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Volume 53 / Social Sciences

ECONOMICS: THE CARIBBEAN AND THE GUIANAS (except Cuba and Puerto Rico)


RANSFORD W. PALMER, Professor of Economics, Howard University

THE MAIN THEMES OF THE LITERATURE REVIEWED include structural adjustment (items bi 91007495 and bi 91020081), economic integration (items bi 91020098 and bi 91020096), external debt (items bi 91020113, bi 91020101, and bi 91020110), agrarian reform, and monetary and financial policy. Against the background of an international economic system that is reorganizing itself into large trading blocs, a number of studies point to economic integration of the small Caribbean economies as the only rational response that will provide opportunities for the future growth and development of the region. One study emphasizes that the success of economic integration will depend critically on the growth of productivity, which in turn will depend on improvement in the quality of the region's human resources (item bi 91020098).

It is not surprising that external debt and structural adjustment continue to be the focus of many studies. Because of the persistence of balance of payments and government budget deficits, many Caribbean countries have accumulated large foreign obligations. As a condition for receiving balance of payments assistance from the International Monetary Fund, they are required to pursue policies to restructure their economies in order to restore economic growth. A recurring criticism of the structural adjustment program is that it forces Caribbean countries to reallocate resources toward the production of goods for export at the expense of domestic production for consumption. As a result, food imports increase, thereby perpetuating the balance of payments problem (items bi 91020113 and bi 91007495).

Because food represents a major share of imports, many view increased domestic production of food as an important step toward solving the region's chronic balance of payments problem. Suggested approaches to expanding food production and reducing food imports include land tenure reform and agrarian diversification (item bi 91020100). Land tenure reform has been shown to have a positive impact on agricultural production in the Dominican Republic (item bi 91011876). Demas argues that reforms in other Caribbean countries, coupled with the development of backward and forward linkages and a regional marketing and research strategy, will have a positive impact on income and employment opportunities (item bi 91020100).

Several important studies have focused on the role of monetary policy (items bi 91020097 and bi 91020090). These have largely been the work of researchers at the region's central banks. The fact that central banks in the Caribbean occupy some of the most imposing buildings disguises the fact that monetary policy in the region is still in its infancy: it is subservient to budget policy and is likely to remain so for the foreseeable future. Yet these monetary studies fill an important gap in the economic literature of the region; their analyses of the interaction between monetary and real variables inform economic policy.

Import substitution and industrialization have received extensive treatment in the material reviewed (items bi 91015301, bi 91009435, and bi 91020094). Studies of the Dominican Republic suggest that since World War I the country has benefitted from a combination of a self-interested autocratic government and an array of legal incentives offered to industries (item bi 91009435). In the 1980s, the industrialization process was helped by the Caribbean Basin Initiative, which stimulated the development of free trade zones to produce export goods for the US (item bi 91020094). The literature suggests that import substitution in other Caribbean countries, especially in Trinidad, was less successful due to unfavorable external influences and inappropriate domestic policies (item bi 91015301).

At a time when the market is becoming the guiding force in the economies of an increasing number of countries, some economic planning by Caribbean governments is regarded as essential for growth and development. In the wake of the oil bust in the 1980s and the rapid downward slide of its economy, the government of Trinidad and Tobago has prepared a five-year plan (1989-95) through which it seeks to restructure its economy and to reduce its excessive dependence on petroleum (item bi 91020081). The main thrust of the plan is to provide the appropriate infrastructure that will allow the non-oil sectors to grow. In the case of the Dominican Republic, one author argues that planning ought to be integrated into the State's daily conduct (item bi 91020089). As always, the main problem with planning is implementation. As a rule, planning documents such as Trinidad and Tobago's have been impressively prepared, but their implementation has often been undermined by unexpected fluctuations in the price of the principal export commodities. Yet it is the vulnerability to these very fluctuations and the belief that government must play a direct role in the development process that motivate the continuing importance of planning in these small economies.

The belief in a direct economic role for the government is most evident in two authors' recollections of their involvement in negotiations between the government of Jamaica and the bauxite companies (items bi 91020092 and bi 91020088). These negotiations occurred against the background of a charged political climate of government control of the commanding heights of the national economy. While the negotiations yielded increased tax revenues, they also gave birth to a number of new institutions, including the Jamaica Bauxite Institute, to ensure that the country benefitted from the future development of the bauxite industry.

Greater government intervention in the economy also has a dark side: the evidence suggests that it is largely responsible for the accumulation of the region's large foreign debt. As a result, the main thrust of structural adjustment policy is to force governments to release resources for productive use in the private sector.

Macroeconomic studies still dominate the Caribbean economic literature. However, a few micro studies have emerged among the literature reviewed, including the above-mentioned examination of Jamaica's bauxite industry (item bi 91020088) and an analysis of the Haitian coffee market (item bi 91022762). On a more descriptive plane is a study of the Barbadian Mutual Life Assurance Company in which the author recounts his efforts to include more black Barbadians on the company's board of directors (item bi 91020118). There is a yawning micro studies gap in the Caribbean economic literature. The soundness of macroeconomic policies would be enhanced by a clear understanding of the micro issues. I would like to acknowledge the assistance of V.R. McDonald, L. Thomas, J. Phillips, and J. Sumner.


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