“From Offshore/Governmental to Onshore/Entrepreneurial.” 2010. CARICOM: Policy Options for...

CARICOM Policy Options for International Engagement

Section 2: Building Relationships for Economic Development Dr. Kirk Meighoo Political Leader (Trinidad) Democratic National Assembly Trinidad and Tobago CEO Epitome Lodging and Gourmet Enterprises, Ltd. Executive Chairman Coastal Development Company 156 Saddle Road Maraval Trinidad and Tobago Email: [email protected] Tel: (868) 671-5556 / 703-7689

Kirk Meighoo: From Offshore/Governmental to Onshore/Entrepreneurial

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Abstract This paper argues that CARICOM’s main plank of relationship-building for economic development – securing market access through preferential trade agreements and quotas, increased foreign investment in vertically-integrated multinational industries, and development assistance through aid and soft loans for governments – continues to perpetuate underdevelopment and poverty in the Caribbean. Thirty years of pursuing this strategy has not changed the region’s peripheral position in the world economy. This failure, it is argued, arises from a flawed diagnosis. To remedy this, an empirical analysis of the Trinidad and Tobago economy is offered as a model for diagnosing CARICOM’s economic problems. It is found that the dual economy has facilitated a lopsided development of the offshore sector and Government dominance in the economy and society, at the expense of the onshore sector, citizen autonomy and well-being, and overall growth and development. A prescription for the development of an innovative-entrepreneurial onshore economy is offered, and a series of concrete recommendations are made to leverage CARICOM’s relationship-building accordingly.


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From Offshore/Governmental to Onshore/Entrepreneurial

The argument advanced by this paper is that CARICOM’s main plank of relationship-building for economic development – securing market access, mainly through preferential trade agreements and quotas for vertically-integrated multinational industries located in the Caribbean, increased foreign investment (usually in vertically-integrated multinational industries as well), and development assistance through aid and soft loans for governments – continues to perpetuate underdevelopment and poverty in the Caribbean. It is argued that this strategy arises from a flawed analysis based on an unjustly assumed position of economic powerlessness and intellectual / epistemic subordination. A properly factual, empirical, and historical diagnosis of CARICOM’s economic problems – without despairing of our assumed inability to solve our own problems – urges a significantly different prescription, one which seeks to substantially build our onshore economies over the long term, and which would leverage CARICOM’s relationship-building accordingly. This paper provides a fundamental-type analysis from this perspective in the spirit of, and building upon, the great theoretical and policy work of the past on the Caribbean economy, particularly by Arthur Lewis, Dudley Seers, Williams Demas, Lloyd Best and the New World Group.1

CARICOM economies’ global performance

In comparative global terms, CARICOM’s economic performance from its founding 1973 to the present has not substantially changed its comparative economic ranking as a group. To be sure, individual countries have achieved some success – notably Barbados, Bahamas, St. Kitts and Nevis, Antigua and Barbuda, and Trinidad and Tobago have attained standards of living classified as High Human Development by the UN. On the other hand, others have faced serious challenges – notably Jamaica, Guyana, and Haiti (See Table 1).

Table 1. Ranking of CARICOM Countries in the 2007-8 U+ Human Development

Index (HDI)

HDI rank

Life expectancy at birth (years)

Adult literacy rate (% aged 15 and above)

Combined gross enrolment ratio for primary, secondary and tertiary education (%)

GDP per capita (PPP US$)

GDP per capita (PPP US$) rank minus HDI rank

High Human Development

31 Barbados 76.6 .. 88.9 17,297 8 49 Bahamas 72.3 .. 70.8 18,380 -12 54 Saint Kitts

and Nevis 70.0 97.8 73.1 13,307 -4

57 Antigua 73.9 85.8 .. 12,500 -4


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and Barbuda

59 Trinidad and Tobago

69.2 98.4 64.9 14,603 -14

Medium Human Development

71 Dominica 75.6 88.0 81.0 6,393 19 72 Saint Lucia 73.1 94.8 74.8 6,707 15 80 Belize 75.9 75.1 81.8 7,109 1 82 Grenada 68.2 96.0 73.1 7,843 -7 85 Suriname 69.6 89.6 77.1 7,722 -9 93 Saint

Vincent and the Grenadines

71.1 88.1 68.9 6,568 -4

97 Guyana 65.2 .. 85.0 4,508 12 101 Jamaica 72.2 79.9 77.9 4,291 11 146 Haiti 59.5 .. .. 1,663 2 Source: United Nations Human Development Report

Indeed, CARICOM’s largest and most populated territories – Belize, Suriname, Guyana, Jamaica, Haiti, comprising over 85% of CARICOM’s population (66% excluding Haiti) and over 95% of its total territory – are its poorest performing economies, ranking between 80 and 146 in the Human Development Index (HDI), out of 177 countries. To be sure, in tourism, offshore banking, and LNG and petrochemicals, the region has become a global participant of some importance. However, the centres of ownership and management of these enterprises are foreign-based and not located within CARICOM’s domestic entrepreneurial space – continuing the economic pattern from the days of King Sugar in the 18th and 19th century. Moreover, even for the better-off performers in CARICOM, the macroeconomic indicators do not adequately reveal the economic challenges of the region. In the well-off dual economies of CARICOM, overall macroeconomic indicators mask the underdevelopment of the backward sectors. Indeed, the sector in which most CARICOM citizens live and work remain low-wage, high unemployment, low-productivity, and comparatively uncompetitive in the global context, with restricted opportunities for individual advancement. This underperformance can be gleaned, for example, from the 2008-9 Global Competitive Index, in which out of 134 measured countries, the four ranked CARICOM economies fared poorly: Jamaica at 86, Trinidad and Tobago at 92, Suriname at 103, and Guyana at 115 (see Table 2).

Table 2. Rankings of CARICOM States in Selected Global Indices, 2008

Global

Competitiveness Index Rank (out of 134)

Global Ranking among Remittance-Sending Countries

Remittances as % of GDP

Emigration rate of Tertiary Educated Persons (%)


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Jamaica 86 4 18.5 82.5 Trinidad and Tobago

92 - - 78.4

Suriname 103 - - 89.9 Guyana 115 2 24.3 85.9 Haiti - 3 21.6 81.6 Sources: Global Competitiveness Index 2008-9; World Bank Migration and Remittances Factbook 2008

Also relevant is the data surrounding migration and remittances. According to the World Bank, the Caribbean has the highest emigration rate of tertiary educated persons in the world, comprising all 10 of the top 10 countries in 2006: Suriname (89.9%), Guyana (85.9%), Jamaica (82.5%), Haiti (81.6%), Trinidad and Tobago (78.4%), St. Kitts and Nevis (71.8%), Grenada (66.7%), Barbados (61.4%), Dominica (58.9%), St. Vincent and the Grenadines (56.8%). Guyana, Haiti, Jamaica, and the Dominican Republic (member of Cariforum) ranked among the world’s top 10 remittance-sending countries, placing 2nd, 3rd, 4th, and 7th, and making up 24.3%, 21.6%, 18.5%, and 10.0% of each country’s GDP, respectively (see Table 2). Remittances are the number one source of foreign exchange earnings in many of CARICOM’s foreign exchange-dependent economies, exceeding earnings from some of the top exported goods and services. While the full meaning of these statistics can be debated, it cannot be argued that these are indicators of healthy economies.

Flawed diagnosis, flawed prescription: the failure of CARICOM’s economic

relationship-building strategy

CARICOM’s relationship-building has been consistent since its foundation in 1973. Tellingly, the most powerful incentive to action and development has been the attempt to protect preferential trading arrangements with the UK, and later Europe. CARICOM’s predecessor, CARIFTA, was largely spurred by the UK’s application to join the (then) European Community (EC), and CARICOM’s formation in 1973 was stimulated by the UK’s actual entry that year.2 Furthermore, the West Indian Commission’s 1992 Report, Time for Action, was driven by the creation of the European Union through the 1991 Maastricht Treaty, and the 2001 revised Treaty of Chaguaramas was hastened by the termination of the previous preferential treatment under the Lome Conventions with the EU, and the requirement to enter Economic Partnership Agreements (EPAs) based on the principle of reciprocity. Indeed, this reactive and defensive, rather than proactive, developmental timeline reveals a major weakness, a clear symptom of deep problems of diagnosis and prescription. To be fair, however, CARICOM has achieved a certain level of success in its aims, particularly relative to its small size, by displaying diplomatic skill in extracting concessions from various international partners, beginning particularly with the Lome Convention and the ACP group in negotiations for preferential treatment in trade with Europe. This success has been extended to the Commonwealth and World Bank as well, most recently by leading the way to have these bodies recognise special needs of (and special regimes for) Small Island Developing States. But what has been the economic


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effect of this relative diplomatic success? A 2009 report by the World Bank and Organisation of American States (OAS) (commissioned by CARIFORUM) reiterates its 2005 conclusions that

although unilateral preferential trading arrangements were established as a development tool to stimulate and diversify Caribbean exports, the prevailing consensus is that “…trade preferences have not delivered expected results” … [and that] despite trade preferences, the Caribbean’s integration into the world economy has been slow and compares poorly with some Asian countries with similar levels of integration 30 years ago ... The Caribbean’s share of world trade has also been declining while countries such as Malaysia and Thailand have increased their share ... Weaknesses in access and low quality of infrastructure together with low labor productivity have resulted in relatively high production costs compared to competitor countries of Asia … World sugar production costs have fallen by about 40 percent in real terms since 1980, while those in the Caribbean have been rising, and preferential quota prices have also been falling. Similarly, in bananas, the Caribbean countries are amongst the highest cost production in the world, rooted in low land productivity, and higher labor and transportation costs … The region’s competitiveness is low reflecting its high costs of doing business, labor market rigidities, tariff dispersion, and trade costs. Most of the Caribbean countries’ overall performance of doing business ranks below that of comparable developing countries, including Mauritius, Hong Kong, Malaysia, and Singapore … Perhaps one of the most critical weaknesses identified within the Caribbean regional and international trade negotiations construct has been the endemic failure of the regions (sic) institutions both at the national and regional levels to take advantage of the market access opportunities presented through either one-way preferential arrangements or in more recent times, negotiated trade agreements with international partners.3

Twenty-five years of one-way free trade with the US in the CBI, 23 years of one-way free trade with Canada in CARIBCAN, 36 years of quotas and preferential access to Europe in Lome and Cotonou, and the more than a century of Imperial Sugar Preferences have not transformed our economies which remain dependent, peripheral and, by definition, low-wage. Indeed, a US Congressional Study Mission and Symposium on the CBI held in Barbados, September 18-9, 1987, found that “there was virtual unanimity at the symposium, as there is in the Caribbean in general, that the CBI has not fulfilled its promise of stimulating economic growth and development.”4 Despite the dismal record with one-way free trade, some opinion leaders and policy makers promote the supposed benefits of reciprocal free trade. Notably, the 2009 World Bank / OAS Report quoted above advises no new strategic thinking or aims, but simply forwards more recommendations on how CARICOM might more effectively integrate into the world economy, improve trade and increase competitiveness, and essentially blames failure on poor implementation and / or weak


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policy formulation. To be sure, we concur with much of the analysis, and indeed there has been poor implementation of earlier recommendations and weak policy formulation. But, despite the useful detail, the overall analysis is still too superficial. The question that arises is, given that we have long acknowledged and anticipated the problems identified in the report, what continues to prevent us from formulating and implementing sensibly recommended solutions? This is the crucial missing element in the diagnosis, risking the same conclusions to be arrived at again, ten years from now. The report itself provides a clue. For it is indeed a prime illustration of CARICOM’s epistemological failure. It is all too commonplace that our well-meaning allies and partners in the International Development industry, the multilateral lending agencies such as the IMF, EU, World Bank, IDB, the ratings agencies, have habitually misunderstood Caribbean economies and have forecasted and diagnosed incorrectly. Yet we either fail to see this, or we fail to acknowledge it. It is difficult to say which would is the greater fault. Still, CARICOM and its member Governments have largely surrendered their epistemological sovereignty to these “authoritative” entities, and accept their under-informed diagnoses of our economic problems accordingly. It is indeed symptomatic that the Cariforum countries did not commission a regional body, such as the UWI, University of Guyana, the Caribbean Centre for Monetary Studies, or the Caribbean Development Bank for the study. But the truth is that these Caribbean bodies most likely would not have recommended or analysed much differently and would have intellectually and epistemologically bowed to these institutions, out of their own free will. This is a singular failure of Caribbean independence, which must be fully addressed elsewhere.5 To begin to correct this situation, we need to understand that it is we who have privileged access to Caribbean economic data, which it is primarily our responsibility to analyse. Our understanding of why we continue to find ourselves in our current economic position is of vital importance. CARICOM’s economic diagnosis (and therefore its prescriptions) appears no more specific (i.e., not based on serious observation of and reflection on the way CARICOM’s economies actually work) than the generic ones found in (foreign) university textbooks and multilateral agency reports. When our analysis does appear to acknowledge our institutional, historical, and structural contexts, they appear to do so only insofar as it assists us in securing development concessions, preferences, favourable terms of trade and investment, aid, low interest loans, and so forth. It has not yet been fully accepted that the establishment of the West Indies as slave colonies in a global economy has profoundly shaped our peculiar economic context, with specific institutional and social relationships which must be overcome to produce healthy economic growth and development. It is our responsibility to formulate and implement the policies to achieve this.

Refining economic diagnosis, toward prescription: the case of Trinidad and Tobago

We can refine our diagnosis by examining in greater detail the experience of arguably the most important economy in CARICOM, Trinidad and Tobago.


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To be sure, Trinidad and Tobago is blessed by its petroleum resources, which has allowed for both upstream and downstream development, provided abundant government revenues available for national expenditure, and enormous foreign direct investment inflows during boom periods. However, it should be noted that this blessing is limited. Despite the impressive wealth flowing through Trinidad and Tobago for the past 14 years (real GDP grew at 14.4% in 2003 and 12.2% in 2006), the country has continued to experience problems of violent crime, infrastructure, education, inequality, health, basic utilities, poverty, education, and governance associated with much poorer countries, some problems actually worsening during the boom. For instance, Trinidad and Tobago’s HDI rank is 14 places lower than its GDP per capita ranking (see Table 1), suggesting that the country’s wealth has been translating poorly into widely-shared human development. Alarmingly, its HDI rank has actually fallen 10 places from 49 in 2001 to 59 in 2008. In addition, Trinidad and Tobago is the world’s 3rd largest emigration country, according to the World Bank’s Migration and Development Factbook 2008, with 28% of its population counted as emigrants. As noted above, Trinidad and Tobago is also ranked the world’s 5th largest emigration country of tertiary educated citizens, with 78% of the population with tertiary education counted as emigrants. Trinidad and Tobago’s chronically high emigration rate suggests a deep vote of no-confidence by a significant proportion of its citizens. Economically, the Global Competitiveness Index 2008-2009, places Trinidad and Tobago at a surprisingly poor 92 out of 134, immediately below Libya and immediately above Kenya. Its ranking has in fact fallen 54 places from its position of 38 in 2002. Its Ease of Doing Business rating has fallen 25 places from 55 in 2006 to 80 in 2009, Corruption Perception Index rank 41 places from 31 in 2002 to 72 in 2008, and Global Peace Index rank from 94 in 2007 to 98 in 2008. These give us a very different view of the state of the Trinidad and Tobago economy during the boom. This paradox of economic growth and declining development indicators must be adequately diagnosed. Firstly, we note that Trinidad and Tobago’s economy is extremely import-dependent (over 61% of Gross Domestic Expenditure in 2008), yet the vast majority of foreign exchange is generated by the foreign-owned petroleum sector (over 88% of all export earnings came from petroleum, gas, and petrochemicals in 2008). Indeed, the entire economy is dependent on, and therefore dominated by, foreign-owned, multinational industries in the petroleum-based sector. Notably, this sector provides little overall employment (4% of the labour force in 2007), has few developmental linkages to the rest of the economy, and depends on massive amounts of foreign direct investment. Moreover, these are “vertical” investments in which Trinidad and Tobago’s (foreign-owned) operations constitute components low on the product value chain, while higher value-added elements are located elsewhere in the multinational corporate web. The main


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link with the rest of the economy is provided through payments to government via taxes and royalties (in coveted foreign exchange). This results in a dual, lopsided economy, with one side dependent on the other. During growth periods, development is concentrated in the petroleum sector, effectively offshore, at the expense of the onshore economy. For instance, investment is almost entirely skewed in the direction of the petroleum sector. In 2005, for example, 91.2% of all Foreign Direct Investment Capital was directed to Petroleum Industries alone. This economic behaviour is commonly referred to elsewhere as “Dutch disease”6, but in the Caribbean has a longer history, deeper significance, and distinctive characteristics and context. Lloyd Best had referred to it as the Plantation Economy, in which the overseas-controlled sugar industry has been replaced by the overseas-controlled petroleum industry, but with similar effects of national underdevelopment. In addition, the revenue blessings that do come from petroleum-based industries are of limited and unpredictable duration, perversely unrelated to domestic economic or political factors. They follow a well-described, documented, and theorised boom-and-bust cycle, whose result, in fact, is short-term maladjustment and long-term economic stagnation, in the words of Best.7 For instance, according to World Bank figures, over the 30-year period 1975-2005, Trinidad and Tobago’s average growth rate was a mere 0.6 % per annum, despite seven years of expansion from 1975-82 and eleven years from 1994-2005. The economic illusions of prosperity provided by booms usually result in overconfident, massive Government expenditure, which as a matter of course do not transform (indeed, often intensify) the dependent nature of the economy, while the expenditure is routinely mis-invested in non-productive activity, very often allocated to foreign contractors, consultants, and firms, on the one hand, and for local political patronage purposes, on the other. These expenditures typically cannot be sustained during bust periods (during price, demand, and / or investment declines), and accordingly long-term government plans are abandoned to deal with immediate foreign exchange and revenue crises (to pay public servants and purchase necessary imports), while the patronage base of ruling parties is undermined. In bust periods – which follow when there is a drop in international commodity prices and/or foreign demand – foreign investment slows or halts in the petroleum-based sector, leaving the underdeveloped domestic economy on its own. This results in severe economic contractions and disinvestments, which effectively wipes out previous gains made. Indeed, there is much to learn today from the previous economic contraction of 1983-93, which followed the boom of 1974-82. Indeed, in many ways Trinidad and Tobago was in a much stronger position at the end of the last boom than it is today. With the oil price drop in 1983, petroleum production slumped, associated government revenues plummeted, and foreign investment dried up or even left, which forced the


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government to take over loss-making plants in order to save jobs. This shook the entire economy, not just the petroleum sector. Yet most did not diagnose or forecast correctly during the boom. For instance, in 1983 Trinidad and Tobago had been graduated by the World Bank, without a phase-out lending period, because of (in the Bank’s words) “Trinidad and Tobago’s relatively easy access to international capital markets, … [the] country’s social development [being] … well above the level of most bank borrowers and above, also, the level of some countries already graduated by the Bank, and … [Trinidad and Tobago’s] net foreign reserves, measured as a proportion of the country’s annual imports, [being] … also larger than in most other countries, including the developed ones.” This had been announced in the 1984 Budget speech. That very year, however, Trinidad and Tobago entered 10 years of economic contraction from 1983-1993, wiping out the previous gains. The country was ranked the world’s 11th worst performing economy in The Economist’s World in Figures 2006, contracting at -2.2% per year over the entire period. By 1988, the country had no net foreign exchange reserves, banks collapsed, many people lost their jobs and homes, incomes fell, pensions were destroyed, and the country had a coup attempt and citizens claiming refugee status in Canada.

Similarly, on 30 June 2008, the US graduated Trinidad and Tobago from its Generalised System of Preferences (GSP) because the country had become a “high income” country according to World Bank statistics. The Government of Trinidad and Tobago has boasted about this graduation as a special achievement. By the end of that very year, the financial crisis had hit, and forecasted growth for 2009 in Trinidad and Tobago has been recently revised downward to 0% by the Central Bank of Trinidad and Tobago.8 The movement toward full employment, too, was also unsustainable, based as it was on government revenues derived from the petroleum sector. In 1980, the unemployment rate dropped below 10% for the first time in the country’s recorded history. In 1982, it reached its lowest point at 9.9%. However, when the price of oil fell, unemployment skyrocketed to 22.3% in just five years. The official figures for the youth unemployment rate, and for rural areas like Cedros, were much higher. Importantly, the attempted coup of 1990 (which saw the overthrew of the Government for six days) – and the looting, which was more physically devastating than the coup itself – came out of this environment. Today, the Trinidad and Tobago Government has proudly pointed to the country’s low unemployment rate, which stood 4.2% in 2008. Yet, the Ministry of Local Government has claimed that there are 75,000 registered employees of the Unemployment Relief Programme, or 12% of the labour force, being “employed” in unemployment relief. On top of that exist many other controversial labour absorption programmes, wholly funded by government. In the first quarter of 2009, layoffs have already been significant. A budget deficit is projected for 2009 – the first since the Asian crisis ten years ago – which will certainly impact on the unemployment rate and other labour absorptions schemes.


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One must wonder, with dread, what the 81 (acknowledged) armed gangs will do when they no longer have the opportunity to receive State contracts for unemployment relief. Savings and surpluses during the 1974-82 boom were also seen to be illusory and precarious as they, too, emanated from petroleum revenues and virtually nowhere else in the economy. For instance, since 1974 the Government put aside 47 “Special Funds for Long-Term Development” apart from the Consolidated Fund, for specific uses, such as health, education, infrastructure, etc. In 1980, the Funds stood at TT$4.4bn (US$1.8bn) or 81% of the 1980 budget. By 1983, however, the administration’s total withdrawals from the “Long Term Funds” stood at TT$15bn (US$6.25bn), leaving a paltry TT$169m remaining in the accounts, just after the first year of oil price declines. The country had no “long term savings” left for 1984 and afterward. 9 The Trinidad and Tobago Government today proudly refers to its savings in the Heritage and Stabilisation Fund (HSF). The 2008 Budget Speech announced that the HSF stood at US$2.46bn, roughly TT$15.5bn, or only 35% of the 2008-9 Budget. And funds may not be deposited into the HSF in 2009 at all, given the projected budget deficit. One anticipates what will happen to the HSF when revenues continue to fall, and the vast commitments on recurrent expenditure, wages, and debt remain, while foreign exchange is needed for essential imports, yet not generated anywhere else in significant quantities. Similarly, in 1981 the country had 19.5 months of import cover in foreign exchange. However, when the petroleum revenues fell, in five years the reserves were exhausted, and from 1987 to 1993 the country had virtually no foreign exchange (0.8 months cover in 1987, and deficits after that). This led Trinidad and Tobago to the IMF in 1988, a justification cited two years by the attempted coup-makers. Today, the Trinidad and Tobago Government has also boasted of the country’s current import cover, which stands at 11 months, ignoring its better position previously. Even then, Trinidad and Tobago eventually had to devalue, restrict foreign exchange sales, and impose import controls. Such shortage will not be merely a government problem, as most private sector businesses, too, will not be able to survive in a climate of government’s foreign exchange shortages. All this is to demonstrate that the macroeconomic indicators presented by the Government – and reinforced by the international and multilateral agencies – inadequately diagnoses the soundness of the Trinidad and Tobago economy. The dependence on the monocrop offshore sector continues to be debilitating to sustained economic growth and development.

Developing the onshore economy

One obvious solution to the problem of national dependence on the foreign-controlled offshore sector is to develop a robust, foreign-exchange earning (or foreign-exchange saving) onshore economy, where the bulk of the population (96%) is, in fact, employed.


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As noted, the onshore economy – Governmental and Non-Governmental – is extremely dependent on foreign exchange. Over 2005-7, for instance, exports and imports – conducted in foreign exchange, not TT dollars, which are practically untradable – exceeded the country’s entire GDP, at 102.7%. During this period, 96.5% of export earnings came from petroleum, gas, and petrochemicals. This onshore economy basically recycles and consumes foreign multinational revenues channelled through national Governments. This extreme dependence is the most perverse and unsustainable aspect of the existing onshore economy.10 This circulation of vital foreign exchange and revenue is conducted primarily through the annual Budget process. Due to the underdevelopment of the onshore sector, Government occupies a dominant role in the economy and society. The largest Budget items in 2008 were transfers and subsidies (comprising 56.5 % of recurrent Government expenditure in 2008), wages (20.5% of Government expenditure in 2008; the State is the largest employer in the country, accounting for 35% of all paid employees; and this does not include daily paid and casual workers, consultants on contract, persons in unemployment relief and labour absorption programmes), purchases of goods and services (15.3% of Government expenditure in 2008; the State is the largest purchaser of goods and services, and many private sector entities depend for their survival upon State contracts and revenues), and the most significant investments (public or private) in social, economic, and physical infrastructure. Indeed, in the Trinidad and Tobago economy, fiscal policy rather than monetary policy is the most important economic signal. In this structure of state dependence, one might imagine the number of opportunities for corruption. Outside of the Government, the private sector (which, as we see, is hardly independent of Government) is an oligarchy organised into a few dominant elite ethnic cliques which form a handful of conglomerates, each of which owns its parallel import, wholesale and retail distribution, finance, transportation, and media firms, with significant intra-firm transactions. The preferred business strategies of the oligarchic conglomerates are importing, franchise-holding, agency services, licence purchasing, and unofficial reselling – from food to entertainment to raw materials to machinery and equipment to production inputs to knowledge itself – with very few goods or services developed locally. This lack of innovation affords limited profitability and slow growth. According to the 2007-8 UN Human Development Report, only 0.1% of GDP is invested in Research and Development, no reported patents have been granted to residents, no receipts of royalties and licence fees are reported, and no researchers in R&D are recorded. High incomes and profitability for owners and senior managers in this low productivity environment can often only be achieved through monopolistic price-fixing, restricted markets, and labour exploitation. (To be fair, and to their credit, some conglomerates have now more seriously attempted to enter the energy sector, which is a crucial requirement to overcome the dependent dual economy handicap. The main effort, in methanol production, has now collapsed, and the other efforts remain limited.) Firms that operate outside of these oligarchic networks do so against the odds, facing great obstacles to growth, expansion, and long-term sustainability. Lloyd Best quite aptly


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referred to these economic outsiders, relying on their own resources, as “maroon firms.” Competition is stifled, and new entrants are discouraged. For instance, Trinidad and Tobago’s overall Doing Business rank in 2008 was 80 out of 181 countries, ranking especially poorly in the sub-categories of enforcing contracts (167), dealing with construction permits (84), registering property (164), and closing a business (181). Additionally, security issues / crime, transportation, customs delays, utility unreliability, bottlenecks, corruption and other externalities unnecessarily create high costs of production. This ensures that the onshore economy remains import-dependent and oligopolistic, following the dominant conglomerate business model. The financial sector, with its high interest rates, wide loan and deposit spreads, and consumption bias in lending; the lack of a developed capital market for investment opportunities; persistent allegations of insider trading and lack of respect for intellectual property and confidentiality; and combative management-labour relations in a low-wage environment make for an onshore economy that discourages investment not only by foreigners, but by nationals as well. In order for the onshore economy to be developed, its stifling oligarchic and Government-dependent characteristics need to be overcome. This is, in fact, a more precise prescription to support the main recommendation of the 2009 World Bank/OAS report that the Caribbean “design a full-fledged trade and growth strategy”. We contend that this diagnosis of and prescription for the Trinidad and Tobago economy provides a model to understand other CARICOM economies as well. The above analysis may be transferred to other CARICOM economies by replacing Trinidad’s petroleum industry with foreign-owned tourism, bananas, offshore finance, and / or mining as the primary foreign exchange earner alongside an import-dependent onshore economy. Regardless of the offshore industry, the onshore economies very likely will resemble each other quite remarkably, with its lack of competitiveness, Government-dominance, and oligarchic structure. However, this hypothesis must be subjected to empirical scrutiny, after which further theoretical refinements may be made. Subject to further evidence, we remain confident that the above analysis will prove useful to diagnosing other regional economies as well, and will have profound implications for CARICOM’s economic relationship-building for economic development.

Innovative-Entrepreneurial Onshore Economic Development: An Alternative to

Government-centric strategies

Hitherto, CARICOM’s relationship-building for economic development has been overly enthralled by Government-led solutions, Government spending, Government wooing of large-scale foreign direct investment, and misjudging the health of their economies by focusing on Government-level measures such as macroeconomic indicators and sovereign credit ratings. Far too little emphasis and analysis has been placed on transformation of the onshore economy and too much emphasis on Government action,


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Government-to-Government arrangements, and Government’s direct participation in economic development. Indeed, given Government’s role in actually supporting Caribbean underdevelopment – through its facilitation of vertically-integrated foreign direct investment, maintenance of the apartheid-like dual economic structure, and its politically convenient dominance of their economic and social landscapes (perhaps helping to explain the “lack of political will” to implement transformative economic strategies) – further Government dependence through similar large offshore foreign direct investment cannot be a logical strategy to build a viable onshore economy and solve our economic problems of underdevelopment. While diversifying the vertically-integrated foreign-controlled offshore sector is a strategy that has grown the economies of South-east Asia to high-wage, semi-peripheral status in the world economy (close to the high-wage, branch-plant and commodity-exporting economies of Canada or Australia, say, which appears to be the aim of most mainstream economic development recommendations for the Caribbean), it has done so to the benefit of government mainly, increasing its domination of society and economy, and decreasing citizen autonomy. Rather, the dependence of the onshore sector (including the Government) on the foreign exchange revenues of the offshore enterprises must be reduced. The onshore economy must start to earn significantly more of its own way in the world. Indeed, it has been persuasively argued that the Caribbean’s historic focus on attracting large, established, multinational firms and vertically-integrated foreign direct investment has resulted in its underdevelopment, not only economically, but also politically and administratively.11 For instance, the Fernand Braudel Center has examined the incorporation into the European world economy of the Caribbean (1650-1700), the Ottoman Empire (1750-1820), and southern Africa (1870-1920), through the establishment of low-profit economic activity vertically integrated into highly profitable global commodity chains. It was found that:

While the changes in production processes seemed to be parallel, the changes in the political arena seemed to be opposite. But these “opposite” changes had the effect of making the three zones look similar after incorporation whereas they had looked quite different before incorporation. The zone with a strong bureaucracy [Ottoman Empire] saw a weakening of its strength. The zone with a nonexistent bureaucracy [Southern Africa, Caribbean] saw its creation. The zone with a large unified state [Ottoman Empire] saw the beginning of dismemberment. The zone with tiny political entities [Southern Africa, Caribbean] saw the creation of larger ones. The end result was medium sized states of medium strength. These states were not strong enough to interfere effectively with the trans-state flows of the factors of production in the world economy, but they were strong enough to maintain internal order and guarantee the availability of a labor force for cash-crop production.12

The argument is that the political peripheralisation, administrative weakness, and policy ineffectiveness of CARICOM states is a direct product of its historic economic role in the


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world economy. Accordingly, it is crucial that CARICOM pays attention not simply to the degree of incorporation into the global economy (focused on by the 2009 World Bank/OAS Report), but the precise ways in which CARICOM economies are incorporated. As George Beckford famously noted, the Caribbean has been participating for four hundred years in modern world economy, and still cannot be said to be part of its mainstream. The lack of differentiation between types of integration into the global economy is a gaping diagnostic hole in the 2009 World Bank/OAS report. Indeed, we believe that the international institutions’ (and most Caribbean political parties’) focus on attracting foreign investment to fundamentally drive Caribbean economies derives in large measure from their inherent scepticism about Caribbean peoples’ ability to build their own viable onshore economies. What alternatives exist to vertical foreign investment and Government-focused development paradigms? In an important study on differences between global capitalisms (Good Capitalism¸ Bad Capitalism and the Economics of Growth and Prosperity) William Baumol, Robert Litan, and Carl Schramm distinguish between slow-growth variants (“bad capitalism”) – i.e., oligarchic capitalism (e.g., Latin America, the Middle East) and state-guided capitalism (e.g., Southeast Asia) – and faster-growth types (“good capitalism”) – i.e., big-firm capitalism (e.g., Europe, Japan) and innovative-entrepreneurial capitalism (e.g., USA). These distinctions are very useful, even though in the real world economies usually display characteristics of more than one type. In their exhaustive empirical study, each form is acknowledged to have specific benefits and drawbacks (for example, state-guided capitalism may be necessary for underdeveloped economies to achieve fast growth during “catch-up” periods). But, overall, innovative-entrepreneurial capitalism is demonstrated as providing the surest path to rapid national growth and development. This type of capitalism is perhaps best distinguished by constant product, industry, technological, and market challenges to the national (and international) economic status quo, reflected in a noticeable churning of top firms, e.g. the list of top US companies in 2005 by revenue is significantly different from the list of top firms in 1995, and 1985, etc. However, they conclude that the most sustainable form of fast-growth capitalism should combine elements of both innovative-entrepreneurial and big-firm capitalism, so that new products and industries can be made to serve the widest possible markets quickly and efficiently. Other types of capitalist economies (like those in the Caribbean) can judiciously adopt policies to effect the distinguishing features of innovative-entrepreneurial capitalism, to achieve faster economic growth and transformation. These features are: (1) it must be easy to start and grow a business; (2) productive entrepreneurs (i.e., those who expand total output, rather than merely redirect a larger share of existing output to themselves) that challenge the economic and social status quo must be rewarded, not penalised, for their successes; (3) there must exist effective disincentives for unproductive activity (i.e. business that merely re-appropriates existing wealth, or diminishes total output); and (4) winners must be kept on their toes.13 This fits in very well with our recommendation to develop CARICOM’s onshore economies. One caution must be noted, however, in that Baumol et al are pessimistic about the potential to easily transform oligarchic capitalism (whose characteristics CARICOM onshore economies appear to possess) toward an


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innovative-entrepreneurial mode, given the self-interest of elites in the extant system. They note that the significant – even revolutionary – changes that are required often must be urged by some form of pressure, internal or external. If CARICOM can provide such pressure, it will play a useful role, indeed. In addition to the argument for growth-related reasons in favour of encouraging innovative-entrepreneurial capitalism in the onshore economy, is another argument based on the current global economic crisis. It has been persuasively argued that the current crisis is the end of a long-wave (50- to 60-year) economic cycle, called the Kondratieff cycle.14 That is, the current Kondratieff cycle began from about 1945, and up to 1967/73 the world economy grew at a tremendous rate due to the birth and expansion of significant new industry, production methods, and technological platforms (the A-phase). After an almost thirty-year period of continuous growth, industrial production reached its peak and further industrial expansion became less profitable in the capitalist centres. During this time manufacturing moved to cheaper areas of the global economy, and the highest global profits were made not by production, but by financial manipulation, speculation, and debt-fuelled growth (the typical B-phase activity). Today, the colossal debt overhang has finally been called in, as such debt overhangs have done in preceding Kondratieff cycles (in the Great Depression of 1929, the Panic of 1873, the Six Year Depression of 1837, and so forth). These ends of long cycles, which necessarily see severe price corrections downward, are particularly traumatic. The world economy then requires a fundamental reorganisation through the creation of new industries (often based on significant new platforms) to generate a new long cycle of growth. In other words, the global economy will only get out of its depression through the development of entirely new industries – inherently unpredictable – to propel the beginning of a new Kondratieff cycle A-phase of solid growth and development. In this context, encouraging innovative-entrepreneurial economies in CARICOM member states may help the region leap frog to a stronger position in a new global economy, if we become active parts of a global innovation process. One does not have to accept the entirety of this analysis to accept the crucial recommendation which flows from this diagnosis: that CARICOM, as a priority, needs to build the right international economic relationships to nurture innovative global entrepreneurs operating out of the Caribbean.

Recommendations for CARICOM’s Relationship-Building for Economic

Development in the 21st Century

Given this diagnosis, obviously, the first principle for CARICOM’s relationship-building for economic development must be to increase the viability of CARICOM’s onshore economy, in particular its private sector. To be fair, CARICOM has increased participation of its private sector in its relationship-building endeavours. However, not only are current levels of inclusion of the private sector inadequate, the oligarchic nature of the onshore private sector (and its dependence


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on the offshore sector) is not usually dealt with as a serious obstacle which needs to be overcome. This is a sensitive but crucial task, which will have to be carefully navigated. Despite the preceding criticism of the Caribbean economy (both the offshore and onshore sectors), many of the existing economic actors will of practical necessity need to play a role in the healthy transformation of CARICOM’s onshore economies. As a whole, these actors must not be driven out of business, or out of the country (as happened at independence and in the militant political movements of the 1960s and 1970s throughout the region), but rather provided with the incentives to engage in faster, more innovative, more competitive, and more equitable onshore growth. In the short- to medium- term, the offshore industries will need to be maintained at the very least to support the otherwise weak revenue base of governments and the meagre foreign-exchange earnings of the onshore economies. The elite conglomerates will have an important role to play in keeping alive the onshore economy and also, in future, in bringing to wider national markets innovations developed by new entrepreneurial firms. Direct government economic involvement will also continue to be necessary for welfare purposes during the transition to faster-growth, innovative-entrepreneurial onshore economies, and for regulatory purposes where markets are weak, underdeveloped, imperfect, or otherwise threatened by manipulation. In the medium- to long-term, however, the offshore and onshore sectors should be more balanced in terms of their status as economic drivers (i.e. the onshore economy should not be dependent on the offshore, and national participation in the international offshore economy should increase, making distinctions between the two less meaningful), local conglomerates should operate in a well-policed, competitive, entrepreneurial environment, and Governments should play a less direct and dominant role in economics and social life, so that citizens may not be politically and economically dominated, even victimised, by an all-pervasive State.15 In this task, CARICOM may well seize on the opportunity presented by the recent crises in Guadeloupe and Martinique, spurred by the current global recession. There, national strikes against exploitation and profiteering by racially-organised local oligarchies – the same phenomena we have discussed in Trinidad and Tobago – have forced the French Government to intervene. CARICOM may wish to enter dialogue with the French Government – currently committed to transforming the economy of mainland France toward more innovative-entrepreneurial dynamism, as well – to help solve the problems of oligarchic markets in the entire region. Co-operation in Competition Commissions, for example, may be one example. (Indeed the CARICOM Competition Commission, whose inauguration in 2008 is a welcome start, was funded by the EU.) In addition, CARICOM may wish to enter into dialogue with the United Kingdom following the damning findings from its recent Commission of Enquiry into corruption in the Turks and Caicos Islands, in which the local administration has been found to display “political amorality and immaturity and … general administrative incompetence.”16 CARICOM may wish to participate in helping establish better economic governance systems or implement alternative remedies to the re-imposition of Crown rule, in order to ameliorate the corrupt culture of business-government relations. This exercise should be of great benefit in assisting the development of CARICOM’s onshore economies as well,


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given that results from the Corruption Perceptions Index suggest that similar levels of corruption are found in independent CARICOM states as well, and form part and parcel of the dysfunctional onshore economies of the region. (The three ranked Eastern Caribbean states are admirably exceptional CARICOM members with relatively high scores on the CPI, followed by grimly poor scores for the larger territories; see Table 3. It would seem sensible for these states to lead efforts in building international partnerships form ethical reform of CARICOM’s economic governance.)

Table 3. Corruption Perception Index Rankings for CARICOM Members States

Country Rank

Country /Territory

CPI Score 2008

Standard Deviation

Confidence Intervals*

Surveys Used**

21 Saint Lucia 7.1 0.4 6.6 - 7.3 3

22 Barbados 7.0 0.5 6.5 - 7.3 4

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Saint Vincent and the Grenadines 6.5 1.5 4.7 - 7.3 3

72 Suriname 3.6 0.6 3.3 - 4.0 4

72 Trinidad and Tobago 3.6 0.7 3.1 - 4.0 4

96 Jamaica 3.1 0.3 2.8 - 3.3 5

109 Belize 2.9 1.2 1.8 - 3.7 3

126 Guyana 2.6 0.2 2.4 - 2.7 4

177 Haiti 1.4 0.4 1.1 - 1.7 4 Source: Transparency International

The attraction of foreign investment will remain an important goal of CARICOM’s relationship building, but with a more focused purpose. For instance, such investment should not be focused on the generation of foreign exchange and other revenues for Governments to redistribute onshore. The investment that should be attracted should be able and willing to participate in an onshore economy, rather than simply form links in international commodity chains, unconnected to the onshore economy and domestic entrepreneurship. Participation, competition, and interaction with other firms in the onshore economy should assist in increasing the competitiveness of onshore firms and onshore markets by breaking oligopolistic and monopolistic sectors. CARICOM’s conventional focus on trade agreements will remain important as well. Indeed, overseas markets will remain vital for innovative entrepreneurs as long as CARICOM onshore economies remain low-wage and competition is stifled through oligarchic capitalism. However, these trade negotiations should not focus on sustaining offshore commodity production for vertically-integrated, multinational industries (e.g. sugar, bananas). Rather, CARICOM’s negotiations should be focused on securing markets for onshore output, in order to strengthen the foreign-exchange earning capacity of private Caribbean industry. CARICOM may have to focus on developing access to specialised niche markets, as opposed to mass national markets, for premium foreign exchange earners such as organic agriculture, luxury, health, and gourmet foods, health


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services, health tourism, and cultural industries. This will involve much closer working relationships with the Caribbean private sector than exists at present. In addition to securing market access for products, CARICOM must focus on fostering closer and more intimate ties with innovative-entrepreneurial economies with a view to also using them where possible as springboards for our own global entrepreneurs. Rather than focusing on trade in goods (particularly if we do not have much more to trade than basic bulk commodities produced by huge multinational firms, such as in petroleum, sugar, and bananas, over which CARICOM citizens have no little or no control in any case), relationship-building should attempt to secure practical learning opportunities for individual citizen-entrepreneurs and small and medium enterprises, even in specific economic jurisdictions perhaps – state-level, city-level, or national-level, wherever innovative-entrepreneurial activity is encouraged. CARICOM’s relationship negotiations should shift focus away from agreements which strengthen multinational vertical investment offshore, or traders, importers, distributors, and other middle-men, which make up the bulk of our low-growth, low-wage oligarchic onshore economies. For instance, the General Agreement on Trade in Services (GATS) agreement (a treaty of the WTO) covers four modes of supply for international service provision, including “commercial presence” and the “presence of natural persons” (i.e. the presence of service providers in a foreign, consuming country). Via this GATS agreement, CSME-type arrangements (enhancing mobility of investors and capital) may be negotiated with countries which make it is easy to establish start-up businesses and which are open to foreign investment, so that our citizens can learn and develop skills through operating in such competitive environments. The United States is the principle innovative-entrepreneurial economy in the world at the time of writing. However, Denmark, Taiwan, the UK, New Zealand, and others have been ranked by the World Bank among the least costly places to establish new business start-ups (and which are generally open to foreign investment). These countries, as well as innovative-entrepreneurial zones of India and perhaps China, may be targeted. No doubt, these new types of arrangements will involve much tougher negotiations, as this will touch on sensitive issues of national security and immigration. However, we believe that it will be more meaningful, democratic, and transformative. Indeed, the current EPA between CARIFORUM and the EU already includes arrangements for CARIFORUM nationals to establish businesses and provide services to EU consumers from within the EU itself. For example, the agreement related to tourism and travel-related services allows Caribbean businesses to invest in Hotel, Restaurant, Catering and Beverage Services, Travel / Tour Operator Agencies, Tourist Guide Agencies, and Spa Services in any European Community country. In addition Caribbean businesses can obtain visas for staff from the Caribbean to work in the company hotel, restaurant, agency or spa (their commercial presence) in Europe. Contractual service suppliers can travel to Europe to provide Travel Agency and Tour Operator services in all European Community countries (except Ireland), and Tourist Guide services (except in France, Lithuania, Poland, Portugal or Spain). The existing EPA also allows Caribbean businesses to provide Hotel, Restaurant and Beverage services, Catering services, Travel


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Agency and Tour Operator services, and Tourist Guide services from their home country to consumers in Europe. And development assistance is provided for the development of internet marketing strategies for SMEs in the tourism sector.17 Similarly detailed agreements have been arrived at for Auditing and Taxation Services, Engineering and Architectural Services, Recreational, Cultural and Sporting Services, Health Services and Social Services, Advertising, Market Research and Management Consulting Services, Medical Services, Environmental Services, Research and Development Services, Communication Services, Construction and Related Engineering Services, and Distribution Services. Elsewhere, there has been serious policy consideration given by the Commonwealth Secretariat and others to further liberalising the “presence of natural persons” from developing countries in developed countries, as part of the growth of the international trade in services.18 These discussions may usefully guide CARICOM’s relationship-building to transform its onshore economies. Similarly, Baumol et al. have recommended that that the United States, in particular, assist in generating innovative entrepreneurs in developing countries by sponsoring the equivalent of “reverse Fulbright” scholarships/internships for university students and recent graduates to go to the United States to take an entrepreneurship practicum at a leading university and to then serve as interns in innovative-entrepreneurial companies.19 In 2006, the Kauffman Foundation initiated such a programme for students from the UK and Italy. CARICOM should negotiate for a Caribbean student component. Not only would such an experience impart practical knowledge, but it would also instil an appreciation for innovative-entrepreneurial endeavours and what legal, institutional and other environmental conditions are required to make them flourish. Government officials could also be exposed to such experiences. Other areas in which CARICOM could broaden its existing trade negotiations include the area of financing innovative-entrepreneurial ventures. It should be recognised that the United States has by far the most developed venture capital industry in the world, far in advance even of Europe and Japan. However, concrete suggestions have been made for the co-ordinated and systematised distribution of financial risk internationally at different stages of business development, so that innovative-entrepreneurial firms operating out of the Caribbean can source appropriate finance externally, until they reach a level of risk that can be more adequately managed by regional financial institutions.20 Indeed, such intricate financial, trade, and business partnerships may justify revisiting the attempts of Dr. Eric Williams and Suriname’s Prime Minister Severinus Désiré Emanuels to secure Associate Status in the European Community for CARICOM states.21 This can form part of a renegotiated Regional EPA agreement. Such status will strengthen the aspects of transformation that go beyond trade, for example, ensuring that economic, competitive, and regulatory standards follow high international criterion (for there will no doubt be minimum conditions that will apply in order to be granted and to maintain Associate membership); affording opportunities to CARICOM states to participate in ongoing deliberations which will impact Regional EPAs; facilitating regulation and monitoring of flows of entrepreneurs and investment from CARICOM to the EU; and lastly, but not least, the establishment of much closer economic ties to the non-


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independent French, Netherlands, and British Caribbean territories. This Associate membership then may be leveraged for other regional associations, in innovative-entrepreneurial regions of Asia, for example, to secure and safeguard these more intimate types of relations. In addition, CARICOM should build the requisite relationships to organise and harness the latent power of its overseas citizens in North America, Europe, and elsewhere to transform its onshore economies. The networks, skills, and businesses of CARICOM emigrants should be used to break local oligopolies, help penetrate foreign markets, access overseas finance, attract investment, create international partnerships, and otherwise grow Caribbean businesses on a global scale. Put differently, CARICOM’s relationship-building efforts should shift from its focus on special and differential treatment in trade agreements and foreign investment to provide Government revenue and job creation, to securing microeconomic benefits of market and firm robustness and competitiveness in its onshore economies.

Conclusion

In sum, CARICOM needs to permanently devote resources to rethink, analyse, diagnose, and refine its relationship-building for economic development for the greater benefit of its citizens. CARICOM must move from its reactive and defensive approach – responding to the shifting trade and economic agendas of its powerful trading partners –think more clearly and pro-actively about transforming its onshore economies, and devise creative, innovative ways to achieve these goals. The strategy of the past 30 years has not yielded the anticipated fruit, and we argue that this is not so much the result poor implementation, as much as deficient diagnosis and pursuing inappropriate aims. Abdicating our epistemological and intellectual sovereignty to the international institutions is a major contributor to the problems of Caribbean underdevelopment. We have placed here a spirited challenge to existing analysis and recommendations, based on serious observation and diagnosis of the Caribbean economy. © Kirk Meighoo Cunupia Trinidad and Tobago 26 April 2009 rev. ver. 1.1: 22 August 2009


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Endnotes

1. For example, see Arthur Lewis, Eastern Caribbean Federation (Trinidad: Report

to the Prime Minister Federal Government of the West Indies, 1961); Arthur Lewis, Eastern Caribbean Federation: Further Notes – 1962 (Trinidad: Report to the Prime Minister Federal Government of the West Indies, 1962); Arthur Lewis, Proposals for Eastern Caribbean Federation of Eight Territories (Trinidad: Federal Government of the West Indies, Trinidad, 1962); Arthur Lewis, The Agony of the Eight (Bridgetown: Barbados Advocate, 1965); Dudley Seers, “The Limitations of the Special Case”, Bulletin of the Oxford Institute of Economics and Statistics, Vol. 25, No. 2 (1963); Dudley Seers, “The Mechanism of an Open Petroleum Economy”, Social and Economic Studies, Vol. 13, No. 2, June (1964); Dudley Seers, “A Step Towards a Political Economy of Development (illustrated by the case of Trinidad/Tobago)”, Social and Economic studies. Vol. 18, No. 3, September (1969); William, G Demas, The Economics of Development in Small Countries with special reference to the Caribbean (Montreal: McGill University Press for the Centre for Developing Area Studies, 1965); Havelock Brewster and Clive Y Thomas, The Dynamics of West Indian Economic Integration (Mona: UWI, Institute of Social and Economic Research, 1967); Steve De Castro, Problems for the Caribbean Air Transport Industry (Mona: UWI, Institute of Social and Economic Research, 1967); Alistair McIntyre, Norman Girvan and George Beckford, Possibilities for Rationalising Production and Trade in the West Indies (Mona: UWI, Institute of Social and Economic Research, 1967); Norman Girvan, The Caribbean Bauxite Industry: The Scope for Rationalization and Regional Collaboration (Mona: UWI, Institute of Social and Economic Research, 1967); Lloyd Best, “The Mechanics of Plantation-Type Economies: Outlines of a Model of Pure Plantation Economy”, Social and Economic Studies, Vol. 41, No. 3, (1968), pages 283-326; George Beckford, Persistent Poverty: Underdevelopment in the Plantation Economies of the Third World. (London: O.U.P, 1972)

2. For example, see Anthony Payne, The Political History of CARICOM (Kingston: Ian Randle Publishers, 2008)

3. Caribbean: Accelerating Trade Integration: Policy Options for Sustained Growth, Job Creation, and Poverty Reduction, Report No. XXX (Washington, DC: Poverty Reduction and Economic Management Sector Unit, Latin America and Caribbean Region, World Bank; Department of Trade and Tourism, Organization of American States; Governments of CARIFORUM Countries, April 2009)

4. Quoted in Winston H. Griffith, “CARICOM Countries and the Caribbean Basin Initiative”, Latin American Perspectives, Vol. 17, No. 1 (1990), page 33.

5. The author provides some relevant analysis in Kirk Meighoo, “Caribbean Civilisation?” in CARICOM Options: Towards Full Integration Into the World Economy, Kenneth Hall and Myrtle Chuck-A-Sang (eds.), The Integrationist, Vol. 3 No. 2, July (2006); and Kirk Meighoo, “Organic Theorising Inorganic Societies or The Need for Epistemic Sovereignty beyond Radicalism and Rebellion” in The Caribbean Integration Process: A People Centred Approach, Kenneth Hall and Myrtle Chuck-A-Sang (eds.), (Kingston: Ian Randle Publishers, 2007).


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6. cf. W.M. Cordon and J.P. Neary, “Booming Sector and De-industrialisation in a Small Open Economy”, The Economic Journal, No. 92 (1982), pages 825-848.

7. cf. Lloyd Best, “The Mechanics of Plantation-Type Economies: Outlines of a Model of Pure Plantation Economy”, op. cit.; George Beckford, Persistent Poverty: Underdevelopment in the Plantation Economies of the Third World, op. cit.; R.M. Auty, Sustaining Development in Mineral Economies: The Resource Curse Thesis. (London: Routledge, 1993); J. Sachs and A.M. Warner, Natural Resource Abundance and Economic Growth (NBER Working Paper 5398, National Bureau of Economic Research, Inc., 1995)

8. Indeed, just before this paper’s final revision, the Governor of the Central Bank of Trinidad and Tobago announced that Trinidad and Tobago would achieve no growth in 2009 and that the slowdown was steeper than he had anticipated in his previous announcements. See Monetary Policy Report, Central Bank of Trinidad and Tobago, April 2009.

9. See Kirk Meighoo, Politics in a ‘Half-Made Society’: Trinidad and Tobago, 1925-2001 (Kingston: Ian Randle Publishers, 2003).

10. This is an extension of the historical fact that the Caribbean economy, after the destruction of the Amerindian world, was established by outsiders as part of overseas sugar production, and never by inhabitants for self-provisioning. As Orland Patterson put it, the West Indian Islands “are unique in World history in that they present one of the rare cases of a human society being artificially created for the satisfaction of one clearly defined goal: that of making money through the production of sugar”, in The Sociology of Slavery: An Analysis of the Origins, Development and Structure of Negro Slave Society in Jamaica, Studies in society (London: MacGibbon & Kee, 1967), pagse 9.

11. For example, cf. George Beckford’s 1972 classic, Persistent Poverty, op cit. cites the damaging impact of what is today usefully called “vertical direct investment” by the traditionally large multinational plantation enterprises. Looking at political underdevelopment from a more historical and sociological perspective in a single state, see Kirk Meighoo, Politics in a ‘Half-Made Society’: Trinidad and Tobago, 1925-2001, op. cit.

12. Report On An Intellectual Project: The Fernand Braudel Center, 1976-1991 (Binghamton, NY: Fernand Braudel Center). Available at: http://www.binghamton.edu/fbc/fbcintel.htm, (Last accessed 10 April 2009)

13. William Baumol, Robert Litan, and Carl Schramm, Good Capitalism, Bad Capitalism and the Economics of Growth and Prosperity, (New Haven: Yale University Press, 2007).

14. For the contemporary and future projections of Kondratieff cycles, Immanuel Wallerstein has written a number of pieces over many years which have been uncannily prescient, including The Age of Transition: Trajectory of the World-system 1945-2025 with Terence K. Hopkins (New York: Palgrave Macmillan, 1996). Investors also use Kondratieff waves to predict returns on various types of long-term investments and anticipate trends: see http://www.chartingstocks.net/2008/11/kondratieff-vindicated/ (Last accessed 13 April 2009); http://www.kwaves.com/kond_overview.htm (last accessed 13 April 2009). In addition is the remarkable book by John L. King, How to Profit from the


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Next Great Depression (New York: New American Library, 1988) who remarkably predicted in great detail the unravelling of the financial markets over the next two decades. In a parallel vein, The Economist (“Minsky’s moment”, 2 April 2009) has highlighted the revival of mid-20th century economist Hyman Minksy’s reputation for his understanding that after periods of solid economic growth, financial markets eventually exaggerate and distort business cycles by creating unsustainable speculative bubbles and bad debt.

15. See Kirk Meighoo, “Trinidad and Tobago General Elections 2007: One-Party Dominance and Lessons for the Long View”, The Round Table, Vol. 98, Issue 400 (February 2009), pages 17-36, for further discussion on the link between political and economic centralisation in Trinidad and Tobago.

16. Interim Report of the Commissioner The Right Honourable Sir Robin Auld, Turks and Caicos Islands Commission of Inquiry 2008-2009 into possible corruption or other serious dishonest in relation to past and present elected members of the Legislature in recent years, Presented to His Excellency, Gordon Wetherell, Governor of the Turks and Caicos Islands, 29th February 2009. Available at http://www.tci-inquiry.org/interim_report.html (Last accessed 20 April 2009).

17. International Trade Centre Business Briefing, Trade Policy, Series on Cariforum-European Communities Economic Partnership Agreement Issues: Part 1, 17 April 2009.

18. In particular, L. Alan Winters has written much on the subject. See T.L. Walmsley and L.A. Winters “Relaxing the Restrictions on the Temporary Movements of Natural Persons: A Simulation Analysis”, CEPR Discussion Paper No. 3719, (London: CEPR, 2003); LA Winters, T.L. Walmsley, Z.K. Wang, R. Grynberg, Liberalising Labour Mobility under the GATS, Economic Paper, No. 53 (London: Commonwealth Secretariat, 2003); L.A. Winters, “GATS Mode 4: The Temporary Movement of Natural Persons”, University of Sussex, Centre for Economic Policy Research, London, Centre for Economic Performance, LSE. Available at www.ycsg.yale.edu/documents/papers/Winters.doc (Last accessed 20 April 2009).

19. Baumol et. al., Good Capitalism, Bad Capitalism and the Economics of Growth and Prosperity, op. cit., page 174.

20. See Avinash Persaud, “A Vision for Financial Services in the Caribbean: Ambition and Obstacles”, paper presented at ‘Investing in a connected future’, The 5th Euromoney/LatinFinance Caribbean Investment Forum, Hilton Trinidad & Conference Centre, Port of Spain, Trinidad & Tobago, 4-5 April 2005.

21. Eric Williams, Inward Hunger (London: Andre Deutsch, 1969); Eric Williams, From Columbus to Castro (London: Andre Deutsch, 1969), Anthony Payne, The Political History of CARICOM, op. cit.


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Author Biography

Dr. Kirk Meighoo has been one of Trinidad and Tobago's most respected political, social, and economic analysts and consultants, nationally and internationally, for various governments, publics, multilateral institutions, and multinational corporations with interests in the Caribbean. He has recently entered active politics. Dr. Meighoo has served as Political Leader (Trinidad) of the recently-formed political party, Democratic National Assembly (DNA), and contested the 2007 General Elections as part of the UNC / Alliance. Dr. Meighoo is CEO of Epitome Lodge and Gourmet Enterprises, Ltd. and Executive Chairman of Coastal Development Company, Ltd., property development companies on the cutting-edge of sustainable living in the 21st century. Dr. Meighoo was a close collaborator with the late Lloyd Best, serving as Honorary Fellow, Director, and Contributing Editor at the Trinidad and Tobago Institute of the West Indies and the Trinidad and Tobago Review. A collaborative, unpublished work by Meighoo and Best on the West Indian System of Government and Politics is still to be prepared for publication. Dr. Meighoo was additionally a founding member and served on the Board of Directors of the British-Caribbean Chamber of Commerce. Dr. Meighoo lectured at the University of the West Indies at the St. Augustine Campus in Sociology, Government, and the Institute of Business, and also at Mona. He was Wilberforce Scholar at the University of Hull, UK. Dr. Meighoo was also a founder of the University of Trinidad and Tobago's Academy of Arts, Letters, Culture, and Public Affairs, and sat on its Advisory Board. Dr. Meighoo also served as an Independent Senator. He also was Vice-Chair of the Government of Trinidad and Tobago's Vision 2020 Subcommittee on Governance and Institutional Structures for Development, and chaired the sub-committee's Constitutional Reform arm. He was also foundation member of the President of Trinidad and Tobago's Committee for National Self-Discovery. Dr. Meighoo’s most recent book is Democracy and Constitution Reform in Trinidad and

Tobago, written in collaboration with Supreme Court Justice Peter Jamadar. He is also author of Politics in a 'Half-Made Society': Trinidad and Tobago 1925-2001. He received the unique honour of being invited to launch his book in the UK House of Commons in 2003. His scholarly articles on Trinidad and Tobago politics and Caribbean development have been published in The Round Table: The Commonwealth Journal of International

Affairs, Commonwealth and Comparative Politics, The Integrationist, Social and

Economic Studies, Plantation Societies in the Americas, and as chapters in various edited collections. He served as Contributing Editor of the Trinidad and Tobago Review, and wrote popular weekly columns in the Sunday Express and Sunday Guardian.

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