis’s allies during that period was Dr. Eric Williams, the future Prime Minister of Trinidad and Tobago, who was in those days, a senior member of the Anglo-American Caribbean Commission, and in that capacity had championed and published Lewis’s work.

At the centre of Lewis’s analysis and strategy was employment and job creation. It was the key problem that centred around everything else. Importantly, this work—grounded in an empirical analysis of West Indian economic issues—became the basis for the newly founded discipline of development economics. Indeed, Lewis’s work, Economic Development with Unlimited Supplies of Labour (published in 1954), became one of the first classics in the field.

Following the Lewis model, throughout the West Indies, Industrial Development Corporations were formed in the 1950s. In the 1950s and 1960s, Lewis actually advised many Governments in the West Indies, and from 1960 to 1963 served as Vice-Chancellor of the University of the West Indies, during the period when the Federation of the West Indies was in existence, and when Trinidad and Tobago and Jamaica later gained their separate independence. It was a fitting component to the impending Independence of the West Indies that the region would produce its own economic model of development, which commanded respect throughout the world. (Indeed, even today, though the model has been almost forgotten by West Indian policy-makers, it remains a staple in development economics, and even Bloomberg News reports on how economists in China today use the Lewis Model to understand the transformation of their economy and its changing dynamics.)

The Unravelling of the Lewis Orthodoxy

With the coming of Independence beginning in the 1960s, however, also came recession in the United States, both at the beginning of the decade and the end. That arguably dealt a serious blow to the Lewis-based policy that had manifested itself as being dependent on foreign investment and exports.

At the same time, younger economists from the University of the West Indies, eventually coming under the rubric of the New World Group, had formed themselves as an opposition to the Lewis-inspired development orthodoxy, and formed branches throughout the Caribbean and in the Caribbean Diaspora. They were concerned about what they perceived to be the failures of the Lewis model (criticising it as industrialisation by invitation) and became associated with more radical transformation efforts, allying itself to radical trade unionists, Black Power ideology, various forms