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BON VOYAGE? TOURISM AND DEVELOPMPENT IN THE CARIBBEAN: THE CASES OF BARBADOS AND JAMAICA BY NICOLE WHALEN A Thesis Submitted to the Division of Social Sciences New College of Florida In partial fulfillment of the requirements for the d egree Bachelor of Arts Under the sponsorship of Dr. Barbara Hicks Sarasota, Florida May 2010
ii This thesis is dedicated to Monica.
iii Acknowledgements The inspiration behind this thesis comes directly from my family: my parents, to whom I am so fortunate to have been schlepped around the world since infancy; the strong woman from Jamaica, who has had a profound maternal influence on my personal development; and to my brother; who has continually showed me how t he seemingly impossible, is actually quite possible. This inspiration would have failed to become text if it was not for the unlimited help and support from one of New College's most valuable assets Dr. Barbara Hicks. Your patience, encouragement, and t hreats of defenestration have been invaluable. And to Trey, only the gods know how you have put up with me so well while I have written this thesis. You are my kind of wonderful.
iv Table of Contents Acknowledgements... iii Table of Contents... iv List of Illustrations and Tables.. vi Abbreviations ... vii Abstract viii Introduction ....... 1 Chapter 1: Tourism and Development: Dilemmas and Disappointment.... 8 Tourism Development: Characteristics and Impacts...... 9 Characteristics of the Tourism Industry.... 10 Economic Effects of Tourism ... 12 Measuring Tourism Effects... 15 Tourism in Developing Countries: A Development Strategy... 17 Why Tourism?.............................. 18 Dependency and Vulnerability. 22 Le akages... 26 Effects on Local Economy and Employment... 27 The Meaning of Economic Development. 33 Theories of Economic Growth and Development 37 Role of the State 43 C onclusions... 47 Chapter 2: Tourism and Development in the Caribbean....... 49 Caribbean Development.... 51 Small Island Developing States.... 52 Jamaica and Barbados: Then and No w. 54 The Barbadian Model... 59 Explaining Barbadian Growth: Historical Accidents?.. 60 Colonial Crisis and Change 1900 1960.... 64 Economic Growth and Development: 1960 2000.... 68
v Mak ing of the Modern Economy.. 82 The Case of Jamaica: Paradoxical Growth... 84 Change without Change: from Colonialism to Neocolonialism... 86 Social, Political, and Economic Change: 1970 1980 93 Readjusting Gro wth: 1980 2000. 102 Paradoxical Growth 1990 present...... 110 Divergent Growth: Accident of Policy .. 115 Chapter 3: Tourism as a Factor in Development.. 124 The Tourist Product 125 Cruise Tourism 126 The Barbadian Tourist Product... 127 Development and Change: Costs and Benefits... 129 The Jamaican Tourist Product 138 The Future of Tourism Develop ment. 141 Annexes... 146 Bibliography... 152
vi List of Tables and Figures Table 1.1 World Tourism Growth: 1950 2009. 12 Table 1.2 Travel and Tourism a s Percentage of Total GDP. 25 Table 2.1 Average Annual per Capita GDP Growth Rate 58 Table 2.2 Average Growth of Arrivals to Barbados and Jamaica, 1956 2009. 58 Table 2.3 S ectoral Shares (%) of Total Real Gross Domestic Product i n Barbados........ 70 Table 2.4 Average Population Growth (annual %) 1961 2009 71 Table 2.5 Central Government of Barbados Current Expenditure by Function... 72 Table 2.6 Ownership of Hotels in Barbados 1971 75 Table 2.7 Percent of Tourist Arrivals by Country to Barbados 82 Table 2.8 Growth of Visitor Accommodation in Jamaica 1959 1969.. 91 Table 2.9 Jamaica GDP by Sectors 1990 2000.. 114 Table 2.10 Select Social Indicators.119 Table 2.11 Divergent Economic Performance of Barbados and Jamaica.. 120 Table 2.12 Sectoral Contribution to GDP 1960 2009.... 120 Table 2.13 Select Economic Indicators.. 120 Figure 1.1 1950s British Overseas Airways Corp oration (BOAC) Poster....... 29 Figure 2.1 Economic Performance of Barbados and Jamaica: 1960 2009........................55 Figure 3.1 Relationship between Tourism and Development......................................... 125
vii Abbreviations AI: All Inclusive BLP: Barbados Labour Party CARICOM: Caribbean Community CBI: Caribbean Basin Initiative ECLAC: Economic Commission for Latin America and the Caribbean ELG: Export Led Growth FDI: Foreign Direct Investment GDP: Gross Domestic Product GNI: Gro ss National Income HDI: Human Development Index IFI: International Financial Institution IMF: International Monetary Fund JLP: Jamaica Labour Party JTB: Jamaica Tourist Board LDCs: Least Developed Countries MNC: Multinational Corporation NIE: New Instituti onal Economics PNP: People's National Party PPT: Pro poor Tourism SIDS: Small Island Developing State TSA: Tourism Satellite Account UN: United Nations UNDP: United Nations Development Program VAT: Value Added Tax WTO: United Nations World Tourism Organiz ation WTTC: World Travel and Tourism Council
viii BON VOYAGE? TOURISM AND DEVELOPMPENT IN THE CARIBBEAN: THE CASES OF BARBADOS AND JAMAICA Nicole Whalen New College of Florida, 2011 ABSTRACT International tourism has become a significant economic sector for many developing countries, and its potential to contribute to national development has become the subject of recent development literature. Due to the increased advocacy by international organizations and nation al governments to adopt tourism as a development strategy, it is important to examine how tourism has affected past development endeavors before prescribing the tourism treatment to other developing countries. This thesis examines the divergent development experience of two Caribbean islands Barbados and Jamaica to examine how the recent development of mass tourism has affected each island's quest for economic growth and development. It concludes that the ability for tourism to serve as a factor in developm ent is ambiguous at best, due to the complex and extensive economic, social, environmental, and cultural changes that the industry will generate without regulation. In order for tourism to serve as a factor in development, strategic public planning and reg ulation is critical. Furthermore, of the factors explaining the divergent development between Barbados and Jamaica, determinants such as history, geography, or resource endowments may have all influenced development outcomes, but proficient policy and soci al cohesion are truly the determining factors of Barbados' development success that were lacking in Jamaica. Dr. Barbara Hicks Division of Social Sciences
Introduction There is nothing so strange in a strange land, as the stranger who comes to visit it. 1 The economic importance of tourism has grown to tremendous proportions during the twentieth century. With 935 million tourists more than three times the population of the United States traveling abroad in 2010, there is no question that t ourist expenditures have evolved into a crucial part of the world economy (WTO 2011). Developing countries, in particular, have witnessed such a great expansion of the industry since the 1950s that tourism now represents a key sector for many emerging econ omies and is even promoted as a means of economic growth and development. However, the development of a tourism industry packs with it both significant costs and benefits. The dual nature of the industry has launched a growing division within discourse of development on exactly how tourism affects development within the anthropological, environmental, and economic context. While proponents of tourism expansion for developing countries often focus on the potential benefits of tourism, such as increases in fo reign exchange and employment, critics argue that relative benefits are far outweighed by the largely unquantifiable costs, including the degradation of the environment, erosion of local dignity, perpetuation of racial inequality, and the skewed distributi on of resources that are 1 Quoted from the 1988 Australian Documentary, Cannibal Tours.
2 spent on providing benefits to wealthy tourists from developed countries. Due to the increased advocacy by international organizations and national governments to adopt tourism as a development strategy, it is important to examine how tourism has affected past development endeavors before prescribing the tourism treatment to other developing countries. This thesis examines the divergent growth experience of two Caribbean islands Barbados and Jamaica to examine how the recent develop ment of mass tourism in the region has affected each island's quest for economic growth and development. The Caribbean is a particularly useful area for study when exploring the relationship between tourism and development in developing countries. Not onl y has the region experienced perhaps the most extensive exposure to and expansion of the tourist industry throughout its development process, but the Caribbean has also become the most tourism dependent region in the world. While it goes without saying tha t the case of tourism development in the Caribbean is not reflective of all developing countries, the Caribbean has shared many features with least developed countries (LDCs), including a historic agricultural economy, high population growth rate, heavy re liance on imports, high rates of unemployment, high inequality in respect to both income and land ownership, and a long history of colonial rule. Notwithstanding, big lessons can undoubtedly be drawn from these small islands. However, it is truly difficult to make accurate generalizations about Caribbean development as a whole due to the fact that there is such great intra regional variance within levels of development. Just among the islands, there is communism, liberal democracy, modern day colonies, the most underdeveloped country in the Western Hemisphere, and one of the most developed! To
3 avoid superficial or misrepresentative analysis, this thesis examines the specific cases of two tourism dependent islands Barbados and Jamaica. By cross comparing and adopting an interdisciplinary approach to the development experience of these two islands, this thesis attempts to explain how tourism has served as a factor in the development of Barbados and Jamaica. Although a traditional focus on economic growth is mai ntained, the inclusion of social conditions remains fundamental. The case studies were chosen due to their unique, comprehensive, and paradoxical development experiences. The experience of Barbados and Jamaica also represents two ends of a continuu m and many characteristics of other Caribbean islands can be found in between. Both islands achieved independence in the 1960s under similar economic conditions, both externally and internally, including similar social and economic conditions, histories, geography, institutions, and economic structures inherited from their shared British colonizer. However, independence brought dramatically different development patterns for Barbados and Jamaica. In the 1960s the world economy was relatively stable, lackin g any destabilizing global shocks. Barbados's real GDP per capita in 1960 was $3,396 and Jamaica's was $2,208. In 2009, Barbados's real GDP per capita hit $17,700, while Jamaica's was only $8,400. The modest income gap at independence of $1187 has swelled to $9300 in 2009, making the current income gap larger than Jamaica's per capita GDP (Henry and Miller, 2009, 3). While Barbados has reached impressive development standards and maintained good growth, Jamaica has continually produced disappointing resul ts no matter the extent of loan assistance or foreign aid. Despite the divergent growth, both islands have evolved congruent organization of their economy through transitioning from an agricultural to service economy dominated by
4 tourism. In 2010, tourism contributed to nearly half of GDP and employment in Barbados, and 24 percent of Jamaican GDP and 17 percent of employment. Development theories have produced a number of factors that explain differences in development outcomes, including institutions, ge ography, history, ethnic diversity, and a slew of economic factors that contribute to growth. However, since Jamaica and Barbados share similar and often identical institutions, geography, history, and ethnic populations, this thesis rejects ideas of histo ric, geographic, and ethnic determinism, and focuses on the public policies implemented throughout the development process and how they have impacted both the economy and the labor force in Barbados and Jamaica. This thesis argues that the heterogeneous gr owth experience of Barbados and Jamaica are explained through differences in macroeconomic policies, specifically with respect to their production structure, not differences in institutional makeup. With tourism as the leading industry in both island's mod ern economy, macroeconomic policy around tourism must have significantly contributed to the development of Barbados and Jamaica. The following chapters are dedicated to uncovering how tourism has affected the development of each island. The analysis is a rranged in three chapters. Chapter I present the topic, dilemma, and theory surrounding the discourse of tourism and development with the intention of presenting both the costs and benefits of using tourism as a development strategy. Chapter II develops th e context and presents the case of development in Barbados and then Jamaica, with special attention to public policies and tourism development. It argues that of the factors explaining why Jamaica was unable to follow the Barbadian Model, determinants such as history, geography, or resource endowments may have all
5 influenced development outcomes, but proficient policy and social cohesion are truly the determining factors of Barbados' success that were lacking in Jamaica. Chapter III offers analysis on how t ourism, on the macro level, has affected both the rise and fall in Jamaica's and Barbados's processes of development. This section seeks to explain what accounts for the difference in development between the two islands, while addressing the initial questi on of how the recent development of mass tourism has affected each island's quest for economic growth and development. While Barbados may have been able to utilize tourism advantageously as a means of economic growth, the changing world environment is affe cting the future options for tourism led growth. While the final analysis concludes that tourism can be and has been used as a means of economic growth and development, the future of tourism led growth many not be so promising in the Caribbean. In order f or the region and the rest of the developing world to continue to benefit from the industry, they must find ways to better utilize the industry as a vehicle for development. Optimizing the benefits of the tourism industry will require a strong role of the government. Before embarking on the rest of this study, it is necessary to address two key limitations to tourism studies that have fundamentally affected this thesis. First and foremost, there has been no international standardization among tourism data until quite recently. While the validity for visitor arrival data has been strong due to well institutionalized immigration offices in many countries, discrepancies have arisen due to inconsistencies in defining and categorizing foreign arrivals as visito rs, tourists, short stay, long stay, and travelers. Although Barbados and Jamaica have maintained comparable categorization of foreign arrivals since the 1950s, it was not until the 1991
6 Ottawa International Conference on Travel and Tourism Statistics that international definitions and standards were agreed upon. Second, as we move from tourist arrivals to tourist expenditure/revenue, most of the validity of past data is lost due its incomparability. Until the arrival of Tourism Satellite Accounts (TSAs) in the 1990s, there was no consistent international method for measuring the economic importance of tourism. However, as of 2010 only 60 countries were producing or developing TSAs and Barbados is not one of them. Due to the inconsistencies in measurement for the tourist expenditure/revenue, tourist arrivals are used as a proxy for the expansion and economic importance of the industry. As tourism development continues to expand in developing countries, there should be an integrated effort by international o rganizations, such as the World Tourism Organization (WTO) and the World Travel and Trade Council (WTTC), and national governments to help build the institutional capacity of developing countries to develop accurate and transparent tourism statistic method ologies. Improved statistical services would greatly improve the transparency in the tourism industry, yield a greater comprehension on the economic impact of tourism, assist governments in reducing sources of leakages, and would hopefully stimulate an int erest in building the relatively weak literature on tourism studies. A third limitation deals with the economy of Jamaica and, to a lesser extent, Barbados: the informal sector. Sine the 1990s, observers have been skeptical of the reporting of many macro economic indicators in the Caribbean, especially for Jamaica where the informal sector thrives and remittances are widespread. Income earned through both remittances and the informal sector have played a substantial part in Jamaican and
7 Barbadian economy a nd indicators such as national income is believed to be undervalued, while unemployment may be overvalued. Again, due to the representational shortcomings of statistics, there maybe strong reasons to believe that significant errors are present in both tour ism and economic statistics. Lucky for this study, the statistical differences between Barbados and Jamaica are large enough to make safe comparisons.
8 Chapter 1 Tourism and Development: Dilemmas and Disappointment Touri sm is the most rapidly expanding industry in the world. 2 From 1950 to 2005, international tourism arrivals expanded at an annual rate of 6.5%, growing from 25 million to 806 million travelers (UNWTO, 2010). Accounting for approximately 9.2% of global GDP a nd 8.1% of all employment in 2010, the business volume of tourism now surpasses that of oil, food products or automobiles (WTTC 2010, 3). As it has increased in both economic size and global breadth, international travel has poured into the developing worl d in the past half century. In 1950, just fifteen destinations primarily European accounted for 98 percent of all international arrivals (Honey and Gilpin 2009, 2). Today the developing world is now tourism's major growth area with emerging economies accou nting for 47% of all international arrivals in 2010. In the face of significant entry barriers to other markets and declining terms of trade for primary 2 Some authors (Mill and Morrison, 2009; Davidson, 2005) argue that tourism is not an industry, but rather a system.' They reason that since many tourism firms offer complementary goods and services (i.e., airline, hotel, travel agency), rather than competing products (i.e., airline, cruise line), it is not an industry. These academics refer to tourism as a system' with elements that are interdependently linked. Regardless, referring to tourism as an industry provides unity to the concept of tourism and the units that comprise it (i.e., hotel industry, travel industry). When aware of the interdependent pieces of tourism, debating between tourism as an industry' or a system' becomes a semantic squabble. Since the term tourist industry' is so widely used, the term will continue to be used in this thesis.
9 goods, tourism's budding potential for the developing world has emerged as an attractive source of econ omic growth, making tourism the centerpiece for many development strategies. With few alternatives and favorable natural resource endowments, tourism has quickly become the largest industry and main source of income for many developing countries, especiall y among the Caribbean islands. Low regulation and continual expansion has yielded significant economic growth through increased employment, new tax revenue, and alleviation in the foreign exchange gap; yet these positive contributions to economic growth do not reveal the industry's full contribution to development. As developing countries continue to become dependent on tourism for economic growth, an understanding of how the industry contributes to the greater process of development becomes critical. Tou rism Development: Characteristics and Imp acts Traveling is no new event: Paleolithic hunters traveled in pursuit of game; religion has prompted pilgrimages, and diasporas have affected civilizations throughout time. Yet today, more people than ever are traveling (both nationally and internationally) due to improved air transport technology, increased expendable incomes, constant media exposure, and growing desires to visit a place different from their home environment. The increased incidence of travel h as resulted in the social, cultural and economic phenomenon of tourism development. Defined by Jafari as "a study of man away from his usual habitat, of the industry which responds to his needs, and the impact that both he and the industry have on the soci o cultural, economic, and physical environments,"
10 tourism can be understood as an activity that transcends both the mere act of traveling and the traditional concept of an industry' (1977, 8). Characteristics of the Tourism Industry Tourism is not one of the 1,170 "industries" in the North American Industry Classification System developed by the United States, Canada, and Mexico to compare production across a uniformly defined set of industries (Mak 2004, 68). Because tourism includes the assortment of goods and services acquired by travelers, such as food and beverages, transportation within the economy visited, lodging, entertainment, gifts and souvenirs, tourism is actually a diverse group of industries and considered a sector. Nevertheless, the fact that tourism is not a single industry, but rather an amalgam of industries, is a key characteristic of tourism. Tourism is also a labor intensive activity that provides a wide range of employment opportunities from highly skilled to unskilled, especially for women and young people. Another characteristic of tourism is that it is considered to be an export since tourism involves the domestic production of goods and services for foreign consumption. However with tourism exports, foreign exchange is occurring within the country of production, not on international markets, and consumption is of non tradable goods and services since it is the consumer who moves, not the product. Tourism is a particularly favorable export industry for both developed and develop ing countries because it faces relatively few trade barriers abroad. Since only a small number of countries place restrictions on the right of their citizens to travel abroad for tourism, virtually all trade barriers that tourism exports encounter are dome stically
11 imposed, such as extensive taxation, domestic regulation, limits on foreign airline access, limits on Foreign Direct Investment (FDI), or stringent customs and immigration procedures (Honeck 2008, 6). These minimal market entry barriers offer opp ortunities for small scale domestic entrepreneurship, while allowing host countries to have significant control over the prices and products of the industry. Flexible prices for non traded goods are of critical significance in the case of tourism as they a llow for the presence of a distortion, specifically, monopoly power in trade (Hazari and Sgro 2004, 2). According to Nowak and Sahli, "tourism always gives a country monopoly power in trade as the relative price of that good is endogenously determined and average and marginal terms of trade are not identical" (2008, 3). In other words, not all tourist products' (i.e., destinations) are equal because they offer different facilities or experiences to the tourist. The differentiation among tourist destination s allows both public and private entities the ability to flex the prices, through optimal tariffs or price discrimination, making the industry even more lucrative. The driving force behind the development of tourism is its potential contributions to desti nation economies, both developed and developing. Although tourism occurs both internationally and domestically, tourism development primarily focuses on international tourists since foreign exchange earnings have greater economic importance. While domesti c travel yields a redistribution of national income, foreign exchange earnings can produce the investment necessary to finance growth in other sectors, relieve balance of payment constraints, increase government revenue, or even influence exchange rates. I n addition to increasing foreign exchange, tourism also increases employment and income in a host economy. Due to such impressive potential economic benefits and continual
12 growth of international tourist arrivals (see table 1.1), the role of tourism as a v ehicle for economic growth has gained more and more academic interest Table 1.1 World Tourism Growth: 1950 2009 Year International Tourist Arrivals (millions) % Change International Tourist Receipts (billions in US$) % Change 1950 25.3 2.1 1960 69.3 173.9 6.9 228.6 1970 165.8 139.2 17.9 159.4 1980 277.6 67.4 104.5 483.8 1990 438.4 57.9 264.1 152.7 1995 538.5 22.8 405.1 53.4 2000 684 27.0 477 17.7 2001 680 0.6 464 2.7 2002 700 2.9 480 3.4 2003 694 0.9 524 9.2 2004 764 10.1 633 20.8 2005 80 1 4.8 676 6.8 2006 846 5.6 742 9.8 2007 900 6.4 854 15.1 2008 919 2.1 942 10.3 2009 880 4.2 852 9.6 Source : UNWTO. Tourism Market Trends, 2006 Edition Annex; UNDATA Online Database Note : Arrivals refer to the number of arrivals (visits) in a desti nation; same day visitors are not included. International Tourism Receipts excludes receipts related to international transport made by non resident visitors. Economic Effects of Tourism The studies of tourism's economic impact aim to ascertain the ne t worth of tourism and its total economic effects. As a labor intensive industry, tourism is often idolized for its large contribution to employment and its impressive contribution to GDP through increased foreign exchange earning and stimulated demand wit hin other industries of domestic production. However, quantifying tourism's economic effects is no straightforward measurement. Although tourism is recognized to have large economic
13 effects, estimates of how large they are become complicated by the direct, indirect, and induced effects of tourism. The direct effects of tourism only take into account the immediate effects of the additional demand on production processes and supply of goods and services in terms of additional goods and services, and additiona l value added and its components (UNWTO 2008, 95). In other words, direct impacts are the first round of spending by visitors, (e.g., money spent on accommodation, food, or taxi etc.). In order to serve visitors, there is a second round of spending by busi nesses receiving the tourist (e.g., hotels need housekeeping, restaurants must buy food, taxies need fuel, etc.). This second round of spending constitutes tourism's indirect effects, or the increased demand for goods and services, in response to initial v isitor spending, which also induces a chain of additional demand for different factors of production. The chain of indirect effects of tourism's initial consumption on other industries are due to the linkages of industries serving tourism to other indust ries that supply them with intermediate inputs and capital goods (UNWTO 2008, 96). This chain carries on into a third round, since all the employment serving directly or indirectly from the initial tourist expenditure is now receiving an income. The increa se of income distributed to the labor generates increased demand for goods and services through a rise in household consumption (UNWTO 2008, 96). Again, additional demand is created, this time by the increase in household consumption. The increase in hous ehold consumption in an induced effect of tourism, and occurs when employees spend part of their wages to buy goods and services locally. Linkages that create indirect and induced effects from the tourism industry arise through the interdependence of dif ferent production processes in the economy.
14 Economic linkages allow revenues to circulate throughout the domestic economy, producing multiplier effects in terms of output, employment, and income for the local people (Brohman 1996, 56). The multiplier effec t is really just the extent of integration of tourism in the national economy the greater the tourism industry, the greater the circulation of money within the economy. In theory, the multiplier effect could carry on infinitely, as tourists spend money, bu sinesses servicing tourist demand increase production in the economy, and wages from direct and indirect employment increase consumption, prompting more demand, more production, and more income. But this cycle is eventually exhausted through the event of e conomic leakages. Leakage is a term used to describe the percentage of tourist revenue that leaves a destination (in imports or expatriate profits) or never reaches the destination in the first place due to the involvement of intermediaries (Meyer 2006, 6 ). The extent to which the benefits of tourism are diminished by leakages in an economy is much debated. While some question whether tourism benefits actually remain within the local economy or reach the local people, others argue the claims of leakages ar e highly exaggerated. Economic leakages occur when foreign investors repatriate revenue, when goods are imported either for tourist consumption or as inputs needed for the production of tourist goods, or when personal income is spent on imported goods. Lea kages are particularly high in small developing island economies, due to islands' high import reliance, and it is estimated that the average leakage for the Caribbean region is reported to be around 70 percent (Meyer 2006, 7). While tourism multipliers ca n stimulate an economy, leakages can severely distort tourism's true economic benefit, thus making efforts to measure the effects of tourism rather complicated.
15 Measuring Tourism Effects As tourism continued to develop during the second half of the twe ntieth century, so did the macroeconomic importance of the industry. Ironically, the beneficial diversity that characterized the tourism industry and made it an ideal vehicle for economic development was the exact difficulty that challenged the industry to develop a type of reliable or credible tourism information base (Theobald 2005, 8). In order to bring about common measures of tourism, The Untied Nations World Tourism Organization held a landmark conference in 1991 in Ottawa, Canada: The International C onference on Travel and Tourism Statistics. With representation from 90 countries, the conference was successful in agreeing on approaches to standardize tourism terminology and industrial classifications, as well as indicators of market growth, economic i mpact, and overall industry development (Theobald 2005, 15). From this conference, the WTO definition for tourism, which remains the most highly recognized definition of tourism in the world, was determined as the activities of persons traveling to a place outside their usual environment for not more than one consecutive year for leisure, business, and other purposes. The Ottawa Conference also recommended the development and implementation of an accounting system of performance measures and indicators con sistent with national accounts to provide a consistent and accurate measure of the economic impact of tourism. This system is called the Tourism Satellite Account (TSA). The WTO describes the TSA as a statistical instrument designed to measure the goods an d services of tourism according to international standards of concepts, classifications, and definitions
16 that allow for valid comparison with other industries and eventually from country to country and between groups of countries. The complete TSA provides : Macroeconomic aggregates that describe the size and the economic contribution of tourism, such as tourism direct gross value added (TDGVA) and tourism direct gross domestic product (TDGDP), consistent with similar aggregates for the total economy, and fo r other productive economic activities and functional areas of interest; Detailed data on tourism consumption, a more extended concept associated with the activity of visitors as consumers, and a description on how this demand is met by domestic supply and imports, integrated within tables derived from SUT, that can be compiled both at current and constant prices; Detailed production accounts of the tourism industries, including data on employment, linkages with other productive economic activities and gros s fixed capital formation; A link between economic data and non monetary information on tourism, such as number of trips (or visits), duration of stay, purpose of trip, modes of transport etc. which are required to specify the characteristics of the econom ic variables (WTO 2008, 3 4). However, the TSA does not include any measurement of the indirect and induced effects of visitor consumption on the economic system as a whole, so that tourism's impact on the economy is not fully reflected in the TSA tables (UNWTO 2008, 4). Using the TSA framework, the World Travel and Tourism Council, partnered with Oxford Economics (WTTC/OE), has added direct industry measure, the value added created indirectly in the industry's supply chain, investment, and collective gove rnment and non visitor (i.e., merchandise) export spending related to travel and tourism, in order to have the broadest measure of the economic impact of tourism. As additions and improvements are still underway to the TSA, the recent adoption and implemen tation of standard WTO definitions and TSAs allow the first methodical classification and universal measurement of tourism's multiple and wide reaching effects across the globe. According to the WTO, a total of 60 countries have been identified by early 20 10 as having already produced or
17 currently developing a TSA exercise, including four Caribbean Islands: Bahamas, Cuba, Dominican Republic, and Jamaica (2010, 2). Tourism in Developing Countries: A Development Strategy Through advances in transport techn ology and profound media exposure, tourism now reaches all parts of the globe. The first commercial transatlantic flight was made by Pan America in 1939 with a scheduled fight time of 29 hours. Today, this same flight can be made in less than 7 hours. As t ourism continues to expand, an important share of the market is being captured by developing countries, where tourism receipts have grown at average rates of 11 percent a year over the past two decades (Lejrraga and Walkenhorst 2007, 4). International tou rism is now a key economic sector in which developing countries have managed to gain participation in the global economy, bringing in tremendous sums of money. In fact, in 2007 tourists spent US$295 billion in developing countries almost three times the le vel of official development assistance (Mitchell and Ashley 2010, 1). Statistics show that there exists a direct relationship between the growth of international tourism arrivals and the growth of global economic output measured in Gross Domestic Product ( GDP), so that in years when world economic growth exceeds 4%, the growth of tourism volume tends to be higher, and when GDP growth falls below 2%, tourism growth tends to be even lower (UNWTO, 2010). Whether or not this macro relationship between tourism a rrivals and economic growth on the global scale translates to individual regions, states, and communities has sparked an increasing though still limited body of literature that examines the empirical relationship between tourism development and economic gr owth. While many studies
18 notice a strong correlation between economic growth tourist expansion (i.e., increased tourist arrivals or increased real tourist expenditure), more recent studies seem to indicate that tourism is a significant factor that causes g rowth in both the short term and long run. However, how to harness this economic growth to bring about development in less economically developed countries has produced a literature rife with controversies. Why Tourism? For developed countries, tourism is a social activity. But for developing countries, tourism is an economic activity with significant economic, social, and environmental consequences. Although the traditionally standard binary categorization of developed' and developing' countries over simplifies many of the complexities of global states, we can use these groupings to highlight shared characteristics among states. Distinguished as countries that are technologically and economically advanced, the developed world enjoys a relatively high s tandard of living and shares similar political institutions. The developing world, on the other hand, seems to encapsulate everyone else. Despite their diversity as a rather eclectic collection of countries at various levels of development, LDCs tend to ha ve a relatively inflexible economic system dominated by an agricultural industry with low levels of productivity, a rudimentary industrial sector plagued by inefficient methods of production utilizing inadequate technologies, a semi literate population wit h little chance of bettering itself because of sheer numbers and a rigid social system, a high level of unemployment or underemployment, and a limited infrastructure. All of these characteristics contribute to a low real per capita income, difficulties in finding export markets, and an environment of economic stagnation (Jursa and Winkates 1974, 45). Tourism is seen as a direct remedy for these substandard
19 economic conditions and has become a key prescription for many development policies through its promis es of generating investment, employment, and foreign exchange. Theoretical underpinnings of tourism as a development paradigm look at macroeconomic benefits governments can expect from tourism that include: (i) earning foreign currency and making a positi ve contribution to the balance of payments; (ii) developing the service sector and contributing to GDP; (iii) attracting inward investment and income multiplier effects; and (iv) employment creation (Holden 2006, 90). Implicit in the tourism as development proposition is that economic growth brings about development, and because the macroeconomic benefits of tourism generate economic growth, tourism can be the stimulus that developing countries need for take off' and development by increasing employment op portunities, raising per capita incomes, and increasing foreign reserves. Recent case studies by Page (1999); Tohamy and Swinscoe (2000); Sugiyarto, Blake and Sinclair (2002); Steiner (2006); and Brau, Lanza, and Pigliaru (2007) have indicated not only tha t tourism is a determining factor for growth, but that it is also a significantly more labor intensive than other nonagricultural sectors that employ a relatively high proportion of female and semi skilled workers (Croes and Vanegas 2008, 95 96). Due to it s many linkages and multipliers, a growing tourism sector can also significantly contribute to the growth of other sectors, such as entrepreneurial ventures, agriculture, and manufacturing. One main attraction to tourism is its great source of employment i n destination areas for both men and women, directly and indirectly, and in formal and informal sectors. Tourism also has a relatively high share of unskilled or semi skilled employment, such as wait staff, receptionists, housekeeping, grounds keeping, and
20 bellboys, and can create new job opportunities for women and youth two social sectors that usually find difficulty in entering labor markets. Tourism proponents often highlight the benefits women can receive from tourism employment, such as the increased independence of working outside the home, higher family income, greater sense of self worth and accomplishment, and greater respect by husbands for their wives (Cukier Snow and Wall 1993, 200). In addition to all these macroeconomic and social benefits, th e industry has demonstrated remarkable and consistent growth over the past half century, averaging 6.2 per cent annual growth since 1950 (Telfer and Sharpley 2008,17). With international travel accessible to the general public, the growth of tourists and t ourist receipts has convinced many developing countries of the economic growth to be found in utilizing tourism as a means of development. Apart from basic economic drivers, other factors that strengthen tourism's attraction as a development strategy, inc lude the "dual nature" of tourism infrastructure and tourism's subsequent low start up costs compared to other industries (Cattarinich, 2001; Telfer and Shasrpley, 2008; Hayle, Singh and Wright 2010). Honeck describes one potential benefit of tourism as "d ual nature" infrastructure: the development infrastructure built by investors (often foreign) that will accommodate tourists such as airports, new roads, ports, passenger ferries, hospitals or clinics, water treatment plants, electrical generation and tran smission facilities, telecommunications, and financial services and also benefit locals by providing new services and opportunities. Honeck cites, for example, the increased frequency of Kenya's cut flowers and vegetable deliveries to Europe, made possible by the greater number of international flight arrivals and departures due to growing tourist levels (2008, 10). Another benefit is the
21 predominantly low start up costs most types of tourism investment typically face due to minimal employee training and th e use of natural factor endowments or "free" infrastructure. Because tourism employs a large base of semi or unskilled workers, many tourism firms (i.e., restaurants, hotels, airports) are not required to invest much in job training. Furthermore, tourism is typically built around existing whether natural or man made attractions, such as monuments, favorable climate, sandy beaches, natural beauty, wilderness areas or heritage sites. The low start up costs from free infrastructure and minimal job training h ave enabled developing countries to build up strong, competitive tourism businesses. In many regards, developing a tourist industry may appear to be the simplest pathway to economic growth and development. Not only does tourism have the potential to enco urage economic growth, it has the prospect to ensure growth continues. Tourist investment is typically of long term nature, since the success of a tourist destination depends upon returning clientele, positive reviews, and new innovations to keep the touri sts coming back. In light of the economic drivers, noneconomic benefits, and the industry's continual growth and expansion, there is little doubt to why tourism has emerged as a safe development plan. Numerous empirical studies have supported the claim tha t tourism expansion is relevant and significant for growth and economic development (Belisle and Hoy 1980; West 1993; Modeste 1995; Zhou et al. 1997; Shan and Wilson 2001; Sandler 2001; Sugiyarto, Blake, and Sinclair 2002; Easterly 2002; Balaguer and Canta vella Jorda 2002; Durbarry 2002, 2004; Dwyer, Forsyth, and Spurr 2003; Vanegas and Croes 2003, 2006, 2008; Dritsakis 2004; Eugenio Martin, Morales, and Scarpa 2004; Steiner 2006; Kim et al. 2006). More recently, many international
22 organizations, including the United Nations, the World Bank, International Finance Corporation, and the International Development Association, have endorsed tourism as an engine of economic growth to assist poor countries in poverty reduction. However, the common perception that the tourism industry can spur economic development is not without critics. The costs of tourism can be crippling, ranging from environmental degradation to dependency to exhaustive economic leakages. Critics have long discredited the idealization of touri sm as a silver bullet for development strategies, and argue that the industry's negative ramifications both economic and noneconomic often outweigh the relative benefits (Jursa and Winkates 1974, 45). Since tourism involves the mass movement of people, it will have high impacts not only of an economic nature, but also of a social, cultural, environmental, and political nature. When adopting a tourism led growth strategy, LDCs face the dilemma of constructing a national production structure upon a capricious industry that has both impressive economic benefits and extensive discrediting costs. Dependency and Vulnerability While the noneconomic costs of tourism (i.e., environmental and social impacts) have taken the brunt of criticism within the discourse of tourism development, the economic case promoting tourism has not gone unassailed. In a 1982 report, the United Nations (UN) succinctly points out, Although tourism can generate revenue and valuable foreign exchange, marked dependence on tourism can als o create problems of an economic or socio cultural nature, particularity for a small country. Heavy reliance on revenue from tourism can result in sharp revenue fluctuations since the industry is very seasonal, as well as being subject to changes in taste or fashion, fears of political instability, allegation of health hazards, etcA high degree of seasonality not only causes large fluctuations in earnings
23 from tourism but also implies considerable social costs in terms of underutilization of productive cap acity and, in particular, high levels of seasonal unemployment (UN 1982, 3). The UN provides a brief survey of some of the negative impacts of tourism and acknowledges the problem of dependency the initial source of criticism by early critics. Early criti cs associated tourism with dependency on a source of growth that is highly susceptible to external changes, more so than staple commodity industries, such as simple fashion, natural disasters, climate change, terrorism, seasons, and global economic downtur n. Recently, allegations of health hazards, such as the pandemonium raised over the swine flu, have discouraged travel. In 2009 on NBC's Today Show, Vice President Joe Biden advised Americans against flying due to the risk of transmission, drawing outrage from the travel industry who feared an even greater decrease in travel expenditure in the already depressed tourist industry. Such external influences on tourism can rapidly generate large demand shocks and thus great vulnerability for states dependent upo n tourism for economic growth. While proponents of tourism have insisted that the movement away from agricultural economies and towards economic diversification with industries that are income elastic should build a sounder economic foundation, critics cl aim that the growth of tourism has not provided economic diversification, but rather a new mono commodity system that is just as vulnerable to the whims of the outside world; wherein the commodity becomes the land, people, and culture of the host country ( King, LeBlan, and Van Lowe, 1). The dependency on foreign investments is a direct result of short run bottlenecks, such as the lack of necessary resources and skills, difficulties in obtaining finance, and a lack of business confidence that plague developi ng countries. Britton
24 stresses the inability for LDCs or peripheral' countries to exercise any economic agency within the international markets, thus creating dependency on multinational corporations (MNCs) and foreign capital to initiate tourism developm ent. He argues that "the establishment of an international tourist industry in a peripheral economy will not occur from evolutionary, organic processes within that economy, but from demand from overseas tourists and new foreign company investment, or from the extension of foreign interests already present in that country," (Britton 1982, 3360). Academics, such as Britton, evoke the framework of the dependency theory to describe tourism in developing countries as reliance on demand and investment from develo ped countries. Matthews (1977), Britton (1982), and Oppermann and Chon (1997) brought the dependency paradigm into tourism studies in the late 1970s and early 1980s, as it became apparent that tourism did not necessarily yield the desired effects of dev elopment for developing countries. Economic benefits such as the multiplier effects were profoundly compromised by leakages, and orienting an industry to the international market requires substantial amounts of investment, which led to dependency on foreig n investment, capital, and professional management. Moreover, new infrastructures built to develop the tourism industry that were supposedly to be dual uasage,' were often concentrated in areas away from urban centers, failed to take into consideration th e needs and wishes of surrounding communities, and were often beyond the financial means of local communities (Mbaiwa 2005,159). For example, it is typical for tourists to enter a host country in an urban area through an international airport, be transport ed from terminal to hotel on an exclusive seaside area or other area confined largely to the formal sector of the tourism company, then shuttled back to the urban center for
25 departure. Tourists have minimal to no contact with the locals, and foreign exchan ge is limited to airlines, hotels and other international companies not local businesses or workers. This exclusive system of tourism, known as enclave tourism, is criticized as a kind of "internal colonialism" where natural resources in a host region most ly benefit outsiders while the majority of the locals derive little or no benefits (Drakakis Smith and Williams, 1983; Dixon and Heffernam, 1991; Mbaiwa 2005). Table 1.2 Travel and Tourism as Percentage of Total GDP Rank Country % GDP Rank Country % GDP 1 Macau 93.6 11 Guadeloupe 44.1 2 Antigua and Barbuda 85.4 12 US Virgin Islands 42.9 3 Aruba 78 13 Barbados 41.4 4 Anguilla 74.7 14 Angola 40.5 5 Maldives 66.6 15 Cayman Islands 34.4 6 British Virgin Islands 54.7 16 St. Vincent & the Grenadines 33.8 7 Seychelles 54.1 17 Fiji 33.1 8 Saint Lucia 51 18 Jamaica 33.1 9 Bahamas 50.1 19 Other Oceana 31.8 10 Vanuatu 47 20 Grenada 29.9 Source: Reprinted from David Telfer and Richard Sharpley Tourism and Development in the Developing World (New York: Routl edge, 2008), 185. Unable to affect prices on global markets, LDCs, especially small island states, are subject to commercial power held by foreign enterprises. The combination of the industry's vulnerability and domestic economic dependency can have dev astating effects when events, such as Fiji's coup in December 2006, leads to immediate tourist departure and cancellations. In the week after the coup, hotel occupancy had fallen 25 per cent and the country was reportedly losing some $1.3 million a day in tourist expenditure (Telfer and Sharpley 2008, 185). The degree of economic dependency of tourism is most readily revealed by the industry's percent contribution to national GDP. Table 1.2 lists the top
26 twenty economies most dependent upon tourism as a sou rce of national income and all, save the continental Angola and peninsular Macau, are small island states. Leakages Perhaps the most debated effect of tourism involves the industry's economic benefits being greatly diminished by leakages. Economic le akages occur when money leaks out of the economy in each round of expenditure, thus distorting the true economic benefit from foreign exchange earnings. Leakages arise from activities such as interest payments on foreign loans for tourism development, high import demand of resources (i.e., consumables such as food or beverages, building materials, equipment, etc.), remittances sent abroad by foreign workers, and the repatriation of profits by foreign travel and tourism companies. Indisputably, the level of economic leakage will vary from country to country; however, most academics agree that foreign exchange outflows from the tourism industry are dependent upon the level of development. Large, developed economies typically possess a more diversified structur e, therefore face fewer resource constraints, and are more likely to benefit from inter sectoral spillover effects. For most developed economies, the average outflow of foreign exchange from tourism is estimated to vary between 10 to 20 percent ( UNEP, 2002 ). Developing countries, on the other hand, face high leakage factors due to their reliance upon multinational corporations, large foreign investment, and major resource constraints. Estimates ranging from 55% to 75% of tourism spending leaking back to dev eloped countries have been proposed (McCulloch et al. 2001, 248). Holden uses the example of airlines to exemplify high leakages since the cost of air transport is usually a substantial percentage of the total cost of a travel vacation
27 package, typically in the region of 40 to 50 per cent (2008, 97). If tourists arrive by means of a national airliner, then greater profits may be retained. But for many smaller developing counties and islands, having a national carrier is neither economically feasible nor po ssible with major established routes controlled by large foreign airlines. Furthermore, in advent of all inclusive resorts and cruises, it is possible that the majority of the tourist's expenditure never arrives in the destination, since guests in these en clave ventures spend their entire stay on the ship or within the resort, precluding local businesses from a chance to earn income (Holden 2006, 95). Package tours essentially has the same effect, with approximately 80 per cent of tourist expenditure going to foreign airlines, hotels, and companies all before the tourist even arrives at the host country (Holden 2006, 95). Effects on Local Economy and Employment A tourist industry creates employment in both the formal and informal sectors, and, as with other aspects of the rapidly expanding tourism industry, consequences have been mixed. Many western assumptions concerning employment in tourism may not be applicable in the developing world (Cukier Snow and Wall 1993, 2001). Broader attention must be paid to a spects of tourism employment so that the quantity of jobs created does not trump the actual quality of these jobs. While tourism employment can be viewed from a number of perspectives, three aspects of employment in tourism in developing areas merit partic ular attention: its role as an economic activity, its implications for culture, and its impacts upon women and men (Cukier Snow and Wall 1993, 196).
28 As an economic activity, job creation in the tourism sector has drawn three main critiques: seasonality, servile nature, and low remuneration. Granted, it is difficult to assess the quality' of employment since traditional alternatives may have been no better, but social implications cannot be dismissed. In a study on Bali, Cukier Snow and Wall (1993) highli ght several important complexities of tourism employment for locals of LDCs: difficulty in maintaining religious and social commitments with formal job requirements; weakening of social bonds as the monetarization of village culture supports a tendency of individualization; a disproportionate increase of work for women, since they are expected to maintain domestic duties while working western' hours; gender specific work that may lead to alteration of established gender roles; and increased employment in t he informal sector. The issue of local social institutions conflicting with the greater institutionalization of tourism is by no means limited to Bali. Women experience specific discrimination and sexual objectification in the tourism sector worldwide. Wh ile stereotypical images of local women have historically been used in advertising and marketing (see figure 1.1), positions of leadership and responsibility in the industry are consistently denied to them; traditional roles of service or housekeeping are perpetuated; and women face a significant amount of sexual objectification as they are expected to dress in an "attractive" manner, to look beautiful (i.e., slim, young, pretty), and to "play along" with sexual harassment by customers (UNED 2002). The qual ity and nature of tourism employment can be overwhelmingly poor if seasonal, low skill and low paying jobs, that reinvigorate racial and gendered labor divides, while relegating people of color and women to stereotypical service job of serving or custodial positions, represent tourism's new employment opportunities.
29 Figure 1.1 1950s British Overseas Airways Corporation (BOAC) Poster Source: Library and Archives of Canada, http://www.collectionscanada.gc.ca/ The critique of tourism as an economic activ ity extends beyond the quality of employment. Critics highlight how the promises of economic benefits are unrealistic due to leakages and skewed resource allocation. While foreign investors repatriate profits, government expenditure often goes towards the provision and maintenance of infrastructure, such as new roads, airports, water, waste management and energy, which is specifically intended for the tourist sector rather than for general use. When tourism infrastructure does not create the "dual usage" be nefit, an exclusive design of national development that is not intended for citizenry arises. Jursa and Winkates also note that the rapid development of infrastructure, as a panacea for rapid economic development, presents the industry with high fixed cost s, with or without a regular clientele (1974, 47).
30 The high fixed costs and risk associated with a fad oriented industry often preclude entrepreneurial ventures among nationals, which only increases dependency on foreign enterprise. Furthermore, government infrastructure has been unable to adequately control and monitor the influx of goods and people, which allowed for the development of a largely uncontrolled criminal sector, including prostitution and drugs as well as the exploitation of many workers whos e working conditions were not closely enough monitored (King, LeBlan, and Van Lowe 2000, 1). Unless there is public planning and control, tourism development can adversely affect the local people, economy, administration, and environment. The extent of ec ological damage due to the influx of tourism is beyond this thesis. From the carbon emissions of air travel to the large waste generated in tourism resorts, tourism has simply not done well in protecting the environment, especially in developing countries where environmental regulation my be undeveloped. While the literature discusses how tourist destinations may be exceeding their carrying capacity, public facilities in developing courtiers have just been unable to expand as fast as tourism development. In the Caribbean, garbage is burned and inadequate waste management has left beaches unsuitable for swimming due to the high levels of fecal bacteria. With international environmental regulations cracking down on anti dumping practices, many Caribbean ports are now expected to absorb the garbage and sewage generated by cruise ships with as many as 4,000 passengers aboard. Fragile ecological environments, such as coral reefs or mangroves, are being destroyed by overuse, pollution, and construction of new touri st sites, including marinas and waterfront resorts. While tourism contributes to the environmental degradation in developing countries, the environmental change may
31 not only ruin the destination's tourism industry, but it can also damage local industries d ependent upon the environment, such as fishing. Public regulation can play a key role in reducing tourism's negative externalities on the environment. While environmental concerns constitute a more recent byproduct of the tourism industry, cultural change through increased exposure to tourists has long been a critique of anthropologists. Tourists often embody and demonstrate values and behaviors that conflict with locals, such as inappropriate dress when visiting mosques or cathedrals, or exhibiting loud, lecherous, drunk, or rude behavior that is not even acceptable in their own country. Due to the socially inappropriate behavior exhibited by foreign tourists, adverse reactions among the locals in host countries may arise. To deal with inappropriate touris t behavior, some destinations have adopted explicit sign creation to instruct tourists how to behave. For example, at the tourist attraction of the tombs of the seven Qutb Shahi rulers in Hyderabad, India, there are signs that instruct, "plucking flowers l eaves, climbing on tree and littering in the lawns are strictly prohibited." Cultural, social, and environmental costs are rarely quantified into considerations when adopting tourism as a development strategy, despite their significant costs. Whether or no t tourism creates more net benefits to society than other forms of development depends primarily on the nature of the country's economy and what alternative forms of development are practicable (Theobald 2005, 84). For developing economies dependent upon t ourism, promises of development by tourism may be disappointing. It is clear that the issues of tourism are complex. They differ fundamentally from other industries since the products being traded are a country's natural and cultural resources. While the benefits of tourism may be attractive to governments, a holistic
32 approach to tourism as a developing strategy is needed since LDCs are entering a global system over which they have little control (Holden 2003, 120). While past experiences of using tourism for development have been inconsistent at best, alternative forms of tourism are emerging with intentions of responsible traveling that does not harm social or natural environments, such as ecotourism,' volunteer tourism,' and pro poor tourism.' Despit e the insensitive name, pro poor tourism,' (PPT) seeks to learn from history to enhance the potential of tourism by increasing economic benefits, enhancing non financial livelihood impacts, and enhancing participation and partnership. Strategies such as u tilizing local suppliers for inputs (i.e., food, fuel, and building supplies), increasing local ownership, employment, and entrepreneurial opportunities, and involving the local community in tourism development initiates are all examples of PPT strategies. Similar to the concept of sustainability', pro poor tourism is the new buzzword within tourism and development studies, but the concept is ultimately vague and open for interpretation. Regardless of the adjectival prefix, tourism has proved to be an inf atuation of the developed world. With popularity in destinations, such as the Caribbean, mushrooming in the advent of all inclusive resorts and cruise tourism, the potential of tourism as a pathway to development rests in economic and industry planning, a strong role of the government, and a commitment to transcend ideals of growth and to focus on needed aspects of development. If tourism is to be used as a development strategy, it must be a contingent framework of development aimed at improving the situati on of the locals. Otherwise, we are left asking for whom are we developing and how are we defining development?
33 The Meaning of Economic Development Economic development is an age old challenge. The term's popularization is often traced to the 1930s and 1940s surge of academic interest surrounding efforts to solve problems of unemployment at home and underdevelopment abroad. Yet, this relatively recent interest in the theory of growth and development is nothing more than a renewed interest, as the me chanics of economic growth and development have forever comprised the core of economic thought. Definitions and components of economic development have long been debated, and interpretations of development differ immensely. Do we define development as the increase in economic growth? The promotion of class and gender equality? The elimination of poverty? How one envisions this value laden notion of development' is contingent upon one's standards or priorities, but development ultimately indicates improveme nt. Different concepts of economic development offer a range of important perspectives and variables that need to be addressed when considering overall development, but more importantly, different ideas of development yield different policies all enacted in the same name of development. These policies have had variant consequences both positive and negative that form the present discourse of development. Development is a contentious process, with the power to produce spectacular change when growth is harne ssed correctly. How to harness growth to bring about development is multifaceted and variant theories for economic development must reflect this for ideas of development to gain solidity. The literature on development is immense, as each branch of the soc ial sciences embraces its own notion of development. With interdisciplinary concerns such as
34 history, geography, structural change, globalization, modernization, distribution of growth, ecological sustainability, and the importance of institutions, politic s, and ethics, the discourse of development inherently becomes one of the most multi disciplinary fields of study. Although definitions and criteria for development can be disputed, one notion of development is infallible: it must incorporate multiple fact ors. Development can be seen as a structure that is supported by three interdependent pillars: the economic, the political, and the social. These three components of development should have a reinforcing relationship with improved human welfare. For exampl e, economic growth should improve human welfare, which will then strengthen economic growth. If the relationship between economic growth and improved human welfare is not reinforcing, it is not development. This distinction between economic development and economic growth is critical to understanding development discourse. Economic growth, as defined by an increase of per capita gross domestic product (GDP), does not necessarily yield economic development. Colonialism, for example, brought economic growth a t the cost of an extractive state system, extreme human exploitation, and profound inequality. Unlike economic growth, development pays attention to the conditions of production and their social consequences (Peet and Hartwick 1999, 1). For some, the idea that people should come first in social and economic improvement is a simple given, but development has long been sought and assessed in economic terms with focus placed upon the annual growth of income per capita instead of the consequences of this growt h on the quality of people's lives (Deneulin and Shahani 2009, 13). Economic growth persists as the dominant normative framework for development under the long running assumption that economic growth raises incomes,
35 which will then, in turn, raise the qual ity of life. Yet reducing the meaning of development to a mere increase in per capita GDP loses any notion of development in the political, social, and even economic sense. Because "developed" countries are characterized as democratic, high income economie s, and "underdeveloped" countries are seen unanimously as low income economies, many mistakenly equate economic development with a linear shift from low national income to high national income. Heterodox economists, such as Dudley Seers and Amartya Sen, c riticize this linear approach and offer a new philosophy for the challenge of development by incorporating many social factors previously excluded from notions of economic development. Seers contends that per capita income is an inappropriate indicator of development since social indicators (i.e., poverty, inequality, and unemployment) can all worsen as per capita income soars. For Seers (1979), the goals of economic development should be to reduce poverty, inequality, and unemployment. Sen takes Sears' ide as of reducing poverty further to realizing general welfare. For Sen (1992), freedom and the expansion of entitlements and capabilities is the ultimate goal of economic development. He focuses on economic and social factors that are deprivations or "unfree doms" that need to be overcome: famines, hunger, premature death, illiteracy, lack of access to clean water, violations of political rights, and barriers to economic fulfillment for women and minority communities. Again, increasing per capita income is not the primary goal. The focus is shifted to increasing individuals' capabilities, a person's actual ability to be or to do something. Sen argues that capability does not correlate closely to attainment, such as income, and that in order for economic develop ment to occur, social reforms (i.e., public health and education) must precede economic reform.
36 Although both Amartya Sen and Dudley Seers focus on broadening the meaning of development from its traditional economic sense, critics argue that non monetary indicators of development are of weak quality. National income has been admired as the singular indicator that is available, objective, and value free for positive analysis in order to formulate predictions and policies for target planning. Yet the utilit y of the national income indicator fades in light of the broadened goals of development proposed by both Sen and Seers, since it still fails to measure improved human welfare. An unfortunate paradox arises, as Seers (1972) points out, when egalitarians arg ue that national income is an inappropriate measure of a nation's development: the significance of a growing per capita income gap' between the rich nations and poor is weakened. However, in 1990 a new measure of development, the Human Development Index ( HDI), was constructed under the auspice of the United Nations Development Program (UNDP) to shift the focus of development economics back to human welfare. With conceptual foundations in the work of Amartya Sen, the HDI was an alternative and broader hum an development approach with the latter defined as a process of enlarging people's choices and enhancing human capabilities (the range of things people can do) and freedoms, enabling them to live a long and healthy life, have access to knowledge and a dece nt standard of living, and participate in the life of their community and decisions affecting their lives (UNDP, 2010). As a composite indicator, the HDI engages both economic and social indicators in three dimensions of human development: life expectancy, education, and standard of living measured by per capita Gross National Income (GNI). Despite its more holistic approach, the HDI has faced criticism not only for failing to incorporate certain elements such as ecological
37 components, but also failing to o ffer insight that preexisting indicators have not. Critics, such as Mark McGillivary, used statistical analysis to show that the HDI generally ranks countries in a manner "not dissimilar" from the way GDP per capita ranks them (1991, 1467). Nevertheless, t he HDI remains the main indicator of human development, often cited along side GDP when discussing a state's level of development. In 2010, the HDI report introduced new components to the index to account for inequality, including gender equity. The format ion of the HDI marks a positive change in the international understanding and interpretation of development, by realizing a development paradigm that finally transcends the rise and fall of national incomes. Theories of Economic Growth and Development Apart from issues of defining and measuring development, the challenge of actually fostering development remains central. Whether one defines development through material prosperity, human freedom, or happiness, its attainment still depends on the formulat ion and application of policy. Policy for development needs to be individualized and state specific, but certain similarities are found among developing states. According to Thrilwall, development obstacles that many developing countries face include: A hi gh productivity of the labor force engaged in agriculture but low agricultural productivity A high proportion of domestic expenditure on food, export trade dominated by primary products, and an import trade dominated by manufactured foods A low level of te chnology A high birth rate coupled with a falling death rate Savings undertaken by a small percentage of the population (2006, 35).
38 Long term economic growth, measured by changes to per capita income, is traditionally seen as the solution to these problem s of underdevelopment. However, the relationship between economic growth and development is not straightforward: growth can occur without development and development can occur without changes to GDP (i.e., if economic growth was offset by population increa se). Thus, the direct link between per capita income and the numbers living in poverty is in income distribution (Seers 1979, 11). Without an increase in equality, increased economic growth will do little to bring about human development. Nevertheless, gro wth is a major component of development and achieving growth is a highly sought after economic exploit. The twentieth century has seen the rise, fall, and reincarnation of numerous growth theories, such as the Big Push,' Export Led Growth (ELG), Neoclass ical Growth Model (i.e., exogenous growth) and New Growth Theory (i.e., endogenous growth). While these growth theories tend to have a following split between supporters and critics, there seems to be a general agreement that developing an export economy i s good for growth. However, the extent to which a state can depend upon exports for growth and development remains contested. Support for the export led growth proposition is based on a number of related reasons: (i) export growth may represent an increase d demand for the country's output and thus serve to increase real output; (ii) an expansion in exports may promote specialization in the production of export products; (iii) specialization may increase productivity and skill levels in the export sector; (i v) resources may be reallocated from relatively inefficient sectors to more productive export sectors; (v) outward oriented trade policy may also give access to advanced technologies, learning by doing gains, and better management practices to further
39 effi ciency gains; (vi) an increase in exports may also loosen a foreign exchange constraint, allowing increased import of capital goods to further boost domestic investment and consumption; (vii) export development of certain goods may achieve economies of sca le with access to foreign markets if domestic markets are too small for optimal scale (Giles and Williams 1999, 3 4). As an exportable industry, tourism becomes incorporated into this long running central theme of growth theory. While much of economic gro wth theory has urged developing countries to increase their exports in primary and manufactured products to achieve increased economic growth, attention is now drawn to the importance of tourism. The links between the increase in tourism and the increase i n economic development are now a major source of interest among academics due to the industry's increased importance in the global economy. However, despite the voluminous research of economists, anthropologists, sociologists, geographers and a range of de velopment practitioners, there is little understanding and no consensus on what impact tourism has had on poverty in the developing world (Mitchell and Ashley 2010, 1). What is clear is that economic development from tourism depends not only upon tourism r evenues, but also the quality of the tourism industry offered to the developing country. Despite these potentials of ELG, the model has its critics who point out that volatility and unpredictability in world markets, trade barriers, foreign ownership of export activities, and the type of product being exported all affect sustained long term economic growth and will impede development. For example, foreign ownership of export activities often precludes dynamic linkages within the economy, such as reinvestm ent of revenue, which therefore curbs the spillover and multiplier effects of
40 export industries. Furthermore, not all exportable goods will bring desired benefits. While primary goods face declining terms of trade, 3 manufactured goods in developing countri es often entail low skill labor, offer little value added to the manufactured product, and may face significant market barriers in international trade. While the majority of development theory revolves around models of long term economic growth, a curious trend has reawakened academic attention to an empirical relationship between the wealth of nations and their geographic location. With roots in Machiavelli and Montesquieu, the geographic endowment hypothesis asserts that geographic environments directly shape economic development by influencing the inputs of production and thus production itself. Under the geography/endowment hypothesis, certain natural endowments (i.e., geographic circumstances, natural resources) can make production technology more feas ible or more difficult. For example, geographical circumstances, such as being landlocked and therefore not open to trade, will permanently limit the country's ability to access a large economic market, hinder its ability to exploit economies of scale, and therefore lower its production efficiency (Easterly and Levine 2003, 5). Jeffrey Sachs, a major proponent of what he calls tropical underdevelopment,' elaborates on the reasons why "economies in tropical ecozones are nearly everywhere poor, while those i n temperate ecozones are generally rich" (2001, 1). Sachs ultimately proposes five hypotheses explaining tropical underdevelopment the income gap between tropical and temperate regions: differences in ecological zones of technological innovation, diffusion productivity along with 3 Terms of trade is the relationship between the price a country sells its exports to what it pays for its imports. With declining terms of trade, this relationship deteriorates overtime due to the income elasticity of demand for manufactured goods.
41 differing societal dynamics (i.e., public health, fertility rates), and geopolitical factors (i.e., colonialism). In all cases, economic development in tropical regions lags behind temperate region development due to natural chara cteristics of the tropics, be it germs, poor soil quality, or susceptibility to natural disasters. This theory is often criticized for its statistical discrepancies and use of GDP as a measure of development. Furthermore, the theory does not explain how tr opical states such as Barbados, Mauritius, and much of South East Asia were able to achieve rapid development to attain the ranking of a "high" or "very high" human development on the HDI. Another critique of this geographic endowment theory comes from a growing literature on the importance of institutions for promoting and sustaining economic change (Easterly and Levine 2003, Chang 2005, Rodrik and Subramanian 2003, Acemoglu et al. 2004, North 1990). Known as New Institutional Economics (NIE), this pers pective assumes institutional change to be the missing link between development and growth. In response to the environmental determinism of the geographic endowment approach, the institutionalist view holds that a geographic or environmental impact on econ omic development is expressed through significant institutions. For example, environments where crops are most effectively produced using large plantations will quickly develop political and legal institutions that protect the few landholders from the many peasants and may even feature slavery, thus thwarting competition and hence economic development (Easterly and Levine 2003, 5 6). By focusing attention on institutions, NIE recognizes other powers at play besides market (or geographic) forces that direc t the economy. Defined by Douglas North as "the rules of the game in society, or the humanly devised constraints that shape human
42 interaction," institutions play a key role in determining the speed and nature of economic development by providing structure to daily life, limiting the nature of exchange, and determining the forms incentives take (1990, 3). The core argument of NIE is that by affecting coordination possibilities and transaction costs, institutions have the ability to foster or retard economic growth. Property rights, for example, are a classic example of an institution that influences the structure of economic incentives in a society. Without property rights, individuals would not have the incentive to invest in physical or human capital or to adopt more efficient technologies ( Acemoglu et al. 2004, 4). Good' institutions, that is, institutions that foster economic growth, are then institutions that enable actors (i.e., entrepreneurs, firms, workers) to make profits, to continually invest, and to work hard. This positive situation arises when contracts can be easily enforced, property rights are secure, and governments pursue growth promoting policies that encourage a virtuous circle of innovation, capital accumulation, and increased economic ou tput (Johnson 2009, 164 5). Individual actors can profit through cooperation, such as trade, and institutions are seen as the medium for producing favorable environments in which cooperative solutions can be adopted to foster economic change, and thus grow th. Development is ultimately a change that is both quantitative and qualitative. It will result in profound structural changes, such as industrialization, and analysis must take into account the weight of political structures, culture, ideology, institu tions, and perhaps geography with affecting change. Quantitative generalizations centered on the economy, such as Rostow's (1959) arguably ethnocentric claim of the five stages of history a state passes though to become "developed," are thus misleading. Fo r Rostow, development was the universal, five step shift from backwards' to modern,' with a
43 single fixed objective of high mass consumption through the adoption of freer markets, economic integration, and foreign aid. This faulty approach was highly crit icized for its generalizations: economic development is not linear, and many economies may miss stages, become locked in a particular stage, or even regress (Ingham 1993, 1806). While theories of economic growth focus on quantitative change of the markets factors that affect qualitative change cannot be ignored. Despite the need to broaden the development framework past economic growth as did Seers by putting people first, the act of pluralizing policy to be "people oriented" instead of "market oriented" can be unpredictable. For example, where institutions are important to economic growth throughout society because they eliminate transaction costs and serve as a medium for political and civil society, they can also be a hindrance to growth if special inte rest groups (e.g., trade unions and professional associations) obtain market power and political influence (Ingham 1993, 1805). Another example of unpredictable policy deals with participation in development strategies. Where bottom up participation can em power and enable the poor with Sen's "capabilities" and guarantee the authenticity of development, economic growth tends to be slowed through extensive consultation procedures. Thus, the way developmental policy is created, enacted, and enforced remains la rgely an ideological issue of debate, especially in regard to the role of the state in development. Role of the State Development is a transformation. How the state should contribute to this transformation is a hotly contested and deeply ideological de bate, especially in regard to economic transformation. Making war and enforcing internal order are classic roles
44 shared by ancient and modern states. In modern times, though, states have become responsible for a third task: economic transformation. Within the Western paradigm, modern politics and economics have become inseparable. Economic outcomes are products of social and political institutions, not just responses to prevailing market conditions (Evans 1995, 18). Without functional states, global markets could not function. Modern markets depend upon the accountability, protection, and adherence to rules that a state provides, such as security of property rights. Despite the potential to have effective state led development policies, ideas of state interv ention, regulation, and planning are seen as economic anathema to mainstream policymakers who champion the magic of free markets. Neoclassical economics fundamentally opposes the essence of the "Developmental State," in which the state takes on a central d evelopmental role in the economy, with or without direct ownership of assets or production. Fears of predatory states, such as Mobutu's Zaire or Somalia under Barre, which arise through the confiscation of property, extortion, corruption, and clientelism, come to the neoclassical mind when ideas of state interventions are considered. Even examples of state intervention without the predatory aspect, such as in Brazil, suffered from profound corruption and embedded clientelism during state driven industrializ ation (however, corruption and clientelism had long been engrained into Brazilian post colonial history). The contradiction between the ineradicable necessity of the state in contemporary social life and the grating imperfection with which states perform i s a fundamental source of frustration (Evans 1995, 4). While disharmony continues over the use of interventionalist policies, economists such as Ha Joon Chang return to history to fetch seemingly forgotten lessons about how
45 developed countries actually a chieved development. In his book, Kicking Away the Ladder Chang (2002) brings to light how developed countries, such as the United States and Great Brittan, utilized strong protectionist policies and state intervention during their nascent developmental s tages but now recommend procedures dramatically different from policies and institutions that they themselves used in development. History has shown that there is clearly a role for the state in successful development initiatives. Both the United States an d Britain used tariff protection and subsidies to develop their industries; the recent developmental success of the "Asian Tigers" ( Hong Kong, Taiwan, Singapore, and South Korea) is due to large agricultural subsidies, high tariffs, and industry protectio nism, and other protectionist policy. The sterile policy debate surrounding state intervention must now rise above the obsolete question of "how much" intervention and focus rather on "what kind" of state intervention is conducive for development, especial ly in regard to the regulation of tourism. When examining "what kind" of state involvement is appropriate for development, interstate variations in internal structure, societal relations, and historical dimensions must be taken into account since they sha pe possibilities for industrial transformations. As his title suggests, in Embedded Autonomy Peter Evans asserts that only when embeddedness and autonomy are joined together can a state be called developmental (1995, 12). This idea of "embedded autonomy" m aintains that it is not enough for state bureaucracies to be autonomous from societal interference, but rather state bureaucracies must become "embedded" or involved in concrete social ties that bind them to society to provide institutionalized channels fo r the continual negotiation and renegotiation of goals and policies (Evans 1995, 12). Contrary to rational choice
46 theorists, Evans argues that the state can facilitate economic development so long as the nature of state power and its connection to society follow the lines of "embedded autonomy." Evans does not, however, give into a utopian faith in the generic efficacy of the state, but rather he argues that developmental outcomes depend on both the general character of state structures and the roles that the state pursues. He recognizes that a state can initiate dramatic economic development even when market forces seem incompatible, or a state can give way to the despotism of a predatory state -the determining factors are internal organization and societa l ties. Evans proposes multiple roles that a state can take on when fostering economic development. As a custodian, the state regulates through protection and policy regarding infant industries; through the role of demiurge, the state becomes directly in volved in productive activities and substitutes itself for private producers; as a midwife, it draws private entrepreneurial forces into a new sector though economic devices such as tax breaks and subsidies; and through husbandry, the state supports and pr ods private firms to move forward (Evans 1995, 78 81). These four frameworks that Evans uses to classify a state's role in development are not mutually exclusive, and roles often overlap or appear in combination. Depending upon the specific goals of econom ic development, a state will assign itself to these roles. Which role a state will adopt and how well it will perform depends largely on structural characteristics, and, since structures create the potential for action, playing out roles will translate the potential into real effects (Evans 1995, 77).
47 Conclusions Tourism is a rapidly expanding industry that can bring about positive growth. It comes with both positive and negative externalities that can further growth or threaten the very intentions of development. While some argue that the economic success to of tourism to bring about growth in LDCs has occurred, others argue that the industry simply drifted into prominence because of the failure of traditional sectors to perform adequately (McDavid and Ramejeesingh 2003, 180). Regardless, the importance of tourism is undeniable for developing countries due to the various potential costs and benefits tourism may bring. The unclear nature of tourism creates the necessity for governments to be proactive in the planning and regulation of tourism so as to correct for negative social, environmental, or economic externalities and maximize potential benefits of economic growth and human development. McDavid and Ramajeesignh argue three reasons for the case of di rect market intervention is necessary within tourism: (i) tourism products, broadly speaking, are public goods (i.e., natural parks, heritage sites and beaches), and it is in the best interest of society for both locals and tourists to enjoy the consumptio n of public goods; (ii) negative externalities create a need for government intervention in order to achieve some degree of distributive equity; (iii) the free play of the market leads to severe pressure being placed on capacity limits and the lack of sust ainability in volume and quality of services being offered,' thus government involvement in the regulation and control of the industry may be a prerequisite to achieve a derived, and not market driven, rate of growth (2003, 181). While this thesis suggest s that the role of government in tourism may significantly contribute to an enhanced economic and human development, environmental protection,
48 and a reduction of market failures, it recognizes the number of legislative and regulative powers that can direct ly impinge on the industry's growth. Through tools of legislation, regulation, planning, stimulation through financial incentives or promotions the government can adopt Evans' custodial, husbandry, and midwife roles to provide for the needs of the local po pulation without crowding out or restricting growth in the private sector. Simple public policies, such as incentives or quotas for using domestic inputs of food, would significantly reduce leakages and dependence on extra regional imports to meet basic ne eds. Policy is critical to growth and development. How developing countries manage tourism will directly affect potential economic benefits of growth via retainment and multipliers. A closer look at tourism in the Caribbean will not only exemplify the n eed for government involvement in the industry, but we will also see the developmental effects of two states that took drastically different approaches to both public policy and tourism and have experienced drastically divergent growth experiences.
49 Chapter 2 Tourism and Development in the Caribbean: The Cases of Barbados and Jamaica Tourism has been an integral part of the economic growth and development of the Caribbean in the last five decades. Today, the Caribbean ranks first in the world for travel and tourism's relative contribution to GDP, exports, and capital investment at 14.2, 16.7, and 11.6 percent respectively (WTTC 2010). Although the Caribbean only attracts a small percentage of all international tourists, on the regional scale, the inflow of tourists is immense. In 2009, Barbados experienced visitor arrivals that were 4.5 times greater than the island's population of 256,000 people. Since the mid 2000s, Jamaica has also experienced more visitor arrivals than residents with over 2 .5 million visitors each year. Due to its sheer scale, tourism has developed as a mainstay for Caribbean economies and accounts for at least 30 percent of the GDP for 13 islands. While the region has an old history of foreign travelers, the development of the tourism industry is a relatively recent phenomenon. In the Caribbean, tourism has developed during the past fifty years and systematically coincides with the region's post colonial quest for development. Islands have adopted different public policies f or utilizing the tourism industry as a means of development, and, although no causal relation can be drawn, differences in development outcomes coincide with the differences in tourism
50 development policy adopted by each state. By comparing the post colonia l development experience of these islands, we may derive a greater understanding of the link between tourism and development in one of the oldest and most tourist dependent destinations in the world. Since achieving independence, the islands of the Caribb ean have strived to develop politically, economically and socially; yet fifty years of development initiatives, policies, and reforms have, for the most part, failed to bring about a high level of development in the Caribbean, especially Jamaica. While isl ands such as Jamaica are still plagued with economic stagnation, civil unrest, and disappointing social development, one small island has managed to achieve good growth performance since independence and now enjoys a relatively high standard of living with 100 percent literacy, proficient policymaking, and the highest per capita income of the Caribbean and Latin America. This island is Barbados. Alongside the United States and Canada, Barbados is the only other nation in the western hemisphere to be consid ered a developed country' by the international community. While Barbados now enjoys a level of development well above its regional neighbors, at the time of independence the socioeconomic development of Barbados was not dissimilar to other Caribbean state s, including Jamaica. In fact, under colonialism Barbados and Jamaica shared many similar (and sometimes identical) political institutions, economic structures, and social conditions. Despite the numerous similarities between Jamaica and Barbados during co lonial times, these islands have diverged substantially in their growth experiences since gaining independence. Ironically, this divergent growth experience has resulted in similarly structured
51 economies, both highly dependent upon tourism. The paradoxical growth and development patterns of Barbados and Jamaica spark three questions: how did Barbados achieve its level of growth and development, why was Jamaica unable to realize similar growth and development, and how has tourism been utilized for the develo pment of each island? This chapter examines the role of tourism against the greater backdrop of development in the Commonwealth Caribbean by comparing the different growth experiences of Barbados and Jamaica to establish what enabled the success of Barbadi an development and how tourism served as a factor of this development. Caribbean Development In respect to studies of growth and development, the Caribbean has truly been a laboratory for the social sciences as the region has experimented with an assort ment of formulas for economic growth, shades of the political spectrum, and measures from international financial institutions (IFIs). Caught in between a North South hemispheric system and between a historic European imperial system and US hegemonic power the history of development in the region has been strongly influenced by external forces of both the political and economic variety. All of these forces have created a difficult environment in which to develop. The region began to gain independence from colonial powers in the 1960s, and, as in other post colonial states, independence meant the inheritance of underdevelopment. Societies were highly unequal and laced with racial tensions; economies were dependent upon agriculture, specifically sugar; unempl oyment and underemployment was high; and productivity and human capital were low from colonial neglect. But, unlike other underdeveloped states, the islands' socioeconomic
52 problems were compounded by a second factor their smallness. While discussing the pr ocess of development among Caribbean states, perhaps the first technicality that needs to be addressed is the issues of small island developing states (SIDS). As globalizing forces continue to draw the world's economic borders together, the literature on t he theoretical disadvantages or "vulnerabilities" that SIDS face in the process of development continues to accumulate. Small Island Developing States Although SIDS experience economic difficulties similar to the rest of the developing world, they carr y distinct vulnerabilities due to their small size, which require special care. The disadvantages associated with SIDS are factors that render the economies of these states vulnerable to forces outside their control: their small size, insularity, remotenes s, and proneness to natural disasters (Briguglio 1995, 1615). The vulnerabilities are often categorized into two types of exogenous shocks: natural' shocks, such as climatic or environmental (i.e., hurricanes, floods, volcanic eruptions) or external' sho cks, such as trade or exchange related shocks (i.e., exchange rate fluctuations, world commodity price instability, changes to external demand). Both natural and external vulnerabilities are explained as unavoidable due to the island's small size and tropi cal geography. In a 2000 report by the Economic Commission of Latin America and the Caribbean (ECLAC) that assessed the disadvantages of small Caribbean states, vulnerabilities were traced back to the interaction of the following socio economic and natural characteristics: Environmental/ecological vulnerability, particularly high exposure to natural hazards Limited land resources and difficulties in waste disposal management
53 Geographic remoteness and isolation Limited diversification and very open economie s Weak institutional capacity and high costs of basic infrastructure (i.e., narrow human resource base) Special social vulnerabilities (i.e., high level of immigration) With what appears to be a semi reincarnated geographic endowment theory with a greater focus on international economics, the literature on SIDS brings to light the vulnerabilities that affect their development. However, the literature is divided on policy decisions for dealing with these vulnerabilities. Briguglio and Guillaumont elaborat e on these vulnerabilities and argue that, with these vulnerabilities, SIDS face the risk of economic growth being effectively reduced. They both go into great detail about economic and environmental shocks that SIDS experience, such as dependence on forei gn sources of finance, limited natural resource endowments and high import content, limitations on import substitution possibilities, small domestic market and dependence on export markets, dependence on a narrow range of products, limited ability to influ ence domestic prices, limited ability to exploit economies of scale, limitations on domestic competition, and problems of public administration. To curb these disadvantages, both authors propose special measures as policy options to help SIDS withstand ext ernal shocks, such as changes in aid allocation (Guillaumont 2010, 843), improved flexibility, improved ability to compete, a niche filling export strategy, and regional technical cooperation to reduce certain per unit costs that tend to be high in a small state (Briguglio 1995, 1624). However, while these authors argue the necessity for special policy measures in favor of SIDS to offset their special disadvantages, others are quick to point out that many SIDS, despite their vulnerabilities, have fared part icularly well in terms of per capita GDP and perhaps have received
54 excessive attention with the numerous conferences and seminars, multiple commissioned studies by the United Nations, and the abundant literature on the special difficulties of SIDS. While not downplaying the importance or legitimacy of the vulnerabilities' of SIDS, a study by Easterly and Kraay provides a more reserved stance towards the SIDS situation. While Easterly and Kraay acknowledge certain SIDS vulnerabilities, they find that small states have, if anything, a significantly higher per capita income than others in their region and do not experience a statistically significant difference in growth performance from large states (2000, 2024). This unexpected performance is explained thro ugh SIDS naturally greater trade openness: the net benefits of openness on growth are positive and outweigh the economic vulnerabilities that freer trade creates. This does not mean that SIDS do not struggle with attaining their development, but rather tha t "lessons of growth experience from all countries seem to be applicable to small states" (Easterly and Kraay 2000, 2024). The vulnerabilities' that Caribbean islands face are still of great importance, but instead of special policy measures being granted for these islands, special consideration must be given to these areas when creating policy to ensure needs are met for positive and sustainable development. Development is not easy, no matter the state size, and the Caribbean has quite an extensive histor y of development. Jamaica and Barbados: Then and Now With the concerns of small island developing states in mind, we can now move on to examine the growth experiences of Jamaica and Barbados. The islands gained independence within four years of each o ther (Jamaica in 1962 and Barbados in 1966) under similar economic conditions, both externally and internally. In the 1960s the world
55 economy was relatively stable, lacking any real destabilizing global shocks. The 1950s had provided each island with growt h as they began to diversify away from agricultural dependence: Jamaica began to develop a significant bauxite alumina industry and Barbados began to develop a service sector, namely tourism. Both have benefited' from remittances from the major waves of e migration to the United Kingdom and the United States that occurred in the first half of the 20 th century. In 1960, Barbados's real GDP per capita was $3,396 and Jamaica's was $2,208. By 2009, Barbados's real GDP per capita hit $17,700, while Jamaica's wa s only $8,400. The modest income gap at independence of $1187 had swelled to $9300 in 2009, making the current income gap larger than Jamaica's per capita GDP (Henry and Miller 2009,4). Figure 2.1 depicts the post colonial economic growth of Jamaica and Ba rbados. The economic divergence of the two islands is clearly evident and raises the simple question: what happened? Figure 2.1: Economic Performance of Barbados and Jamaica: 1960 2009 Source: World Bank Indicators 2010.
56 While the post independence eco nomic growth of Barbados was not exactly a rapid miracle, it was a steady advancement (see table 2.1). Barbados not only experienced economic growth, but more importantly it experienced social and economic development. Since the introduction of the HDI in 1990, Barbados has consistently outranked the rest of Latin American and the Caribbean region. In 1990, Barbados ranked 22 nd among 160 countries with a value of 0.945 and in 2009 it ranked 38 th among 169 countries to be classified with "very high human dev elopment." Jamaica, on the other hand, lagged behind as 100 th on the 2009 HDI ranking, classified as "medium human development," above Paraguay and Sri Lanka. By both economic and development indicators, Barbados's economic growth and human development has lapped around Jamaica's and by 2000, development strategists were speaking of the "Barbados Model" in much the same way that they spoke of Singapore at the end of the 20th century (Beckles 2006, XV). If the per capita GDP growth of Barbados has grown app roximately three times faster than Jamaica's over the past half decade, we can examine the factors that enhanced and detracted from growth in the experiences of these two islands. When testing for factors that lead to a country's economic success or failu re, these two Caribbean islands provide for what Stanford economist Peter Henry calls "as close to a laboratory experiment as you could hope to find in social sciences," due to their striking similarities at the time of independence and the stark contrast of their current situation ( Rigoglioso, 2009). The similarities of these two SIDS are abundant as they sha re a common regional geography, virtually identical property rights and legal systems inherited from their common English colonial power, and congruen t economies that have been historically dominated by a single crop sugar. But despite these similarities,
57 independence brought dramatically different growth trajectories for Barbados and Jamaica, with Barbados's GDP per capita growing roughly three times a s fast as Jamaica's from 1960 2002 (Henry and Miller, 2009, 1). With such similar institutions, specifically the inheritance of English common law, Westminster Parliamentary Democracy, and strong constitutional protection of private property, recent growth theory built around the importance of institutional foundations fails to explain the drastically divergent economic growth experiences of Jamaica and Barbados. In rejecting the institutional approach to growth and development, the recent work by one Jamai can American economist, Peter Henry, attributes the divergent development of Barbados and Jamaica to differences in macroeconomic policy choices. How Barbados and Jamaica approached development and created developmental policy in the years after independen ce has had lasting repercussions. Plans for development occurred in the years prior to independence and focused on economic growth. During this time, Barbados chose to diversify its production structure by promoting tourism and light manufacturing, while Jamaica pursued diversification through expanding mining, manufacturing, and tourism. Today, the tourism industries of Barbados and Jamaica differ greatly, as does the level of development for each state. While Barbados has developed into a high end touris t destination with a predominantly European clientele, Jamaica originated the all inclusive resort and caters to a predominantly American clientele. Each island has also experienced significant differences in the industry's rate of growth, represented by t he number of arrivals. For Barbados, the average rate of growth of total tourist arrivals was double that of Jamaica until the 1980s (see table 2.2). Since Barbados is often regarded as having the most
58 impressive Caribbean growth experience, it is useful t o see how tourism has provided the island with tremendous growth opportunities and how Barbados has utilized the industry for its greater potential to yield development, or at least finance it. Table 2.1 Average Annual per Capita GDP Growth Rate 1960 s 1970s 1980s 1990s 2000 2001 2002 2003 Barbados 6.0 3.0 1.9 0.5 1.9 2.4 2.4 0.8 Jamaica 2.7 0.2 0.2 0.6 0.1 0.9 0.2 1.1 Caribbean (average) 2.3 3.9 2.2 1.9 1.9 0.8 0.2 0.6 Latin America & Caribbean 2.4 3.3 0.2 1.2 2.2 1.1 2.2 0.1 East Asia & Pacific 1.8 5.0 5.7 6.2 6.1 4.7 5.8 6.8 Source: Data adapted from World Bank Report, A Time to Choose Caribbean Development in the 21 st Century (2005), Annex Table 1.9. Table 2.2 Average Growth of Arrivals to Barbados and Jamaica: 1956 2009 Growth o f Tourist Arrivals (%) Growth of Cruise Passenger Arrivals (%) Growth of Total Visitor Arrivals (%) Barbados Jamaica Barbados Jamaica Barbados Jamaica 1956 1959 19.8 7.3 13.3 6.7 16.4 9.6 1960 1969 16.2 8.3 19.4 7.5 16.9 6.2 1970 1979 11.0 5.8 4.0 7.5 8.7 5.3 1980 1989 2.5 7.6 14.2 11.7 5.8 8.3 1990 1999 1.2 4.3 2.8 6.5 1.8 6.1 2000 2009 0.2 4.0 4.9 2.9 2.3 0.2 Source : Barbados Ministry of Tourism; Jamaica Tourist Board Statistics; CARICOM Regional Statistics.
59 The Barbados Model Barbados ha s been viewed as a model for many small developing countries. Sir Courtney Blackman often describes Barbados as the world's most successful predominantly black nation, and indeed, Bajans enjoy a rare quality of life: income is more equitably distributed th an in most countries; infrastructure is highly developed by means of highways, seaport, airport, electricity, water, and telecommunications; there exists a well developed national security safety net for the disadvantaged; the crime rate is relatively low; there is a remarkable absence of social and political unrest; and civil and democratic rights are deeply entrenched in Barbadian society irrespective of religion, ethnicity or gender (Blackman 1998). By the year 2000, the economic and social development of Barbados had outstripped the rest of the region and academics became engaged in identifying what factors have accounted for the growth and development of the Barbadian economy during the period of 1960 2000. Although the literature on the economic grow th performance of Barbados consistently addresses the importance of tourism in the Barbadian economy, studies that focus specifically on the role of tourism in the development of Barbados, or the Caribbean region, are lacking. This chapter attempts to addr ess this deficiency, while highlighting what was so successful about the Barbadian economic strategy that has enabled it to surpass islands with better resource endowments, such as Jamaica. Analyses of Barbados' growth experience have emphasized historical accidents, good institutions, and sound fiscal management as main determinants of growth and development.
60 I extend this argument further to make the case that good fiscal policy surrounding the decision to pursue a high end, luxury tourism industry early on in the market diversification process was important to the success of Barbados., as were public policies focused on increased local ownership. As discussed in chapter one, tourism can bring both benefits and costs, and Barbados has learned how to utiliz e tourism for its benefits. Explaining Barbados's Growth: Historical Accidents? Caribbean countries differ from each other in many ways, and Barbados is unique in more ways than its growth experience. Barbados is a small, densely populated country with a rather fortunate geographic position. Located some 100 kilometers east of the Caribbean archipelago, Barbados is the most eastern Caribbean state and happens to fall outside the principal Atlantic hurricane belt, thus reducing its environmental vulnerabil ity as a SIDS. Being the easternmost island in the Caribbean chain, Barbados was historically situated far from Spanish navigation routes and became the first port of arrival for the English sailing to the Caribbean and a preferred stopover port for Dutch ships traveling from Brazil (Pons 2007, 58). For these reasons, Barbados originated as a springboard for economic trade. Barbados also benefited from its natural barriers of corals, Atlantic breakers, and favorable wind patterns surrounding the island, whi ch have historically made Barbados unassailable for attack. Barbados's geography and natural military defense largely explains why it is the only Caribbean island that did not change hands during the European conflicts of the 17 th and 18 th centuries, thus allowing for uninterrupted development. For Blackman (1998), the island's geography is the first fortunate historical accident,' which has given rise to the Barbadian state.
61 Apart from geography, Blackman identifies six other fortunate historical acciden ts that have affected the performance of the Barbadian state, one of which was the initial establishment of English settlement as a colony of settlement' and not a colony of conquest.' In 1627, the first English colonists arrived on an uninhabited Barbad os looking to cultivate profits from the booming demand for cotton and tobacco in England. While motives for occupying other colonies in the region were for territorial acquisition or absentee economic exploitation, the English came as settlers to Barbados with the intention of making a second start in the New World (Blackman 1998). These settlers planted deep institutional roots and by 1639 the resident elite had founded the second oldest parliament in the Caribbean. Barbados first cultivated tobacco, but it was soon deemed "the worst that grows in the world," and with falling prices of cotton in England, the sugar crop became the profitable staple (Beckles 2006, 17). As the Barbadian planter elite began to rise, Barbados did not see the degree of absenteei sm that characterized other colonies, such as Jamaica. The incidence of a large domestic landownership would play a great part in the rise of an entrepreneurial middle class after independence. The commitment of Barbadian settlers to parliamentary govern ment was especially strong, and in the 1870s Barbados managed to narrowly avert the imposition of a Crown Colony government 4 that would stunt political development in the rest of the British Caribbean, including Jamaica (Blackman 1998). The next two histo rical accidents' that Blackman identifies as the historical roots of the "Barbados Model" are based around social cohesion and include the early accession of free coloured to political and civil rights by the 1820s and the early exposure of Barbadian slave s to education, so 4 Crown colonies were ruled with direct government fr om London through a governor and non elected council.
62 that by the end of the 18th century many slaves were literate. The value has been ingrained in the minds of black Barbadians that education is the most reliable means of upward social mobility and political liberation (Blackman 1998). Ed ucation was seen as the second key to their freedom. The fifth historical accident of the island has paradoxically been the island's small size. The small size and large population worked in a rather counterintuitive way in the decades following emancipati on. Whereas many former slaves in other Caribbean colonies abandoned the plantations to establish free villages in unsettled land, the land in Barbados was already completely occupied and Barbadian freed men were forced to return to the plantations as wage laborers, to accommodate to the ways of the white planters, and, in the process, absorb English values and attitudes over the next century (Blackman 1998). Blackman notes how "confinement to the plantation must have been a bitter pill for contemporary fre ed men to swallow, but it has paid off magnificently for subsequent generations. Ironically, the Jamaican freed men who became an independent peasantry were to pay a high posthumous price in the illiteracy of their descendants" (1998). Blackman's sixth fo rtunate accident is what he calls the nobelsse oblige,' and constitutes of efforts of the coloured and black elites in the years immediately after emancipation to fight for the rights and improved welfare of former slaves. Blackman claims that the politic s of Barbadian coloured and black elites have been "populist," and political leaders have "spent lavishly on education and the social services, placing a sturdy floor under the welfare of the least advantaged" (1998). In transitioning to an independent, co lor blind democracy, Barbados accomplished a transfer of political
63 power from white oligarchy to the black majority without physical violence or discrimination a feat that few countries with racial tensions have been able to accomplish. Lucky breaks, such as the cordial transfer of power to a black majority, account for the final fortunate accident of Barbadian development. Barbados has certainly experienced economic luck during its development history, but as Blackman points out, this luck has also been ma nufactured to the extent that Barbadians have seized the opportunities presented to them. For example, when subsidized beet sugar production in Europe threatened the sugar industry in the late 19 th century, the economic disruption caused by Jos Mart redu ced the supply of Cuban sugar and lifted prices on the international market; when economic conditions declined and domestic opportunities contracted, migration outlets were available during multiple stages of the country's development; and with the advent of the commercial jetliner in the 1950s, Barbados would launch the tourism industry, which is now a major foreign exchange earner for the island (2008). Other studies that have attempted to explain what enabled the success of Barbados include those by Ro ss Brewster (1995), Wickham (1997), and Henry and Miller (2009). While Ross Brewster (1995) attributes the relative success of Barbados to its better endowment of human capital (i.e., investment in education, training, and health) and to the higher stock o f social capital,' defined as the combination of norms, interpersonal trust, social networks and organizations that bring about lasting social cohesion and integration in a country, Wickham highlights the absence of sharp demographic differences and the r elative similarity of the political parties in Barbados as being responsible for the relative political stability of the country (ECLAC 2001). While such
64 historical antecedents, factors of political stability, and continued investment in social and human c apital may all influence the success of a country, Henry and Miller argue the macroeconomic decisions of governments can exert just as much influence on the trajectory of the economy, but it is through policy that a government can flex its agency to direct ly affect the institutional, social, and physical capital of a country (2009, 2). In the case of Barbados, the government has maintained a strong history of socioeconomic planning since the 1940s and has adopted an effective midwivery' and husbandry' rol e to provide the solid institutional framework and economic incentives to the private sector necessary to produce returns of increased economic activity. To understand the fiscal policies that have guided Barbados' economic growth and development during th e 20th century, it is useful to gain a historical context of the island's underdevelopment and early attempts to combat it. Colonial Crisis and Change: 1900 1960 For almost 300 years, Barbados had been a colony organized around the production of sugar an d rum. As in other colonial possessions at the beginning of the twentieth century, social and economic development was inadequately poor and highly unequal. Advances in the socioeconomic development of Barbados began to take shape with structural changes i n the economy, that is, when sugar ceased to provide a reliable source of prosperity. By the end of the 19 th century, the sugar economy was under serious threat due to increased market competition and the emergence of subsidized beet sugar in Europe. From 1900 to1950, sugar production and employment oscillated greatly, and the need for economic alternatives and increased social development was unavoidable.
65 The first decade of the 20th century brought diminished production, high unemployment, and economic d ecline as sugar's demand and profitability decreased. With economic decline and mounting unemployment at home, the construction of the Panama Canal (1904 14) offered an attractive outlet for many Barbadians through emigration. Workers' remittances to Barba dos increased from £7,509 to £63,816 between 1906 and 1913 (Downes 2001, 147). The surge in remittances helped to alleviate problems of poverty at home, and before the canal was completed, the economy received a second boost from reinvigorated sugar produc tion as prices and demand increased during the First World War's drop in supply of European beet sugar. However, the quantity demanded was not maintained and sugar prices dropped again in 1921 and plunged even further in 1929. Low wages, wide income differ entials, high levels of unemployment and poor social services resulted in a series of riots in 1937, which prompted colonial administrators to launch significant reforms, including the establishment of political parties, elections, and the formation of tra de unions (Downes 2001, 149). The poor socioeconomic conditions of Barbados were finally beginning to receive attention but a greater structural change was yet to come, as the island was still a sugar economy. The Second World War brought another increa se in sugar prices, as European beet sugar production was reduced yet again. Another wave of emigration occurred, this time to meet the labor shortage in the United States. Although emigration alleviated some socioeconomic problems of Barbados through redu ced unemployment and increased remittances, it was no cure for the island's dependency upon the wildly unstable sugar market. Plans for greater socioeconomic development came with
66 increased political development as Barbados was led toward greater self gove rnance after the Second World War. Independence was earned in a series of events, beginning with the elections held in 1946 for a partial ministerial government. The Barbados Labour Party (BLP), which was the black dominated political party, won the electi ons and replaced an old representative system controlled by agro commercial elite. In 1950, full adult suffrage was granted and a full ministerial government was introduced in 1958. By 1961, internal self governance was granted and Barbados became responsi ble for its own financial affairs. Finally, in 1966 full independence was granted (Downes 2001, 149 50). With the new political transformation, attention was immediately directed toward socioeconomic improvement through planned development. Early developm ent plans occurred between 1946 and 1960 when the Keynesian theory was widely advocated in mainstream economics. For Barbados, development planning was and is the process by which the national effort is coordinated to achieve development goals that reflect the hopes and aspirations of the Barbadian people with respect to raising the quality of their lives over time (ECLAC 2001, 10). Development initiatives were two fold and focused on building developing social infrastructure (i.e., health, education, water and housing) and the move toward greater economic diversification. In keeping with the suggestions made by Sir Arthur Lewis in his articulation of an alternative development plan for the Caribbean, two medium term plans were drafted that signaled the gov ernment's intention to promote the manufacturing and tourism sectors by encouraging foreign direct investment (Downes 2001, 150). Institutionalization of development planning deepened with the establishment of the Barbados Development Board in 1957, which aimed at financing
67 entrepreneurial enterprises, and the creation of two legislative measures: the Pioneer Industries Act of 1958 and the Hotel Aids Act of 1956. Both of these acts involved expanding new industries to diversify the economy, specifically the hotel industry, through fiscal incentives to attract foreign investment. The Hotel Aids Act, for example, guaranteed income and profits tax exemption for ten years and free entry of building materials (Howard 2006, 76). Despite initial attempts to diver sify the economy, development planning was held back by two constraints: constitution and size (Emtage 1969). The movement to alternative development strategies that abandoned a sugar monoculture and agrarian capitalism was slow and Barbados's colonial st anding often impinged on domestic policymaking. Furthermore, there was the metropolitan belief that Barbados was too small to develop an industrial alternative to sugar. Between 1946 and 1960, agriculture still accounted for an output share of just over on e third of total real GDP and employed roughly two thirds of the working population (Craigwell et al 2005, 5). While structural change lagged behind drafted plans, Barbadians resorted to an old outlet for poverty alleviation: emigration. During the period of 1955 61 it is estimated that over 17,000 persons emigrated from Barbados to Britain to work in hospitals, hotels and the transportation system (Downes 2001, 151). In fact, Britain was actively promoting the emigration by sponsoring jobs and offering loa n services. Emigration absorbed the surplus labor, brought foreign exchange to the country, and ultimately helped to relieve poverty in Barbados, but this outlet was short lived with a change to the UK immigration law in 1962. While development planning wa s initiated during the 1940s and 1950s, it was not until after independence that these plans were realized.
68 Economic Growth and Development: 1960 2000 During the second half of the 20th century, Barbados made impressive advancements in socioeconomic deve lopment. Growth and development in Barbados has depended upon structural changes in the island's production structure and the role of the state in facilitating the transition from an agricultural to a service economy. The approach to development planning i n Barbados has been largely indicative,' or what Peter Evans would define as husbandry' (and often mixed with midwifery'), with the government providing the institutions, infrastructure, and environment needed for the private sector to thrive. The early development strategy of the 1960s focused on attracting foreign investment to increase economic growth and diversification by promoting production in new exports of light manufacturing (i.e., garments, chemical, electronic components) and tourism. This i ndustrialization through foreign investment' approach yielded a favorable transformation in the economy of Barbados and has provided transfers of technology and finance. However, the development strategy shifted to non economic growth objectives between th e 1970s and the 1990s with the focus on poverty alleviation, social development, and employment creation (Downes 2004, 9). In recent years, development efforts have been reorganized into maintaining good growth, productivity, and policy to face the new cha llenges from the ever changing global economy. An assessment of development planning since the 1960s provides six main development policy goals that have been pursued by the Government of Barbados: (i) diversification of the economic production structure ; (ii) creation of new employment; (iii) strengthening of social services; (iv) achievement of balanced and sustained growth;
69 (v) development of the human resource base of the country through training and education in new areas of technology; (vi) creation of a more equitable and cohesive society with greater participation in the decision making process (ECLAC 2001, 12). In order to bring about goals iii iv (and in keeping within the principals of a parliamentary democracy), Barbados needed economic growth and access to financial markets to fund the increased provision of public goods. During the 1960s, the government embarked on market diversification projects to initiate economic growth, but, due to Barbados' small size and relative lack of a natural resou rce base, foreign direct investment (FDI) became the primary means of financing initial development projects. A unique aspect of Barbados' development strategy has been the national consensus that openness is the most appropriate option for promoting growt h and social progress, and, unlike other Caribbean islands, Barbados held little anti foreign investment sentiment since many plantations during the colonial period were owned by Barbadians (DaCosta 2007, 21). While other islands saw foreign investment as a new form of dependency rather than national development, it can be argued that Barbados successfully managed its dependency to attain economic growth and development. The government launched incentive programs to attract foreign capital to develop both tourism and manufacturing industries for diversification. Foreign direct investment, from companies such as IBM and Intel, willingly flowed into the stable social and political environment of Barbados. As tourism and manufacturing developed into important sectors of the island's production structure, the economic importance of sugar waned (see table 2.3). From the 1946 1960 to the 1961 1970 period, the sectoral shares of real GDP for sugar decreased by 10.7 percent, while services experienced an 11.5
70 percen t increase over the same period. By the 1980s, Barbados had fully transitioned to a service economy, with tourism exports being the country's leading foreign exchange earner and a significant employer of labor. Although the economic importance of agricultu re was reduced, it still remained an important aspect of Barbadian life, both economically and socially. Agricultural diversification was an instrument of structural adjustment and although attempts to stimulate export crops other than sugar met with only moderate success, Barbados did become self sufficient in vegetable production through import substitution policies (Howard 2006, 145). Table 2.3 Sectoral Shares (%) of Total Real Gross Domestic Product in Barbados Sub Period Total Agriculture Sugar Non Sugar agriculture Industry Manufacturing Tourism Services 1946 60 32.3 25.6 6.7 8.0 2.0 4.8 59.6 1961 70 18.5 14.9 3.6 10.4 5.0 11.0 71.1 1971 80 8.5 5.7 2.9 16.0 8.7 21.4 75.5 1981 90 7.4 4.0 3.4 17.7 9.3 24.2 74.9 1991 03 6.2 2.4 3.8 19.5 9.2 15.2 7 4.3 Source: Craigwell et al., "Sectoral Output Growth and Economic Linkages in the Barbados Economy Over the Past Fifty Years." Central Bank of Barbados Working Paper 2005, Table 1. The early changes of Barbados' production structure contributed to a decade of good growth performance in the 1960s and, as we will see, it reduced the negative effects of external shocks in the 1970s. Barbados' transition to a service economy was made possible by FDI. Defined as the holding of 10 percent or more of the v oting stock of a foreign enterprise, FDI may take the form of equity capital, reinvestment of earnings, and loans from a parent company. Unlike commercial lending, FDI typically incorporates the transfer of technologies, job training, and management all of which
71 can enhance productivity and growth. Thus, it is not surprising that the decade of the 1960s saw good growth performance as the inflow of FDI to Barbados increased. From 1961 1969, annual average GDP growth was 6.4 percent and an annual average of G DP per capita growth was 6.0 percent. The low differential growth rate between GDP and GDP per capita reflects Barbados' low population growth, which is an important element for economic gain since slower population growth reduces pressure on natural resou rces, needs for government services, and demands for new employment. Barbados has in fact maintained one of the lowest population growth rates in the world (see table 2.4), which can be explained partly though emigration and partly through efforts at famil y planning and education, which began in the 1950s. Table 2.4 Average Population Growth (annual %) 1961 2009 Barbados Jamaica 1961 1969 0.3 1.4 1970 1979 0.4 1.3 1980 1989 0.4 1.2 1990 1999 0.3 0.8 2000 2009 0.1 0.5 Source : World Bank Indicators 2011 Efforts at family planning and education constitute part of the post colonial state's provision of public goods, which was made possible as a result of higher levels of foreign borrowing (Howard 2006, 34). While the government followed the foreign investment model to attain growth, special attention was paid to expanding the provision of both social services (i.e., education, training, health, housing, community services) and economic services (i.e., agriculture, water, roads, trade, industry and to urism). Judicious government investment in the building of a new seaport, the improvement in the airport
72 terminal and runways, and the upgrade of roads not only encouraged investors, reduced costs, and improved services for tourism, manufacturing, and agri culture, but also were of direct benefit to citizens as well (Worrell 1995, 7). By 1981, Barbados became the first (and remains the only) Caribbean country to offer an unemployment insurance scheme (Downes 2001, 155). Table 2.5 shows the percentage of gove rnment investment in social services since the 1960s. Public expenditure on education, health, and welfare accounted for more than 40 percent of public expenditure in 1960/61 and by 1970/71 it had increased to 54.4 percent. The post colonial political agen da has been committed to social development and initiatives for poverty alleviation and the provision of public resources, such as free' education from the primary to tertiary level, regardless of political party in office. Table 2.5 Central Government of Barbados Current Expenditure by Function 1960/61 1970/71 1980/81 1990/91 2000/01 Bds$m % Bds$m % Bds$m % Bds$m % Bds$m % Gen Services 5.10 23.6 18.92 22.8 61.59 15.6 146.89 15.3 260.89 17.2 Defense 0.10 0.50 0.14 0.2 8.38 2.1 25.59 2.7 40.33 2.7 E ducation 3.96 18.3 19.22 23.1 92.93 23.5 221.4 23.1 353.29 23.3 Health 2.61 12.1 15.54 18.7 61.67 15.6 141.01 14.7 203.5 13.4 Welfare 2.34 10.8 10.47 12.6 47.8 12.1 87.8 9.2 151.15 10.1 Housing 0.07 0.3 0.18 0.2 8.55 2.2 48.02 5 55.01 3.6 Other Soc Ser vices 0.13 0.6 0.41 0.5 9.48 2.4 12.82 1.3 25.23 1.7 Economic Service* 5.83 27.0 13.63 16.4 74.09 18.8 141.54 14.8 197.58 13.1 Debt Charges 0.70 3.2 4.64 5.6 30.49 7.7 132.19 13.8 225.82 14.9 Total Expenditure 21.62 .. 83.14 .. 394.98 .. 957.27 .. 1513. 79 ... Expenditure % of GDP ** 17.2 .. 28.7 .. 25.7 .. 32.3 .. 35.3 .. Source: Reprinted from Downes, Andrew. "Economic Growth in a Small Developing Country: the Case of Barbados." (2004): table 5. Notes: *total expenditure includes unallocated expenditu re for some years; ** GDP is at factor costs in current prices for the calendar year.
73 Although the basis of the development strategy has been a state aided, foreign investment model, there have been some areas of direct participation, albeit limited, of th e government in agriculture and the hotel industry. In attempt to provide institutional support for agricultural diversification in the late 1960s, the government managed some estates, led agricultural projects, and became a major shareholder in a dairy. The role of the state as a limited entrepreneur was seen in the construction of the Hilton Hotel, which was estimated to cost $7.63 million and directly employ up to 250 people (Howard 2006, 30). The state maintained two thirds of gross operating profits, while the remaining one third went to Hilton Hotels International for management services. In recent years, the government has taken over a number of small hotels that were indebted to the former government owned Barbados Development Bank for refurbishing under the Gems of Barbados' project (ECLAC 2001). It is important to note that despite the limited forms of state ownership, Barbados never experienced the broad nationalizations or sweeping import substitution policies adopted by other Caribbean countrie s, including Guyana and Jamaica. Barbados maintained an open economy with continued dependence on foreign capital for financing development through fiscal incentives. Although foreign investment enabled Barbados to move towards a more diversified export economy, the heavy dependence on foreign capital became a source of concern by the 1970s. Foreign capital (mostly in the form of equity) financed about 20 percent of gross fixed capital formation from 1956 1959 and had increased to 70 percent of gross fixe d capital from 1960 1964 (Howard 2006, 30). While economic diversification and growth did occur, the threat of a new structural dependency was emerging that, in effect, substituted sugar for foreign capital. In order to prevent a
74 reincarnation of complete structural dependency, domestic entrepreneurship had to be stimulated. The participation of nationals in key economic sectors quickly became the next objective of Barbadian development planning, especially in the context of the tourism industry. Foreign capital was largely responsible for the rapid expansion of hotels and accommodation that was initiated in the 1950s through fiscal incentives. Initial bias in the legislation encouraged the building of large luxury hotels, which thus precluded many local B arbadians from hotel ownership due to financial limitations. To allow for greater national participation, an amendment to the Hotel Aids Act in 1973 stated that Barbadian nationals should be given concessions to build hotels with less than twenty five room s, and apartments with less than fifty units (Howard 2006, 76). Increasing national participation in the tourism industry offered increased control of the industry and reduced economic leakages. Table 2.6 shows the distribution of hotel ownership in Barbad os in 1971, in which foreign ownership dominated lucrative top tier hotels (i.e., luxury and class A' hotels) and local ownership was confined predominately to guesthouses, apartments, and apartment hotels. The government hoped to further increase local i nvestment, local entrepreneurship, and national productivity in tourism by increasing human capital through the establishment of the Barbados Hotel School in 1964 and the Barbados Institute of Management and Productivity in 1972. Furthermore, the Barbados Development Bank was founded in 1963 to specifically mobilize domestic resources to finance local entrepreneurs (Howard 2006, 31). By the 1980s, the pattern of hotel ownership had been successfully modified so that Barbadian ownership accounted for 59.6 p ercent of all accommodation and 45.2 percent of top tier hotels (Howard 2006,
75 77). Updated studies on hotel ownership in Barbados are needed to allow for greater comparison and analysis of the relationship between local ownership and economic growth. Tabl e 2.6 Ownership of Hotels in Barbados 1971 Category of Accommodation No. of Hotels Locally Owned No. of Hotels Foreign Owned Percent Locally Owned Luxury hotels 3 10 23 Class A' hotels 3 8 27 Class B' hotels 6 5 55 Class C' hotels 2 1 67 Apartment hotels 20 12 63 Guest houses 10 100 Total 44 36 55 Source: Howard 2006, Table 7.2 pg 77. Although the 1960s exhibited good growth, a series of international economic instabilities soon began to threaten Barbados's economic progress and created a mor e difficult environment for Barbados to carry on with efforts of growth and development. Currency in Barbados was still issued by the Eastern Caribbean Currency Authority for use in all the English speaking islands of the Lesser Antilles (except Trinidad a nd Tobago) and was pegged to the pound sterling. When the United Kingdom devalued the pound in 1968, Caribbean economies faced large price increases for imports from North America, their major trading partner. The Central Bank of Barbados was established i n 1973 and it quickly replaced the East Caribbean dollar with the Barbadian dollar, which it then pegged to the US dollar at 2 to 1 exchange in 1975. The exchange rate policy became a nominal policy anchor that was adopted to curb the inflation rate associ ated
76 with devaluations and to prevent the speculative activity associated with exchange rate expectations and capital flight and remains the same to this day (Downes 2004, 38). The next external shock came from the 1973 oil crisis, in which consumer oil prices increased four fold. Dramatic increases in the price of fuel suppressed domestic and foreign demand and consequently reduced aggregate domestic production for agricultural and manufacturing sectors. Tourism also suffered a contraction as transport costs followed the oil price trend and visitor arrivals decreased 8.6 percent from 1974 1975. With the three main economic sectors agriculture, manufacturing, and tourism contracting, the Barbadian economy experienced negative or no growth from 1971 1976, except for 1975, where Barbados experienced a brief turn around due to an increase in sugar receipts. Barbados was still producing enough sugar to place large amounts on world markets, and in 1974 75, the international price for sugar tripled. This foreign exchange helped restore lost purchasing power, however the government did not spend the entire proceeds, but rather kept the underlying budget fairly close to the limit of ordinary revenue and put aside a portion of the sugar windfall in a fund intended f or low income housing (Worrell 1995, 9). Within just two years after the first oil crisis, tourism proved its resilience and visitor arrivals sprang back with strong annual average growth by 1976, peaking at 18.7 percent in 1978. In conjunction with reduc ed import prices, the increase in tourist activity has been cited as the main reason for economic recovery (Downes 2001, 159). The economy recovered relatively quickly from the world crisis and enjoyed an average annual GDP growth rate of 6 percent from 19 77 1980. Unfortunately, this recovery was short lived because the world economy experienced a second crisis at the end of the
77 decade. The 1979 "energy crisis" caused oil prices to surge again and sent the world economy into a short recession from 1980 1981 Despite the external economic shocks of the 1970s, net economic growth for the decade was positive, exports were diversified for the first time in Barbadian history, grinding poverty and destitution had been eliminated, and the distribution of income was among the most equitable in the Caribbean and Latin America by the end of the decade (Worrell 1995, 10). By the 1980s, economic growth and successful policy had put Barbados ahead of its Caribbean neighbors, but as regional competition intensified for tou rism and manufacturing markets, Barbados was unable to maintain its old strategy of foreign investment for promoting growth and development in manufacturing and tourism industries. After three decades of good growth, economic activity in Barbados came und er serious threat with all sectors of the economy contracting during the first half of the 1980s, save non sugar agriculture. The second oil crisis and subsequent world recession in 1980 81 led to the largest percent decrease in visitor arrivals in Barbadi an history, dropping by 7.2 and then 15.1 percent in 1981 and 1982. Sugar exports suffered a massive reduction when the US reduced its import quota of sugar by 75 percent in 1980. Major manufacturing operations began closing between 1983 and 1986, partial ly due to the over production of computer chips and partially due to the availability of cheaper production costs elsewhere. Barbados was unable to maintain regional wage competitiveness in manufacturing after countries including Jamaica, Mexico, and the D ominican Republic (whose wages had already been lower than Barbados) had devaluated their currency as part of the sweeping IMF structural adjustments of the late 1970s and 1980s. Foreign capital in manufacturing and tourist industries began to leave
78 Barbad os and flow into other countries in the Caribbean with cheaper labor or better incentives. Tourism investment, in particular, was attracted to Aruba by generous investment guarantees offered by the Dutch Government and to Mexico and the Dominican Republic by cheap labor and virgin' tourist sites (Worrell 1995, 10). From 1980 1985, average annual growth of GDP for Barbados staggered at a mere 0.1 percent. The government responded to these adverse economic circumstances by increasing public works and servic e sector jobs. Worrell critically notes, that at a time when manufacturing was contracting, sugar production plummeting, and there was no new investment in tourism, the country witnessed an orgy of construction of shopping malls, commercial office building s, official buildings, roads, and luxury homes (1995, 11). Worrell highlights that the strategy was bound to implode, due to the insufficient foreign exchange to finance imports and the insufficient tax revenue to finance spending, which left the governme nt to promiscuous borrowing on foreign capital markets and from the Central Bank of Barbados (1995, 12). While the government debt was accumulating, the increase in public sector jobs and incomes boosted demand for imported goods and Barbados began to suff er from twin deficits. Although it was largely due to the unsustainable expansion of the government's capital works program, the economy did have a marked increase in activity in 1986 with a recorded growth rate of 9.4 percent. However, this good growth also coincided with the renewed demand for Barbados' tourist services that had returned by 1983. Total visitor arrivals increased from 1983 1989 and were the result of increased cruise passengers. While tourist arrivals were rather inconsistent during this period, cruise passengers increased dramatically by 29.5, 54.7 and 29.5 percent in 1986, 1987, and
79 1988. Moreover, by the late 1980s, small and medium sized hotels provided some 80 percent of the hotel beds in Barbados, and, because they were owned mainly by Barbadians, they had the greatest potential for retention of earnings and creation of local employment (Government of Barbados, quoted in Griffith 2002, 95). It might be convenient to point to the renewed demand of tourism to explain the economic uptu rn of 1986, but this conclusion may be deceiving since the increase in visitor arrivals is due to large increases in cruise passengers, who hold a low marginal economic benefit to an economy due to the all inclusive nature of cruise lines. Regardless, when all private sectors of the economy were contracting, tourism was once again expanding. The period of 1990 1995 was characterized by a deep recession that even tourism was unable to reverse. From 1989 to 1992, real GDP per capita contracted by 5.1 perce nt per year (Henry and Miller 2009, 8). Due to the simultaneous fiscal and current account deficits and exhausted financial reserves, Barbados was forced to seek financial assistance from the IMF. In 1991, Barbados implemented a structural adjustment prog ram, which combined stabilization policies to curb aggregate demand and structural reform to increase aggregate supply. The longstanding currency peg to the US dollar at a 2 to 1 exchange came under threat during the early 1990s, but instead of accepting t he IMF recommendation of a currency devaluation, the government began a set of negotiations with employers, unions, and workers that culminated with a tripartite protocol for a one time cut in real wages of about 9 percent (Henry and Miller 2009, 8). The f all in real wages completed the same task as would a devaluation, which is restoring external competitiveness and profitability, but it allowed Barbados to evade the
80 danger of provoking inflation, which disproportionately affects the poor since the majorit y of their assets are in currency. Determined to maintain its fixed peg and the stability of the Barbadian dollar, Barbados utilized budget cuts, income restraints, and tourism promotion, and began diversifying into offshore financial services to reduce state economic activity and stimulate growth through the private sector. In addition, an important tax reform policy to fortify government revenue occurred in 1997 the introduction of the value added tax (VAT). The VAT is a form of consumption tax charged on all goods and services, with some exceptions such as prescription drugs, at a rate of 15% and 7.5% on hotel accommodations, and it replaced several other taxes. The government had been reluctant to sufficiently tax the local population, but with new pol icy reforms, the economy recovered and from 1993 to 2000 GDP per capita grew moderately by 2.7 percent per year (Henry and Miller 2009, 8). Despite the economic difficulties and subsequent reforms in the 1980s and 1990s, Barbados managed to come out uns cathed. Economic growth returned, human development was high (Barbados was ranked 29 th out of 174 countries on the HDI in 1999), and a new economic activity had emerged as an important income earner for Barbados: offshore financing. Many companies had beco me interested in Barbados' low license fees and low or no relevant taxes on transaction, and during the 1990s it has been estimated that growth in the two largest business entities international business companies and foreign sales companies doubled in num ber (Doyle and Johnson 1999, 97). Although little data for the economic contribution of offshore finance to Barbados exists, there is little doubt of the importance of the financial sector as a major income
81 earner. In 1999, Doyle and Johnson estimated aver aged net foreign exchange earnings of all offshore companies to be $110 million between 1995 and 1997, second only to tourism (98). Despite the rapid development and revenue accrued by offshore finance, the ability of the financial sector to continue produ cing economic growth may now be under serious threat. Recent sanctions from the United States, the European Union, and the Organization for Economic Cooperation and Development have announced a crackdown on tax evasion and money laundering two activities t hat tend to occur in Caribbean financial centers. While Barbados claims it is not a tax haven but rather a low tax regime, it will be interesting to see how external forces may influence a main economic sector of Barbados yet again. Apart from the emergen ce of the offshore financial sector, another fundamental change surfaced in the tourism sector in the 1990s an increase of arrivals from Europe. Figure 2.7 shows the percent of tourist arrivals by country for Barbados. For the most part, market share had b een historically diversified among the United Kingdom, the United States, Canada, and other CARICOM countries. However, as the tourism industry has matured, it has given way to mass tourism with tourists traveling on a budget. Tourists from North America, specifically the United States, are no longer solely from the top income brackets, and the marginal benefit of American tourists has decreased relative to European tourists. This is due to the fact that tourists traveling from Europe tend to be wealthier t han American tourists due to the larger travel costs incurred just to reach the island. Furthermore, Americans have come to partake in substantially shorter vacation periods relative to Europeans. When strategizing a consumer base for a country's tourism p roduct, a destination wants to attract the tourist who will spend the
82 most money. Naturally, Barbados began to push tourism promotion in the European market in the late 1990s. As expected, the percentage of tourists arriving from the UK has nearly doubled from 22 to 41.6 percent from 1990 to 2000. Although in 2000 there was a downturn in arrivals from the UK, it still maintained the greatest share of the market at 36.9 percent. Table 2.7: Percent of Tourist Arrivals by Country to Barbados UK USA Canada C ARICOM Other 1960 5.9 27.3 10.6 41.2 15 1970 7.7 36.5 25.3 21.4 9.1 1980 15.2 23.2 23 22.8 15.8 1990 22 33.2 13.4 14.4 17.1 2000 41.6 20.6 11 16.1 10.7 2009 36.8 23.6 12.3 17.1 10.2 Source : data taken from Downes table 11, pg 36 2004, CTO. The Ma kings of the Modern Economy In the past four an a half decades since independence, Barbados has made impressive socioeconomic transformations and has managed to diversify the economy from early on with specific attention to tourism, while maintaining a fr ee civil society and a stable political environment even in the wake of the fiscal severity measure during the 1990s. Moreover, Barbados was able to launch early effective development planning that has provided generous public services, a favorable environ ment for foreign investment, and the space for a rising entrepreneurial middle class. In a sweeping report on the development achievements of Barbados during the 20th century in 2001, ECLAC concluded that the case of Barbados reveals six key lessons for ot her SIDS: (i) small size is not a constraint on the achievement of a high level of social and economic
83 development; (ii) sound economic management and planning is critical; (iii) there is a need to focus on the quality dimension, for example, human resourc e development and social infrastructure; (iv) the establishment of a strong public education program permits popular participation in the development process; (v) there is a need to develop an appropriate institutional framework to promote private sector d evelopment and to establish a good information and surveillance system to keep track of social and economic developments within and outside of the country; (vi) it is important to determine the appropriate role of the State in the development process whil e using appropriate cultural attributes to aid social and economic progress. Perhaps the fortunate accidents' put forth by Blackman have provided Barbados with a favorable platform to launch socioeconomic development, but, as we will see in the case of Jamaica, there is no substitute for propitious policy. In the case of Barbados, policy adopted to diversify and maintain an open economy by fostering the tourism industry while investing heavily in social services has been rewarding. Today the economy is s tructured upon the production of services, specifically of the tourism and financial industry, with services contributing to 74.3 percent of total real GDP from 1991 2003 (see table 2.3). When averaging the WTTC's indicator of travel and tourism total con tribution to GDP' from 1991 2003, tourism accounted for 43.1 percent of Barbados' GDP. By 2010, travel and tourism's total contribution to GDP had increased to 46.6 percent (see annex 4). Barbados has undergone profound structural changes to the economy. W ithin less than five decades, the island had managed to transform from an agricultural to service economy, raise the standards of living, and maintain good economic growth in the face of crippling external shocks. Despite the decline in relative
84 contributi on of agriculture to overall domestic economic activity, the sector is still recognized as important in the cultural and economic life in Barbados and the largest cultural festival in Barbados, Crop Over, is in celebration of the end of harvesting the suga r cane crop (Craigwell et al. 2005, 6). Moreover, Crop Over has become a Carnival style celebration that attracts many tourists from the beginning of June to the first Monday in August, the islands off season for tourism. However, development is a continua l process of moving forward and if Barbados is to maintain its advancements in development, special attention will need to be paid to addressing the present day concerns and challenge of the island's industries, specifically tourism, which is rapidly chang ing. The Case of Jamaica: Paradoxical Growth Jamaica is a small, mountainous island sitting practically in the center of the Caribbean Sea. Separated from its closest neighbors, Cuba and Haiti, by cultural and linguistic barriers, the location of Jam aica in the Greater Antilles has set it apart from the British territories of the southeastern Caribbean (Clarke 1975, 1). Like its neighbors, Jamaica has had quite a dramatic history of development. From colonial conquest to post colonial indebtedness, Ja maica's history and development has been largely a frustrating paradox. Despite factors that are typically growth enhancing, including the island's relatively large resource base, advantageous proximity to US ports, inheritance of the English language and institutions, tremendous amounts of foreign aid and investment, economic diversification, trade liberalization, efforts of governments since independence, and its seemingly good prospects at the outset of independence, Jamaica
85 has failed to achieve relativ e economic growth and development since the end of the 1960s. While there is no arguing that in absolute terms Jamaica has seen some form of development, especially on a social level, when compared to the economic development of similar counties, especiall y within CARICOM, Jamaica has simply fallen short (Chung 2009, 3). The question seems to be how has a country that has so much and has tried so hard remained in a state of dismal development? Jamaica gained independence in 1962 with high hopes for future socioeconomic and political development. Unfortunately, the future proved to be extremely disappointing. Since independence, Jamaica has experimented with both democratic socialism and free market capitalism, yet neither political ideology has been able to bring about a sustained period of growth. Despite good growth in the 1950s and 1960s, Jamaica has faced a series of external shocks and influences that have severely stunted economic growth. From 1970 to 2009, GDP grew on average only 1.6 percent, while G DP per capita averaged a mere 0.6 percent growth. With such poor economic outcomes, it is no surprise that many Jamaicans have resorted to emigration. For every three Jamaicans living in Jamaica, there is at least one living abroad (Kim 2007, 7). In many ways, the development prospects of Jamaica are less optimistic now than at the time of independence due to the encumbrances of debt and frequency of destabilizing forces. Over the decades, Jamaica has accrued the fourth largest per capita debt in the world and the burden of servicing this debt has severely impaired the flexibility of macroeconomic policymaking. Destabilizing forces both external and internal also challenge Jamaica's attempts at development and are more present than ever in our globalized wo rld. Factors such as world financial crises, erratic oil prices,
86 high rates of crime, high unemployment and underemployment, the proliferation of the international drug trade, and human capital flight, continue to suppress Jamaica's development potential a nd threaten Jamaica's primary employer and foreign exchange earner: tourism. While Jamaicans have shown remarkable resilience, McAffee points out that the media has perhaps made their disappointment more visible as frustrations, despair, and social disloc ation spew forth in the form of ghetto gunfights, politically manipulated violence, soaring cocaine use, drug wars, and a sense of near panic among the middle classes (1994, 77). While McAfees description of social unrest was a caption of the early 1990s, the recent international parade of the arrest and extradition of Christopher "Dudus" Coke 5 the convicted drug lord who had Robin hooded his way to popularity in Jamaica as a community benefactor by providing the means for food and schooling reflects that the socioeconomic problems have not abated in the least. To understand the current socioeconomic dilemmas of Jamaica, it is important to understand their origins in their historical context. By examining the economic environment of Jamaica since independe nce, we can see what factors have aided and detracted from the island's development. However, before charting the post colonial development of Jamaica, it is necessary to reflect on the island's history to gain context. Change without Change: From Colonia lism to Neocolonialism Jamaica is the largest of the former British colonies in the Caribbean and one of the first to be settled by Spain in 1494. Unlike Barbados, Europeans encountered an 5 When the Jamaican government bowed to heavy US pressure and announced in May 2010 that it would extradite Mr. Coke, the supporters of Mr. Coke attacked police stations, prompting the declaration of a state of emergency in Kingston and the biggest mobilization of the Security forces in Jamaican history (BBC, 2010).
87 indigenous population when they first settled Jamaica. However, by the time the English captured Jamaica from the Spanish in 1644, the Arawak population had been obliterated. By the late 17th century, Jamaica had transformed into a slave plantation society, specializing in the production of sugar, introduced from Barbado s, for the private profit of a predominantly absentee planter class (Beckford and Winter 1982, 16). Jamaica's extractive plantation society based on slavery would formally continue until emancipation in 1838, which transformed the slave plantation economy into a capitalist plantation economy. Emancipation gave rise to a large peasantry class, through the mass exodus of ex slaves into the mountainous interior or other available lands in Jamaica to create "free villages," where communities largely engaged in subsistence activities. Labor shortages on Jamaican plantations grew increasingly severe and Jamaican planters resorted to importing many immigrants from India and China. Whereas Barbados saw a greater inclusion of former slaves in society after emancipati on, Jamaica experienced a greater class separation both spatially and in legislation. Racial tensions inhibited social mobility and delayed the development of human capital in Jamaica as racial relations among whites, mulattos, blacks, and immigrant worker s remained essentially hierarchic and discriminatory. Lingering racial tensions are sill present in today's society, especially in regard to Western tourists and local workers. Jamaica's political development was abruptly disrupted when the Jamaican legis lature renounced its charter in 1865 and became a "Crown Colony" with direct colonial governance from London. This shift in governance resulted from an uprising known as the Moran Bay Rebellion: a peaceful protest against the discriminative rules of privat e property and the system of racial oppression, which prevented former slaves
88 from squatting on land, purchasing property, and utilizing their right to vote, quickly ignited into the mass killing, arrest, and flogging of hundreds of black Jamaicans. While some measures of self government were restored by the end of the 19 th century, the establishment of the Crown Colony is generally seen as a regressive step in Jamaica's social and political advancement. About the time of the rebellion, changes in the worl d economy gave rise to large multinational corporations. MNCs, such as the United Fruit Company were attracted to developing countries for cheap labor and their abundance of raw materials, and quickly set up large scale banana productions in Jamaica. The c ultivation of bananas was important for a number of reasons: (i) it diversified agricultural exports in a time of falling sugar prices; (ii) it utilized the hillsides unfit for sugar production; (iii) it created jobs for peasants including cultivation, pac kaging, and shipping; (iv) and it produced a fledgling tourist trade as tourists arrived on the banana boats. By the end of the century, the Jamaican economy was still centered on agriculture but export earnings from bananas had begun to exceed those of su gar and new manufacturing enterprises began to appear. While sugar and rum were the main manufactured goods, several new enterprises had been established around processing of other crops, including soft drinks, cigars, and coffee. The 20th century ushe red in great changes. For the first thirty years, prices and production teetered as banana production decreased with the First World War, while sugar prices increased with the destruction of European beet sugar industry, but then severely decreased with th e Great Depression. The economic collapse of the international capitalist system in the 1930s brought high unemployment and economic
89 hardship in Jamaica, which resulted in severe social instability and another rebellion in 1938. Peasants and workers formed an alliance based on the communal struggle for economic survival and agitated for social change and real representative self government (Beckford and Witter 1982, 61). A new constitution was granted in 1944, which gave locals a degree of self government that was gradually increased, leading to full independence in 1962. While the transition to an independent nation was both peaceful and democratic, Jamaica would not be able to shake free of its colonial condition of economic dependence and foreign influen ce on policymaking. As in Barbados, growth and development planning in Jamaica was launched after the Second World War through the industrialization by invitation' of foreign capital. However, Jamaicans had very little involvement in the earlier stages o f industrial planning, which was done primarily by the British and was carefully structured to supply the needed raw material for British and European manufacturing concerns as well as their markets (Hewan 1994, 13). After the Second World War, large depos its of bauxite had been discovered in Jamaica, and unlike Barbados, foreign investment flowed into Jamaica because there was a natural resource to exploit. Similar to Barbados, the government offered favorable incentives (i.e., duty free imports, tax exemp tions) to foreign investors to promote industrialization. American and Canadian companies and their banks began heavily investing in mining activities in 1952, and output soared from 1 million tons in 1953 to six million tons in 1958 (Payne and Sutton 2001 65). Unfortunately, little of Jamaica's bauxite production was refined into aluminum in the country and much of the economic gain from value added processes in mining was lost.
90 The wave of foreign capital not only affected the bauxite industry, but als o spilled over to the establishment of branch plant manufacturing and the expansion of the tourist industry (Beckford and Witter 1982, 66). With foreign investment leading the expansion in bauxite and aluminum, manufacturing, and tourism, the modern econom y began to take shape. Between 1950 and 1955, real GDP grew at 10 percent per annum, and then it grew at 7 percent per annum between 1955 and 1960 (McBrain 2001, 202). Such impressive growth made Jamaica a model for other colonies aspiring to economic dev elopment through FDI spurring economic activity. Tourism development in Jamaica picked up significantly in the late 1950s, and experienced remarkable growth with a 56.9 percent increase of tourist arrivals in 1960. Prior to the 20 th century, Jamaica was reputed as "a graveyard for white folks" due to high mortality rates among civilians and military from malarial disease and bacterial illness, but by 1900 it had cultivated renown as a white man's sanatorium (Taylor 2003, 13). This about face for the indus try resulted from a conscious decision to promote Jamaica as a tourist destination in the late 19 th century. While tourism in Jamaica was initiated as a health spa in the mountainous regions, the industry was overhauled as a tropical playground on the beac h for wealthy North Americans after the Second World War. The government launched the Hotel Aides Act in 1944, which waived import and revenue taxes, and launched the Jamaica Tourist Board in 1954 to promote and maximize the industry. Foreign capital provi ded the great leap forward and between 1945 and 1962 the number of hotels on the island increased twofold (Taylor 2003, 162). Table 2.6 shows the growth of the industry from 1959 1969. Due to Jamaica's proximity to the United States, North American tourist s represented the largest share of arrivals.
91 US visitors to Jamaica greatly increased after the Cuban Revolution closed Cuba as a tourist destination for Americans. Table 2.8 Growth of Visitor Accommodation in Jamaica 1959 1969 Total Visitor Arrivals % Growth Number of Beds Number of Beds Percent Change 1959 22.0 5,800 23.4 1960 38.3 6,140 5.8 1961 2.4 6,758 10.5 1962 4.5 7,471 10.5 1963 1.5 7,563 1.2 1964 6.1 7,395 2.2 1965 11.0 7,941 7.3 1966 15.5 8,250 3.9 1967 10.9 8,911 8.0 1968 8.1 9,616 7.9 1969 2.1 10,950 13.9 Source: Adapted from Hewan, 1994 table 3.2. Jamaica owes the success of its initial diversification of its production structure to foreign capital, which first diversified its agricultural base with the production of b ananas, and then through mining, manufacturing, and tourism. Foreign capital certainly provided the investment and technology for impressive diversification and record economic growth, but it was a peculiar diversification in which the new sectors had no l inks among themselves and developed very few links with agriculture (Beckford and Witter 1982, 66). Tourism, in particular, maintained a high quantity of food imports and was notorious for failing to create linkages with local agriculture. Furthermore, gai ns in both employment and government revenue were also misleading. The capital intensive nature of new operations limited job creation, and public revenue was marginal due to the extensive incentive legislation that secured duty free imports of raw materia ls, tax holidays, tariff protection, subsidized factory space, and accelerated depreciation
92 allowance. As a result, the extractive colonial import export status quo was hardly changed as almost all the inputs (i.e., raw materials, services, skilled manpowe r) were imported and almost all of the output (i.e., bauxite, aluminum, manufactured goods) was exported. In effect, the extent of the structural change to the production structure only added to the number of primary products being extracted by developing bauxite mining. Although economic growth was strong throughout the 1950s and 1960s, Jamaica constitutes the perfect case of economic growth without development. In the course of twenty years, export led growth by foreign capital had actually escalated inc ome differences, urban decay, and rural poverty. Whereas Sir Arthur Lewis theorized that development of an industrial class would alleviate the surplus labor in agriculture, thereby lifting wages, productivity and opportunities, Jamaica seemed to experienc e the exact opposite. Higher wages in new mineral and manufacturing enterprises did attract former peasant farmers too many farmers, in fact and the capital intensive industries failed to absorb the labor surplus. The steady decline in agriculture as a sou rce of employment was not accompanied by a steady increase in job availability in a diversified and more complex division of labor (Lacey 1977, 7). Consequently, the decline in the economic importance of agriculture was accompanied by an increase in unempl oyed and underemployed workers. In addition, developments in agriculture were neglected in the limelight of industrial development, so instead of developing simultaneously with industry, agriculture fell behind. Former President, Michael Manley, argues tha t the failure to mount an assault on the problem of agriculture, particularly in view of the fact that some 24% of the working population depended directly upon the land, was to prove disastrous in later years and was the primary cause of the gap existing between the have
93 and have nots in Jamaican society (Hewan 1994, 17). Whereas the Barbadian state included plans for agricultural reform and even took over production for select estates and enterprises, agricultural reform in Jamaica was left undone and the conditions of the peasant class deteriorated. As peasants moved away from agricultural production, increases in food imports and food prices occurred, which prompted an inflationary situation that only further aggravated class distinctions. Declining circ umstances for the peasant class contributed to the wave of internal migration to town and cities, but urban industrial advances were not sufficient to accommodate this labor influx and migrants lacked the skills required in any case (Beckford and Witter 19 82, 69). Unemployment increased from 13 percent in 1962 to 23.2 percent in 1972 (Henry and Miller 2009, 7). To further complicate matters, Jamaica experienced a high average annual rate of population growth during the 1960s of 1.4 percent. However, the ra te of net annual increase in the population had varied due to the mass emigration (between 15,000 and 18,000) that occurred between 1955 and 1962 (Lacey 1977, 7). Similar to Barbados, much of this labor was destined for the United Kingdom, but emigration d ropped in 1963 when UK emigration laws changed. What resulted is a constant build up of population from 1963 to 1966, which triggered a sudden population explosion' and subsequent unemployment explosion,' particularly at the younger end of the labor mark et (Lacey 1977, 8). The build up of the population coincides with the urbanization and social unrest, which accumulated in the 1960s. Development policy during the 1950s and 1960s overemphasized the importance of industrial development and was remiss on in itiatives for greater social or agricultural developments. With skewed growth, internal migration, growing unemployment, and
94 high population growth, it is not surprising that the economic growth of the 1950s and 1960s was accompanied by the high growth of urban slums, poverty, unemployment, crime rates, prostitution, and other social ills. Much of the explanation for growth without development lies with the extent and nature of the foreign control to which the Jamaican economy was still subject at the beg inning of the 1970s: leading sugar estates were owned by a large British company; the bauxite industry was in the hands of four American and Canadian corporations; many hotels were part of foreign business, as were banks, insurance companies, the communica tions network, and a number of basic public utilities, including electricity and telephone (Payne and Sutton 2001,66). Despite possessing the fourth largest bauxite deposit in the world, Jamaicans were left with simple low value activities of the industry specifically the extraction of the bauxite ore, since foreign companies first secured the concessions to exploit their bauxite (Hewan 1994, 28). Jamaica's economic growth was overly dependent upon foreign capital transfers to the island, predominantly fr om the US, which were often lost through leakages of profit repatriation and intra company transfer pricing. In fact, Owen Jefferson calculated that between 1959 and 1969 the funds flowing out of the Jamaican economy actually exceeded all the incoming inve stments attracted by official incentive policies (1972, 66). Ultimately, during the 1950s and 1960sm Jamaica had diversified it production structure, but it was unable to reverse its structural dependence. While Barbados was able to manage its dependency o n foreign capital, Jamaica fell to its hegemony. In less than a decade since independence, Jamaica's structural dependency, in effect, had transferred from British colonial control to the domain of US hemispheric power.
95 Social, Political, and Economic Cha nges: 1970 1980 Apart from market diversification, the significant development up until the 1970s was the advancement of all sections of the bourgeoisie and the middle class (Beckford and Witter 1982, 73). Socioeconomic advances for the lowest class remai ned unrealized. While the economy had diversified production away from agricultural primary products to include mining, manufacturing, and tourism, three shortcomings prevailed: the economic growth of two decades had failed to translate into socioeconomic benefit for the poor majority, the economy still depended on the export of primary products for growth due to the groundswell of mining activity, and the economy had developed an extractive clientele relationship that disproportionately benefited foreign c apital. By 1970, bauxite/aluminum was Jamaica's largest source of foreign exchange, accounting for 41% of exports of goods and services (Worrell 1987, 111). Furthermore, the Jamaican Labour Party (JLP), the incumbent political party who had come to power i n 1962 with the support of a broad alliance of classes, had lost its popular support due to the policies pursued and the position Jamaica had fallen into with the changing world economy. To the disappointment of many, economic growth had escalated horizont al inequalities, and it is to no surprise that rising social discontent soon followed. Beckford and Witter give examples of the many forms of the social discontent that surfaced, such as the spontaneous breakdown of social life, increased anti social beh avior (i.e., crime, hustling, corruption in the government), political challenges to the conservative JLP with the growth of nationalist and socialist political groups, particularly among the intelligentsia, the growing Rastafari movement resisting cultura l oppression of the African that sanctioned the economic exploitation of black workers
96 and peasants, and the reorganization of the People's National Party (PNP) Jamaica's democratic socialist party under Michael Manley (1982, 750). Manley would win the 197 2 elections on a populist campaign for democratic socialism with the platform of bringing self reliance and social justice to Jamaica with land and agricultural reform. Central to his plans for development was initiating a greater role of the state in prod uction. While Manly was ultimately unable to bring growth to Jamaica, academics seem to have very different opinions on why he was unsuccessful. Opinions towards Manley tend to be split on whether the economic decline of Jamaica during the 1970s and early 1980s was due more to adoption of socialism or to external forces. Regardless of the merits of the PNP's economic program, the world economic crises of the 1970s would be particularly taxing for Jamaica and from 1973 the divergence of growth performance be tween Barbados and Jamaica was clearly substantial. Manley sought a third path for Jamaica, distinct from the Cuban or Puerto Rican models. Each dependent on a superpower, Cuba managed to make impressive social improvements, although the cost was politi cal freedom, and Puerto Rico yielded impressive gains for foreign investment, yet lacked social development. When the PNP government took office in 1972, Jamaica was facing high unemployment, rising domestic inflation, and a balance of payment deficit sinc e independence (Chambers and Airey 2001, 97). Manley began implementing a series of programs for social welfare, nationalizing public utilities (with compensation) and initiating centralized planning of the economy. Among the new welfare programs were the Special Employment Program (with emphasis on street cleaning) to reduce unemployment, food subsidies, modest land distribution, free education to the university level, equal pay and increased work
97 opportunities for women, and the enactment of a minimum wag e law. Manley was determined to reach an independent, third path,' but the new government was unfortunately confronted with a radically changing external economic environment that frustrated policy options. Tourism was also a key industry that Manley sou ght to develop. After the hotel boom of the 1960s, the tourism industry was assuming increasing importance to the island's economy ranking second to bauxite in terms of foreign exchange earnings and the government sought to devise policies for tourism deve lopment that would energize the flagging economy (Chambers and Airey 2001, 98). A main issue the government sought to correct was the widening gap between tourists and locals and the rising hostility expressed toward tourists. The Jamaican population had c ome to adopt a negative attitude towards visitors for a number of reasons, including racial tensions relating to the island's historic legacy of black servitude, the skewed distribution of resources that favored the tourist enclaves, and policies adopted d uring colonial rule that had barred locals from tourist hotels and beaches. Policies, such as the Beach Control Act of 1956, had established a system of exclusive licenses, which effectively excluded locals from some of the finest beaches in the country, u nder the rationale of beach management (Chambers and Airey 2001, 98). Early tourism development had shut out Jamaicans by policy, psychology, and price, as the relative prices of goods and services were exceedingly more expensive in tourist enclaves. Host and guest relations in Jamaica have never fully resolved and selling Jamaica to tourists has proved much easier than selling the idea of tourism as a means of development to Jamaicans.
98 Although, the government saw no conflict between the tourism industry and a socialist political agenda, the decline in tourist arrivals under the PNP reflects otherwise. Tourism is notoriously sensitive to political and social conditions, and by adopting a political posture of socialism, Jamaica effectively heightened tensi ons with its most influential hegemonic neighbor, who also comprised the largest percent of visitor arrivals to Jamaica. Tourist arrivals quickly slowed when the PNP took office from an annual average growth of 13.7 percent in 1970 1972, to 2.9 percent in 1973 1974, and then dropped to 15 percent in 1975 1977. While the declaration of socialism may have led to the decline of Western visitors, the greater shocks of the 1970s, specifically the oil crisis of 1973, led to the contraction of tourism worldwide. However, while the rest of the foreign travel industry quickly resumed its habits, Jamaica did not experience a revival. The shocks of the 1970s developed into a long term economic crisis for Jamaica. The trouble began with the significant increase in int ernational commodity prices in 1971, followed by the soaring price of oil in 1973 and international recession of 1974 1975. The economy was hit in five ways: (i) severe terms of trade losses: import prices rose and export prices fell, which negatively affe cted trade balance; (ii) decreased real GDP per capita: rising import prices pushed up the cost of living; (iii) decreased growth: foreign capital inflows and external demand severely declined during the recession of 1974 1975, especially in Jamaica's most productive sectors of mining and tourism, which meant fewer jobs were created; (iv) fiscal crisis, as fiscal expenditure exceeded fiscal revenue since the government remained committed to increasing social welfare and increased public expenditure on welfa re; (v) increased inflation, as government
99 spending was financed with central bank accommodation and over borrowing. By 1974, Jamaica was facing twin deficits as external economic conditions exacerbated the trade balance and the spending of the government on much needed welfare programs had increased deficits. In an attempt to rescue Jamaica from the crisis, the Manley administration responded with measures regarding the island's two most important industries bauxite and tourism that have been regarded as radical and ill advised by US mainstream observers. For tourism, Manley launched a great deal of policy focusing on the Jamaicanisation' of the tourism industry, which promoted two trends: bringing greater involvement of Jamaicans in hotels and other tou rism facilities, with regard to ownership and employment, and maximizing revenue from the industry. However, Jamaicanisation did not provide foreign capital with feelings of confidence, and growth did not resume in the industry. Many hotels were closed dow n and the government was forced to assume ownership of these and other hotels that could no longer pay their mortgage bills due to low occupancy levels (Chambers and Airey 2001, 102). By 1980, the government owned 17 of the largest hotels and so controlled about 60 percent of the first class hotel rooms on the island (Sealy quoted in Chambers and Airey 2001, 110). While the policies of Jamaicanisation, such as nationalizations and the cessation of foreign investment initiatives, were sought to increase Jama ican involvement in the industry, they were largely responsible for the reduction in investor confidence and ensuing massive capital flight from the country. Changes also came to bauxite production. In 1974, Manley imposed the Bauxite Levy to increase go vernment revenue. A production levy on all bauxite mined or
100 processed in Jamaica set at 7.5 percent of the selling price of the aluminum ingot proved to be an extremely effective mechanism from the Jamaican point of view, as it raised the revenue from the industry from a meager J$22.71 million in 1972 to no less than J$170.34 million two years later (Payne and Sutton 2001, 73). The PNP then moved onto its next offensive on the bauxite industry, bringing the bauxite industry under partial public control and setting up the International Bauxite Association, a producer's cartel inspired by OPEC (Hewan 1994, 69). Unsurprisingly, the aluminum corporations did not respond well to Jamaica's new policies and retaliated by filing a suit with the World Bank contesting the legality of the levy and by transferring bauxite production to other countries. Jamaica's share of world bauxite market dropped from 19 percent to an all time low under 14 percent between the years of 1973 and 1976 (Payne and Sutton 2001, 74). With ba uxite and tourism contracting, internal and external economic relations deteriorated. Jamaican under the Manley administration not only displeased the bauxite corporations, but also started to arouse the US government. Jamaica announced its full diplomat ic recognition of Cuba and the PNP government maintained a friendly relationship with the Cuban regime, which agreed to provide Jamaica with technical assistance in school construction and fishing (Payne and Sutton 2001, 75). US relations deteriorated even more after Manley publicly announced Jamaica's support for Cuban involvement in Angola, and US economic aid to Jamaica was blocked. Unable to change the progressively deteriorating economic conditions and the growing hostility of the United States, Manley began to lose support from the local capitalist class, which sided with the US in a campaign against the Manley regime. Economically, they contracted
101 their investments in Jamaica, exported foreign currency illegally, and migrated in the largest mass migra tion of professional and ordinary Jamaicans to the United States since World War II (Payne and Sutton 2001, 75). The migration of professionals and businessmen meant the flight of the entrepreneurial class and a decimation of national investment needed to drive the economy. As Griffith notes, if foreign investors must be replaced because they are responsible for underdevelopment, there must be a national manufacturing entrepreneurial class to take their place (2002, 87). Jamaica did not have the support of the national entrepreneurial class to fall back on. The United States has also been accused of launching one of its infamous destabilizations', as inaccurate foreign press reports began to destroy the tourism industry, Jamaica's second most important ind ustry at the time, with skewed representation of violence in Jamaica. The result was dramatic decreases in tourist arrivals of 17.2 and 19.2 percent during 1976 and 1977. Most damaging of all was the credit squeeze to which the country was subjected: the US Agency for International Development turned down a request for good grants, the US Export Import Bank dropped Jamaica's credit rating from the top to the bottom of its category, and commercial banks ceased all lending to the island (Payne and Sutton 20 01, 76). The conglomeration of negative external shocks from the world economy, decreases in bauxite production after the imposition of the levy, flight of capital and the migration of large sectors of the bourgeois and professional classes, the false repr esentation of Jamaican violence in Western media prompting the sharp decline in tourism, and the credit and aid restrictions imposed by the United States thoroughly secured the economic
102 decline of Jamaica during the 1970s and Jamaica had no option other th an to initiate negotiations with the IMF in 1977. Negotiations with the IMF resulted in a currency devaluation of the floating Jamaican dollar of 15 percent over the first year of the program, drastic cuts in the size of the public sector, a cutback in t he operations of the State Trading Corporations, sharp tax increases, price liberalization to guarantee a 20 percent rate of return on capital invested by the private sector, and finally a mandatory limit on wage settlements of 15 percent a year, in compar ison with the predicted increase in the cost of some 40 percent (Payne and Sutton 201, 80). Jamaica swallowed the IMFs economic medicine, but the economy never recovered. The second oil crisis at the end of the 1970s assisted in the failure of Jamaica's re covery. By 1980 inflation was 27 percent per year, investment had collapsed to 14 percent of GDP (down from 26 percent in 1972), and the PNP was voted out (Henry and Miller 2009, 7). Readjusting Growth: 1980 2000 The turbulent 1980 elections terminated Manley's democratic socialist experiment and brought the return of the Jamaican Labour Party led by the new conservative administration of the Boston born, Harvard trained Edward Seaga. When Seaga entered office, Jamaica was on the verge of social and pol itical anarchy after the erosion of the economic and social infrastructure during the previous decade (Hewan 1994, 87). With the neoclassical counterrevolution becoming mainstream school of thought, the 1980s would be a time of economic readjustment and po litical shifts for much of the Caribbean region, Jamaica included. By dismantling public ownership, planning, and regulation, Seaga's policy objectives for rebuilding the Jamaican economy were based upon free
103 trade and foreign aid from leading internationa l financial institutions (i.e., World Bank, IMF) and the US sponsored Caribbean Basin Initiative (CBI). However, despite the ideological shift in development strategy to tenets broadly aligned with neoliberalism, Seaga would experience frustrations similar to Manley in attempting to bring about growth and development to Jamaica. Even with extensive structural adjustments and massive amounts of foreign aid and loan assistance, growth was minimal and development was disappointing. After almost a decade of n egative growth culminating with the price increases of the 1979 oil crisis, two main economic concerns dictated policy at the beginning of the 1980s reducing inflation and stimulating economic growth. At the time, there was a 23.7 percent rate of both unem ployment and inflation, and GDP per capita had dropped by 7 percent. To turn the economy around, Seaga began negotiations with international financial institutions, namely the IMF and the World Bank, immediately upon assuming office. Although Jamaica had b een effectively frozen out of the international money market for several years, the IMF offered Seaga ample assistance in borrowing and refinancing without the conditionalities that had been imposed on Manley, such as extreme currency devaluation (Chambers and Airey 2001, 109). Following suit, aid from the World Bank flowed into Jamaica and constituted more than 67 percent of the Bank's total lending in the Caribbean from 1981 to 1982 (McAfee 1994, 69). The US also stepped up its assistance to Jamaica. In a ddition to rescinding its travel warnings against Jamaica, US economic aid to Jamaica jumped from $38 million in 1978 1979 to $208 million in 1981 82, making Jamaica the third largest per capita recipient of US aid in the world (McAfee 1994, 69). What Payn e and Sutton refer to as "the coordinated
104 international rescue of the Jamaican economy," brought immediate gains in the provision of foreign exchange to rehabilitate traditional industries and stimulate new ones, but carried the long term cost of a three f old rise in foreign debt, which increased from an estimated US$1.2 billion at the end of 1980 to US$3.1 billion by the end of 1983 (2001, 109). The aid was part of the United State's Caribbean Basin Initiative (CBI) to ensure that the greater Caribbean re gion's economic crises would not affect the region's political stability. The CBI was a unilateral economic program meant to dissuade states from entering a socialist model of development by providing carrots to non socialist states through arrangements in trade, aid, and investment, including one way free trade for most exports, increased economic aid, tax incentives to encourage US entrepreneurs to invest in the region, and technical assistance to the private sector (Payne and Sutton 2001, 13). Through th e CBI, aid' from the United States flowed into the Caribbean at alarming rates in order to increase exports and reduce government deficits. However, this aid did not go to social development initiatives, and was largely absorbed in financing deficits and militarization. The US had encouraged Jamaica to substantially increase the strength and size of its military forces through arms purchases, and US military assistance to Jamaica swelled from US$ 95,000 in 1981to US$ 9,288,000 in 1986 (Hewan 1994, 132). Th e theory of the "magic" of the markets was pitched as to help countries earn their own way to self sustaining growth and it was accepted (Hewan 1994, 2). Seaga's economic strategy was to open Jamaica's markets to foreign enterprise through joint developm ent projects. Jamaica would utilize foreign capital and
105 technological skills and its abundantly cheap and plentiful indigenous labor in projects such as traditional exports of sugar, bananas, apparel, leather goods, exotic liquors, textiles, and tourism, a nd in non traditional industries including electronics, chemicals, and "screw driver" assemble manufacturing (Hewan 1994, 88). Although this strategy seems reminiscent of the 1960s entrenchment of foreign dependency that Manly attempted to reverse in the 1 970s, Seaga explained the influx of foreign capital as part of the trade and aid concept: foreign capital would assist Jamaica to build up a viable export base, which would then help to develop Jamaica's economy. In other words, Jamaica would depend on for eign capital for economic growth, and this growth would translate into economic development. However, this strategy failed at the very first link. Despite the tremendous amount of aid, investment, and transfer of foreign capital Jamaica witnessed a mere 0. 1 percent GDP growth over Seaga's first five years in office. Seaga's strategy faced initial troubles due to fluctuations of world market demand for Jamaica's longstanding foreign exchange earners: bauxite, sugar and bananas. Market forces led to the dec rease in production of both sugar and bananas, while new technologies of harder plastics severely reduced the world demand for aluminum and production was consequently cut. The decline of Jamaica's main foreign exchange earners caused the trade deficit to triple, and new IMF loans to plug up the trade deficit were made contingent on a 43 percent devaluation of the Jamaican dollar, which greatly reduced the purchasing power of the poor (ibid). Unfortunately, bauxite demand never returned, and in 1985 major f irms began to shut down their operations entirely. However, while all other traditional exports earners were contracting, the tourism industry had shown strong growth from 1981 to 1984 in response to a vigorous publicity
106 drive and the favorable opinion of Seaga in North American audiences, and tourism was able to contribute to the slight upturn in growth in 1984. Seaga's new foreign policy, which aimed at renewing friendly relations with the United States, positively affected tourism development. The decl ine of the bauxite industry had propelled tourism, for the first time, to the position of leading foreign exchange earner for Jamaica (Chambers and Airey 2001, 110). In 1980, Seaga launched an entire Ministry dedicated to the tourism concerns. Although th is Ministry was reincorporated into the Ministry of Mining and Energy in 1984 after the Minister of Tourism resigned, the JLP continued to push through new policy for the tourism industry, including disinvestment of the hotel properties taken over by the P NP. By 1983, only two hotels were still fully owned and operated by the government with the others having been leased to private sector interests (Chambers and Airey 2001, 110). What emerged was an important development in the tourism industry: the all inc lusive concept. While the first all inclusive resort, Superclubs, had been established in 1978, the 1980s witnessed the mushrooming of such facilities (Chambers and Airey 2001, 12). Guests would pay one price for their holiday, in advance and in their home country, and all aspects of their vacation would be included accommodation, food, drink, recreation, entertainment, tips, airport transfers, and tours. The benefits of the all inclusive resorts remain contested. While all inclusive resorts consistently pe rformed better than traditional hotels in terms of profits, occupancy levels and length of stay, they have often exacerbated problems of relations between locals and tourists through segregation, precluded locals from entrepreneurial ventures within the to urist industry, and failed to provide greater linkages to the local economy. Nevertheless, the all inclusive concept
107 undoubtedly made a significant contribution to the development of the tourism industry during the 1980s, and by 1988, 20 percent of the tot al rooms on the island were all inclusive with occupancy rates of 65.9 percent, compared to 53 percent occupancy in traditional hotels (Chambers and Airey 2001, 12). Apart from developments in tourism, Jamaica's traditional foreign exchange earners contra cted and Seaga responded by utilizing unfettered free enterprise to bring in capital inflows to develop non traditional export earners. Seaga promoted the expansion of the country's free trade zones (FTZ), reduced government protection of Jamaican producer s, and opened the economy to more imports from abroad (McAfee 1994, 70). The sudden liberalization of imports caused severe problems. First, many local producers who had been nurtured on import substitution industrialization were unable to compete with for eign goods in both agriculture and manufacturing and those who did not close found it impossible to participate in the export market due to the uncompetitiveness of Jamaican exports. Second, liberalizations launched what local gibe referred to as the three Vs Volvos, videos, and venereal disease as luxury imports and tourists flowed into the country, which raised expectations about improvements in the standard of living to new and unattainable heights (Payne and Sutton 2001, 111). Finally, liberalization de teriorated the balance of payments as the trade deficit tripled, thus prompting new IMF austerity measures, specifically the reduction of the government's budget deficit. What followed was a double sting on Jamaicans as taxes increased and public expenditu re was reduced by laying off many public sector workers, cutting food subsidies, slashing expenditure on health care, intensive policing of the leakage of foreign exchange from the tourist sector, and increases in the price of
108 gasoline. By 1985, unemployme nt remained at 25 percent, inflation was still double digit at 25.7 percent, and the economy recorded 2.9 percent GDP growth, with GDP per capita dropping even further with 4.3 percent growth. During Seaga's five years in office, the economic conditions of Jamaica had not improved. So in 1985, his government announced a new policy, which was more in keeping with the interventionist policies of the Manley government than with neoliberalism, in which the state would reopen and invest in a major mining plan t that had closed the year before (Payne and Sutton 2001, 116). This new policy announcement also came with news of yet another IMF negotiation. The greater severity measures of this loan sent Jamaica into the first general strike in its post independence history (Payne and Sutton 2001, 117). The period following the strike brought no sign that investment and enterprise were responding to the cheap labor economy created after two years of currency devaluations (ibid). In addition to large budget cuts and re duction of public services, the people of Jamaica were forced to make great sacrifices and social tensions escalated, especially as the thriving tourism sector continued to create an environment of wealth disparity. Tourist developments on the popular nort heast side of the island (i.e., Montego Bay) had created an exclusive enclave of development, which the masses of Kingston across the island would never experience. Furthermore, as severity measures continued, an increasingly more serious problem of illega l activities had become rampant in resort areas. Given that tourism was the greatest, and at times only, performing sector of the economy during the 1980s, it is to no surprise that locals had begun to associate tourists as sources of opportunity. What i s known as tourist harassment,' or the peddling of
109 handicrafts, drugs, and sex, had become too common for the likings of tourism operators and the government. The government responded by issuing licenses in 1985 for all main operators in tourism to preven t, touts, pimps, hustlers, and drug pushers from jeopardizing the tourism industry, but as of 1987/1988 it appeared that the government had still not been able to address the harassment problem' successfully (Chambers and Airey 2001, 112). The social cost s of structuring an economy upon tourism became clearly visible during the 1980s. While Seaga was faced with profound domestic pressures, he began being squeezed by his other constituency the IMF. Similar to Manley, Seaga began to realize the relatively weak position in which the leaders of SIDS find themselves within the world structure. The IMF was becoming tighter with Jamaica after the latter consistently failed to meet quarterly requirements. From 1986 to 1988, Seaga reversed his policy approach and introduced an expansionary budget designed to renew economic growth. The crucial background factor was the fall in the international market price of oil in 1986, which provided the government with more room to maneuver economically than it had been anticip ated (Payne and Sutton 2001, 119). With a towering debt to repay, Seaga reentered negotiations with the IMF in 1986 and managed to avoid up front currency devaluations. Price controls were instated, pay guidelines were announced, and import duties were fur ther reduced, which allowed cheaper goods to flow into the market to the disadvantage of local manufacturers. In 1986, the economy started to turn around, resulting from the decrease in oil prices, increase in bauxite production, and boom in the tourist s ector. With an election year coming up, Seaga's public expenditure programs also faced a turnaround as public
110 expenditure increased in health, education, and public infrastructure. In 1988 another IMF negotiation was surprisingly unproblematic and made no attempt at reversing the expansionary approach the government had advanced in the two preceding years. Despite the upturn of the economy and the reversal of fiscal policy by the end of the decade, the JLP was not reelected into office in the 1989 elections In a generally peaceful campaign by local standards the PNP returned to government with 57 percent of the popular vote, but under a drastically different platform (Payne and Sutton 2001, 124). Paradoxical Growth: 1990 present Jamaica entered the 1990s after two decades of seemingly trial by error structural adjustments, which produced contrasting political and economic policies of the governing parties neither of which were able to bring about greater growth and development. By the 1990s, globalization had fundamentally reorganized the external environment, and the PNP's platform had reorganized in response. The free market had replaced democratic socialism as the way forward and public policies became focused on getting adjustment right, principally in achieving price and exchange rate stability. While growth was still understood to be a market driven private sector led process, neoliberal principles were tempered by the realization that more attention had to be paid to human resources' (Payne and Sutt on 2001, 21). The PNP won the 1989 elections, which returned Michael Manley to office, albeit briefly, as complications in his health caused him to step down in 1992. The decade of the 1990s experienced overall poor macroeconomic performance: average ann ual growth of GDP was only 2.1 percent and average annual percentages for unemployment and
111 inflation recorded high double digits at 15.8 and 17.5 percent, respectively. Interestingly enough, although growth in GDP and employment was low in the 1990s, inves tment and poverty alleviation was high. In fact, the poverty headcount was halved between 1992 and 1998. The apparent paradox of low growth and poverty reduction can be explained through the combined influence of several factors particular to the period: ( i) GDP growth is believed to be underestimated by 1 2 percentage points per annum in the second half of the 1990s, due to the increasingly service dominated economy where the informal sector is large; (ii) inflation, which hurts the poor disproportionately fell sharply; (iii) the relative price of food declined, owing largely to trade liberalization and the appreciation in the real exchange rate, which reduced a major element of cost in the budget of the poor; (iv) real wages rose; (v) and remittances rose (World Bank 2004, 12). However, much of the development in the 1990s resulted from policy changes necessary for economic stability (i.e., reducing double digit inflation), not strategies for poverty reduction. Since further gains in the reduction of food prices or lower inflation are unlikely, active measures to attain sustained growth and human development are needed for improved social development and poverty reduction. The poor economic growth during the 1990s can be attributed to two factors: an adve rse external climate and the financial crisis from 1996 1997 that arose from bank privatization to poorly capitalized investors and financial liberalization unaccompanied by appropriate regulatory strengthening (World Bank 2004, 2). Growth was also negativ ely affected by the legacy of debt and the high rate of crime. The financial crisis increased public debt sharply as a result of costly government bailouts. The debt to GDP ratio was reduced from 138.3 percent in 1990/1991 to the still high level of 79 per cent in
112 1996/1997, but it rose again after the crisis to 150 percent in 2002/2003 (World Bank 2004, 15). The increase in crime rates mirrored the increase in public debt. After being quite steady in the 1980s, the crime rate rose in the 1990s, giving Jamai ca the third highest rate of violent crime in the world for much of the 1990s and 2000s (ibid). The high crime rate is partly the result of increased drug trafficking, partly the result of insufficient employment opportunities, especially for the youth, an d partly due to the deterioration of social capital due to increased social dislocation. Costs and perceptions of crime have been so significant that they are often blamed for impinging upon growth by discouraging investment and tourism, while sparking inc reased emigration and government expenditure on initiatives to offset crime. The lack of opportunities and high level of crime have contributed to the migration of nearly 80 percent of the well educated and highly subsidized tertiary graduates (World Bank 2004, 15). Migration has depleted Jamaica of valuable human capital (i.e., professionals, entrepreneurs, university graduates) and has created social dislocation among families and communities (Cunningham 2006, 17). The flip side of this brain drain is rem ittances, a traditional coping strategy for the poor. Between 1995 and 2001, private remittance inflows to Jamaica grew at an average rate of nearly 8 percent per year in US dollars (World Bank 2004, 51). The large increase in remittances can explain the d ecline in poverty during the 1990s, despite the high unemployment and minimal economic growth. Apart from problems of violent crime and the brain drain, fiscal challenges remain a great challenge for Jamaica. In 2010, Jamaica ranked 7 th in the world for the highest public debt as a percentage of GDP at 123.2 percent and 4 th highest in the world on a per capita basis (CIA Factbook 2011). Debt servicing continues to hinder the ability
113 of the government to invest in needed infrastructure and social programs to cultivate growth, while the need to invest in initiatives to counter crime consumes limited resources and further weakens fiscal policymaking. Both unemployment and inflation have decreased since the 1990s, with annual averages for the decade decreasin g from 15.8 to 12.0 percent for unemployment and from 27.8 to 11.1 percent for inflation. Changes in GDP per capita, however, have not provided improvement. While unaccounted income through remittances and the informal sector distort these figures, the ann ual average growth of reported GDP per capita was 1.3 percent throughout the 1990s and dropped to 0.6 percent growth in the 2000s. The main sectors contributing to growth during the 1990s were the services including financial, communication, and tourism services (McBain 2001, 205). Jamaica actually experienced a reversal of economic diversification during the 1990s as the manufacturing sector declined dramatically (notably due to the exit of some textile and tire manufacturing companies), and the share of services in sectoral output substantially increased (see table 2.9). While acts of violent crime were becoming more frequent in urban areas, tourist arrivals actually increased during the 1990s. In fact, the high incidence of crime has justified the devel opment of enclave resorts. Similar to mining, tourism centers on large projects and large scale investments but usually in isolation from the rest of the economy (IMF 2006, 22). From 1990 to 2000, tourism as a sectoral contribution to GDP increased from 2. 1 percent to 9.2 percent. With annual average growth of visitor arrivals increasing at about 6 percent from 1990 to 2000, the tourism industry remained one of the few enterprises whose share in total bank lending increased
114 during the financial instabilitie s of the 1990s, raising from 8.5 percent in 1993 to 13.9 percent in 2003 (IMF 2006, 23). Table 2.9: Jamaica GDP by Sectors 1990 2000 1990 2000 Sectoral Contribution to GDP growth Agriculture forestry and fishing 6.2 7.1 0.4 Mining and quarrying 8.7 9 1 Manufacturing 21.1 15.8 2.2 Construction and installation 9.8 7.6 1 Services 54.2 60.3 5.1 Of which: Hotels, restaurants, clubs 2.1 9.2 3 GDP at constant market prices 17,446.10 19,153.90 2.6 Source: Reprinted from IMF 2006, 23. Notes: Based on G DP at constant 1986 prices. While the 1990s were not a loss to Jamaica, they did not bring the great transformation for which Jamaicans had been waiting. Despite the greater liberalizations of the economy, economic growth was minimal and economic divers ification shrunk as the island's production structure shifted towards services, namely tourism. With few options for employment, many educated Jamaicans emigrated. Mass emigration gave rise to the substantial increase in remittances, and by 2000 remittanc es accounted for 9.9 percent of Jamaican GDP (see table 2.10). Although remittances may alleviate the edge of poverty, they are no substitute for a national, educated, taxable, entrepreneurial class. The high levels of violent crime and public debt contrib uted to the suppression of growth and the further propulsion of emigration. Although Jamaica did manage to halve its poverty count, this social improvement was not due to active development policies, but rather through the substantial reduction in inflat ion and food prices. More importantly, Jamaica had already fallen behind other
115 developing countries in the region. While observers began talking about a Barbados Model, Jamaica was still grappling with the question of how to bring about growth and developm ent. However, by the end of the 1990s the economies of Jamaica and Barbados maintained a similar organization highly dependent upon the growth of tourism services. Divergent Growth: Accident or Policies? We return to the three questions: how did Barbad os achieve its level of growth and development, why was Jamaica unable to realize similar growth and development, and how have the benefits of tourism been utilized for the development of each island? When trying to identify factors that have aided or detr acted from the development experience of Barbados and Jamaica, factors of history, geography, structural change, distribution of growth, institutions, politics, and ethics have all proved influential. However, it is through policy that a state can shape it s development outcome influenced by these various factors. History provides a founding structural difference between the islands: while Barbados initiated as a settlement, Jamaica originated as source of extraction. Initial settlements benefited Barbad os with a greater commitment to economic, political, and social development, which lasted throughout its colonial history. Barbados has also benefited from its geographic smallness and spatial distance from the rest of the Caribbean Basin, which spared the island many colonial conflicts, destructive hurricanes, and the formation of a post emancipation peasant class. Jamaica, on the other hand, has experienced complications due to its central location in the Caribbean and proximity to the US, which placed th e island in the nucleus of external influences.
116 Factors such as pirates, planter class politics, and the production of bauxite have all complicated Jamaica's development. As these two islands developed under colonialism, they shared a production structure dominated by the export of sugar until the late 19 th century, when foreign investment launched banana productions in Jamaica. Barbados would remain dependent upon sugar until independence, but Jamaica received a second influx of foreign investment when bau xite reserves were discovered on the island. Bauxite soon became Jamaica's largest income earner, but, due to the nature of foreign ownership of Jamaica's factors of production, economic benefits were neither maximized nor distributed equally. At the outse t of independence, Barbados was diversifying its production structure with services and light manufacturing, but Jamaica failed to provide a more complex and skilled division of labor by maintaining a production structure based on primary products. While Barbados and Jamaica have evolved similar production structures, services displaced agriculture in Barbados long before Jamaica. Jamaica maintained an economy based around the export of mainly primary products, with bauxite being the most important until t he 1980s. Barbados and Jamaica both realized that the continued reliance upon agriculture would not bring the socioeconomic changed needed for greater development. However, they were unalike in how they addressed development planning and policymaking. Res idual effects of colonialism greatly influenced initial development policies for both islands, but colonialism had produced dissimilar socioeconomic conditions in Barbados and Jamaica. While the Barbadian society exhibited greater social cohesion in direct ing policies to reduce inequity and increase the welfare for the lowest classes before and
117 after independence, Jamaica remained highly unequal and socially divided, often along racial lines. Consequently, initiatives for increased social development lagged behind incentives for economic growth after Jamaica's independence. Both islands did choose economic diversification through foreign investment. But since Barbados did not have a natural resource to exploit, policy had to be centered on developing new production. In fact, Griffin argues that Barbados' better economic performance was partly due to an absence of traditional raw materials, which forced the government to allocate increasing amounts of resources to the promotion of export tourism in order to earn foreign exchange and create additional jobs (2002, 96). Barbados chose to develop services and light manufacturing, while reducing and diversifying its agricultural sector, and by the 1980s tourism became the largest foreign exchange earner. It can b e argued that while foreign capital entered Barbados due to the favorable investment environment (i.e., stable democracy, educated society, minimal social frictions), foreign capital came to Jamaica because there was a resource to exploit. Mining companies succeeded in securing for themselves unimpeded access to Jamaica's bauxite very much on terms dictated by them (Hewan 1994, 30). While manufacturing and tourism services were also developed, neither sector would be as economically important as bauxite unt il the late 1990s. Distribution of growth has played a key role in policymaking for both islands. After strong growth during the 1950s and 1960s spurred by foreign investment, both islands experienced skewed income distribution, inequitable access to land and dependence on foreign investment. However, dependency, inequity, and poor human development were much more acute in Jamaica. Barbados responded by increasing
118 public programs, increasing opportunities for greater local entrepreneurship, and maintainin g an open economy. Jamaica, however, had greater social problems and responded with greater structural changes. Jamaica adopted democratic socialism and launched extensive public sector reforms under Michael Manley, such as social welfare policies (e.g., m inimum wage, equal pay for women, free education), nationalizations of key sectors (e.g., bauxite, banks, hotels), and sweeping land reforms. While some argue these radical' polices derailed Jamaica's growth by leading to decreased investment by the natio nal business classes and their subsequent emigration, others point to destabilizing external factors, including the oil shocks, the IMF, and the United States. While neither factor was independent of the other, the economic shocks of the 1970s greatly affe cted the macroeconomy of both Barbados and Jamaica, especially the latter. The 1970s brought erratic growth, increased unemployment, two periods of double digit inflation, and increased government debt to Barbados. Jamaica experienced negative growth, tw in deficits, and double digit inflation. The changing external economic environment created the need to change the internal economic structure of Barbados. Barbados pegged its currency to the US dollar at 2 to 1 parity in 1975, kept fiscal spending under c ontrol, avoided nationalizations, ran a tighter monetary ship, and adopted an outward looking growth strategy (Henry and Miller 2008, 8). Jamaica carried on with social reforms even though revenue did not keep up with government expenditure, actively suppo rted Cuba to the displeasure of the US, and continued expanding the state sector. While policies enacted by Barbados strengthened a national entrepreneurial class, policies passed by Manley cost Jamaica support of foreign and national capital sources. IFIs cut off access to financial resources and Jamaica
119 experienced the flight of both foreign and domestic capital, as many domestic professionals migrated to North America. By the end of the 1970s, progress in Barbados looked healthier than ever, while politi cal, social, and economic conditions in Jamaica had deteriorated. Jamaica was forced to seek assistance from the IMF, which brought a series of currency devaluations, a reduction in public services, and higher inflation that only worsened the position of t he poor. Policy responses, especially during times of macroeconomic shocks, have a great impact on socioeconomic conditions. Tables 2.8 2.11 summarize the socioeconomic divergence brought on by the divergent policies. Table 2.10 Select Social Indicators Life expectancy at birth, total (years) Mortality rate, infant (per 1,000 live births) Adult literacy rate (%) Barbados Jamaica Barbados Jamaica Barbados Jamaica 1960 64.5 64.2 .. 56.5 .. .. 1970 68.5 68.3 40 47.6 .. 67.5 1980 72.0 70.2 22.9 36.7 .. 7 5.9 1990 74.4 71.1 14.8 27.7 .. .. 2000 75.2 71.0 12.9 26.8 97.4 a 79.9 2009 78.0 72.0 9.8 25.9 99.7 b 85.9 Net migration Telephone lines (per 100 people) Physicians (per 1,000 people) Barbados Jamaica Barbados Jamaica Barbados Jamaica 1960 21252 145735 3.0 1.2 0.3 0.4 1970 14578 152762 7.8 1.9 0.5 0.4 1980 7792 101414 13.9 2.5 c 0.9 0.4 1990 5000 161264 27.8 4.4 1.1 0.6 2000 12000 97933 49.2 19.1 a 1.2 d 0.9 Source: World Bank Indicators, UNESCO data Note : a 1999 data; b 2009 data; c 1984 data; d 2003 data.
120 Table 2.11 Divergent Economic Performance of Barbados and Jamaica Barbados Jamaica 1966 1972 1973 1980 1962 1972 1973 1980 Growth Rate of GDP per Capita 6.0 2.7 4.3 4.3 Fiscal Deficit % of GDP 2.6 5.3 2.3 15.5 Inflation 6.0 14.8 4.4 23.0 Source: Reprinted from Henry and Miller 2009, 8. Table 2. Table 2.12 Sectoral Contribution to GDP 1960 2009 Agriculture as % GDP Industry as % GDP Services as % GDP Barbados Jamaica Barbados Jamaica Barbados Jamaica 1960 21.5 .. 19.7 .. 58.8 .. 1970 11.0 .. 19.5 .. 69.5 .. 1980 9.9 8.2 22.5 38.3 67.5 53.3 1990 7.4 7.1 19.7 40.5 72.9 52.4 2000 4.3 6.7 16.3 31.5 79.4 61.8 2009 a 3.8 6.2 a 18.4 22.1 a 77.9 71.7 Source: World Bank Indicators Notes: a 2008 data. Table 2.13 Select Economic Indicators GDP per capita (current US$) Unemployment rate (%) Inflation, consumer prices Remittances % of GDP Barbados Jamaica Barbados Jamaica Barbados Jamaica Barbados Jamaica 1960 378.8 429.1 13.0 a .. .. .. .. .. 1970 760.2 75 1.6 18.0 b .. 7.3 14.7 2.4 .. 1980 3455.8 1256.2 11.4 27.3 14.4 27.3 1.1 3.6 1990 6587.0 1921.4 15.0 15.7 3.1 22.0 2.2 5.0 2000 10168.0 3479.1 9.3 15.5 2.4 8.2 4.5 9.9 2009 14050.0 4471.1 8.1 c 11.4 3.6 9.6 3.2 15.8 Source: World Bank Indicators Notes: a 1965 value; b three year average (1975 1977); c 2008 data. Throughout the 1980s and 1990s, Barbados continued to outperform Jamaica. Barbados maintained political stability, social cohesion, and growth, while Jamaica
121 zigzagged between economic liberal ism and state intervention, unable to bring growth or social stability. Factors including strong social capital, effective development planning aimed at increasing human welfare, prudent monetary policymaking, strong commitment to maintaining the fixed exc hange, and key fiscal incentives and initiatives that led to the formation of a greater national entrepreneurial class -with perhaps some historic, geographic, and economic luck -have all contributed Barbados' successful development. Few countries could ha ve managed to produce the government negotiations with employers, unions, and workers that achieved a consensus for a one time cut in real wages during Barbados's 1991 crisis. Of the factors explaining why Jamaica was unable to follow the Barbadian Model, determinants such as history, geography, or resource endowments may have all influenced development outcomes, but proficient policy and social cohesion are truly the determining factors of Barbados' success that were lacking in Jamaica. Furthermore, while the development of Barbados was ultimately externally propelled, the strategy of successive governments in Barbados has been the successful management of dependence, rather than any challenge to it (Payne and Sutton 2001, 135). In the case of Jamaica, soc ial capital has been underdeveloped, policy has been continually impeded or swayed by external actors (i.e., US, IMF, World Bank, MNCs), and the inability to find constructive policy compromises among Jamaica's stratified society has greatly delayed Jamaic a's potential. Although Jamaica was unable to maintain a growth trajectory similar to Barbados', recent trends are showing that Jamaica is on the right track. However, significant hurdles remain. Among economic indicators, inflation has stayed relatively low, unemployment has declined, and services have risen to 71.7 percent of GDP in
122 2009. Despite the high rates of crime, which is predominantly specific to Kingston, social indicators have also improved since the 1990s (see table 2.11). In the 2010 HDI Re port, Jamaica jumped twenty places to be ranked 80 out of 169 countries, as opposed to 100th in 2009. Between 1980 and 2010, Jamaica's life expectancy at birth increased by about 2 years, mean years of schooling increased by over 4 years, and expected year s of schooling increased by almost 1 year; Jamaica's GNI per capita increased by 43 percent during the same period (HDI 2010, 4). Continuing socioeconomic progress, while dealing with the constraints of high debt, pervasive crime, 'brain drain,' poor educa tion outcomes and uneven quality of schools, and a weak domestic entrepreneurial class, will require the utmost tact in policy creation. Public policy would also benefit greatly from loan forgiveness from the huge inflow of official loans and grants during the 1980s that was largely spent on public and private consumption or nonproductive ventures. However, while Jamaica is clearly heavily indebted, it is not poor enough to qualify as a Heavily Indebted Poor Country and is thus is not eligible for debt reli ef. Despite the divergent development experience, both islands have evolved economies heavily dependent on tourism. While the economy of Barbados aimed to develop the provision of services at independence, Jamaica's economy has shifted away from primary economic activities and has moved towards a service oriented economy since the 1990s. Today, tourism represents the leading foreign exchange earner for both Barbados and Jamaica, however, it should be noted that if the retention rates of foreign exchange f lows into Jamaica were to be considered, then remittances would surpass tourism and bauxite mining as the leading source of foreign exchange (Seaga 2006). Tourism is now critical for both economic growth and employment, and it has been one
123 of the few sect ors that have continually been growing. While tourism has provided Barbados with a consistent source of growth, despite periods of negative growth in times of international crises, Jamaica's tourism industry has been somewhat unreliable. The third leg of o ur question how have the benefits of tourism been utilized in the development of each island is examined in the following chapter. Although tourism can be a driver of change, as discussed in chapter one, the change can be either positive or negative.
124 Chapter 3 Tourism as a Factor in Development The development of a tourism industry over the past sixty years has provided the Caribbean with extensive changes and numerous economic benefits, including increased foreign exchange, new employment opportunities, extensive infrastructural development, new government revenue, and a strengthened entrepreneurial class. Tourism has reorganized traditional uses of the land and the sea for many islands, and has enabled both Barbados and Jama ica to transition from an agricultural to a service economy within the past sixty years. While tourism development will undeniably bring economic, social, environmental, and cultural changes to a host country, the extent and outcome of these changes is lar gely dependent upon the management of the tourist product. How a host country develops and manages its tourist product will directly affect outcomes in national development especially when an economy is tourism dependent. For tourism to be understood as a factor in development, attention must be paid to the 'quality' of changes brought about by the costs and benefits of tourism development, not just the 'quantity' of change. The development and effects of the tourist product of Barbados and Jamaica are out lined in this chapter to understand how tourism has acted
125 as a driver of change in the past, and how it needs to evolve to meet ongoing challenges for future growth and development. The Tourist Product The tourist product is what encompasses the total v acation experience and includes everything from arrival to departure. A tourist product is largely specific to a country due to the unique people, attractions, culture, food, festivals, and entertainment indigenous to a tourist destination. However, factor s that shape the effects of the tourist product are comparable. For example, while Jamaica followed Barbados in adopting a tourism dependent economy, the tourist products' of each island have developed quite differently along lines of ownership, leakages, linkages, visitors, tourism policies, externalities, and future challenges to the industry. Since the tourist product contains both the costs and benefits of tourism, its management will influence development outcomes (see figure 3.1). However, although B arbados is referred to as a development model' by some observers, its tourism industry has not quite been exemplary. Figure 3.1 Relationship between Tourism and Development Costs managed affects Tourism Tourist Product' National Development Benefits
126 Cruise Tourism The Caribbean represents 45 percent of the world cruise industry's capacity year round and 68 percent during the winter. More importantly, the Caribbean represents 65 percent of the industry's pr ofit. In 2004, Carnival made US$7.7 billion in sales and US$4.4 billion in profit; approximately US$ 2.5 billion was made from the Caribbean (Chastanet 2006, 121). Cruising is unlike any other form of tourism and is treated quite differently with the follo wing benefits: a) European Governments provide grants and economic loans as incentives to get ships built in their shipyards. b) Ships are all registered in tax free environments. c) Staff are recruited globally with no work permit restrictions, no access to unions and no contributions to social security. Most of their income is based on cash gratuities that are not subject to income tax. d) The sourcing of supplies is done in bulk. As an example, Carnival has over 100k cabins, with no license requirements and no taxe s. e) All electricity is produced on board and is subject to no surcharges. Water is either purchased at a reduced cost, or free. Sewage is dumped in international waters. f) No gambling licenses apply. g) Passengers clear immigration and customs only once h) Ships' r evenue is maximized by using volume to obtain major discounts from shore excursions (Chastanet 2006, 120). Although studies on cruise tourism have been practically nonexistent, it is easy to see the deep leakages cruise tourism carries by repatriation of profits by foreign cruise lines, numerous tax exemptions, the all inclusive nature, and the high costs of port facilities that are not offset by passengers spending in the local economy. Cruise tourism fails to provide the standard economic benefits typica lly touted for tourism, such as increased employment, foreign exchange, and government revenue. High leakages result with few economic benefits relative to traditional tourism. According to Chastanet land based tourist sector is responsible for 95 percent of tourism revenue, 90 percent of the tourism
127 employment, and 95 percent of the taxes (2006, 120). The Jamaica Tourist Board estimated that stay over tourists spent on the average US$113.98 per person per night in 2009, while cruise passengers spent an ave rage of US$83.36 per person. Since Jamaica is not characterized as a high end destination and tends to receive more budget stay over visitors, the difference in economic contribution from a tourist versus a cruise passenger would likely be more extreme in Barbados. The lack of regulation of the industry allows for tremendous profit maximization, little of which stays within the Caribbean. With cruise tourism becoming a dominant form of tourism for Caribbean states, especially Barbados, it is important for f uture policy to enact measures to offset the cost of cruise passengers and increase marginal benefit. The Barbadian Tourist Product Barbados is one of the most mature tourist destinations in the Caribbean. Like other tropical islands, the tourist product of Barbados is known primarily for its natural factor endowments such as the favorable sun, seas, and sand. Barbados is also recognized for its stable political environment, friendly people, rich history, and vibrant culture. Barbados' product is quite diverse in quality and quantity and, as of December 2009, contained 157 registered tourist accommodation establishments, including 63 hotels, 76 apartments, and 18 guesthouses, totaling 6,570 registered rooms, with many restaurants and other food and beverage facilities, natural attractions including underground caves and marine parks, historic sites, festivals, golf courses, and a range of other activities (Ministry of Tourism 2010, 7). The tourist product of Barbados has been arguably less gaudy and extractive than its Caribbean neighbors, due to building
128 restrictions and the high degree of local ownership. Hotels of Barbados are not the high rises seen in San Juan or Daytona Beach; most are low, often single story resorts and cottages with lush grou nds planted in flowering trees and shrubs (Gmelch 2003, 15). The United Kingdom has been Barbados' largest contributor of stay over visitors, representing 37.6 percent of total market share; leading the other major markets are USA 32.2%, CARICOM 20.8%, a nd Canada 8.7% (Ministry of Tourism 2006, vi). Tourism in Barbados has traditionally been for luxury and long stay visitors, but in the last twenty years, a very different type of tourism has emerged: cruise tourism. Cruise tourism became a considerable ac tivity for the Caribbean in the 1990s, and since 1992 cruise passengers have not only outnumbered traditional stay over tourists in Barbados, but cruise tourism has also displayed stronger growth performance than traditional stay over tourism. Tourism ha s brought great changes to Barbados and has been a main driver of economic growth since independence, providing substantial foreign exchange, employment for thousands, and important linkages that have served as a catalyst for development in other sectors. However, the absence of a strong tourism planning and policy framework in the early stages of Barbados' tourism development, has contributed to a range of environmental and social challenges that can be attributed, if only partially, to tourism development (Ministry of Tourism 2001, 8). While it is somewhat surprising that Barbados has lacked a formal tourism policy or regulatory framework due to the government's strong role in development planning since independence and the sheer importance of the industry Barbados is currently drafting a tourism plan which will be released as a White Paper sometime within the next year. The release of the White Paper
129 comes a decade after the 2001 Green Paper was first released as a discussion paper to identify, evaluate, and analyze current tourism policy on the island. While the White Paper will be the basis for a formal tourism policy Master Plan, it has taken the greater part of a century to begin drafting a formal tourism policy in Barbados. The lack of a regulatory framework has brought variant degrees of environmental and social distress to Barbados. Although environmental degradation may be easier to describe due to the less subjective nature of biological effects versus social effects, neither can be ignored. If t ourism is to be used as strategy of development for LDCs, these states must not replicate Barbados' extremely long deferral in creating a regulatory framework for tourism. With the knowledge and technology of today, it is unacceptable for the extent of env ironmental damage that has characterized the past to reoccur. Furthermore, the social effects of tourism are often abrasive to the host country and often spark feelings of exploitation among the local population. If tourism is to serve as a centerpiece f or development, it must be developed in such a manner as to meet the needs of visitors, conser ve national resources, protect fragile environments, and ensure the acceptance of and participation in tourism development efforts. Development and Change: Cost s and Benefits Due to the further travel distance and subsequent higher travel costs from both the metropole and the United States, early visitors to Barbados were quite wealthy and the industry initiated as a select, high end tourist destination. As ear ly as the 19 th Century, visitors began to frequent early sea side resorts that were developed primarily for their health giving properties dips in the sea were salubrious and were prescribed as general
130 pick me ups as well as for serious medical conditions ( Gmelch 2003, 3). In fact, guidebooks for Barbados often praise the island's tourism history as the location to which President George Washington brought his older brother, who suffered from tuberculosis. Wealthy North American and European tourists have h istorically seen the Caribbean as an ideal holiday destination due to the relatively safe disease and pest free environment, the fine and natural beauty, and the convenience of a common language, while still being an exotic,' foreign place, and Barbados was no exception. It was not until the late 1950s when the industry received an inceptive boom from advances in transportation technology and foreign investment that the market became accessible to a larger consumer base. The 1956 Hotel Aids Act launched foreign investment and many hotels were constructed. By t he 1960s tourism had expanded from an infant industry catering to a small number of discriminating visitors, to a product accessible to a much broader cross section of the North American market (Wor rell 1987, 15) However, Barbados still maintained the stature of a high end tourist destination with the majority of visitors staying in luxury or class A' hotels (Bryden 1973, 106). Although two thirds of the accommodation establishments are locally own ed today, the early development of the hotel industry in Barbados was marked by a high degree of foreign ownership with relatively little marketing and practically no governmental guidance or control (Greenidge 2005, 19). The government did not develop a s pecific tourism policy or plan, but rather addressed tourism through national development plans and physical development plans (Mycoo 2006, 487). Through development plans, fiscal incentives were granted in the Pioneer Industries Act in 1958 and the Hotel Aids Act in 1956 to spur tourism development by foreign investors by
131 using tax holidays and concessionary loans Through physical development plans, Barbados zoned land in 1970 to concentrate tourism development in particular zones and to protect environm entally sensitive areas and agricultural zones (Mycoo 2006, 497). As the industry thrived throughout the 1960s, greater initiatives were undertaken to increase the participation of local entrepreneurs in tourist accommodation with the 1973 amendment to the Hotel Aids Act. However, Valkeners highlights that local ownership was and remains largely concentrated to about five local white families. According to Valkeners, these families have provided important inputs to the tourism industry through their investm ents in shopping malls, duty free shops, and construction of marinas and apartment complexes. She highlights that these families understood the enormous possibilities of tourism at the break of the mass tourism era and for several generations they have bee n key owners of stores, warehouses, real estate, and land (2007, 146). Tourism kept Barbados afloat during the economic shocks of the 1970s and the government began to subsidize tourism marketing heavily. The average annual growth rate of tourist arrival s was 11 percent from 1970 to 1979. Barbados maintained its reputation as a high end tourist destination, and studies began to surface on certain aspects of tourism, such as linkages, leakages, and environmental effects: Zinder and Associates (1969) argued that the multiplier effect of one tourist dollar was 2.3 before the impact wore off through leakages; Bryden and Faver (1971) obtained a multiplier between 0.8 and 0.9 to describe the income to nationals for Antigua; Doxey (1971) estimated the leakage of tourist expenditure abroad was 42 percent (Howard 2006, 79). However, as Howard notes, all of these efforts were highly tentative because they were
132 not grounded on a clear definition of the tourism sector and the underlying data base was fragmentary (2006, 78). By the 1980s environmental problems began to receive more attention. Despite the zoning policies adopted in 1970s, Archer (1985) and Cambers (1985) found that tourism development led to substantial destruction of coal reefs, extensive beach sand los s, and costal water pollution as a result of inadequate regulatory foresight (Mycoo 2006, 498). Wilkinson (1997) highlights that even with recognition of the negative environmental impacts of tourism in the 1979 National Development Plan, policies such as the enforcement of maximum densities and building controls to mitigate costal erosion, and the provision of coastal conservation works, maintenance, and expansion of beach access failed. It was the 1988 National Development Plan that gave priority to the p revention of beach erosion, and the 1988 Physical Development Plan sought to discourage new hotel development on the heavily developed south and west coasts, while prohibiting such development on the east coast (Mycoo 2006, 498). The Physical Plan tried to reduce tourist sprawl and argued that before decentralizing tourism development, there should be more land use optimization through infilling in existing tourist zones, area renewal, conservation and enhancement of prime beaches, relocation of non tourist activity to accommodate expansion and infrastructural improvement, especially sewers (Mycoo 2006, 498). Environmental sensitivity is a major vulnerability of a SIDS. Water pollution from hotel sewage, dumping practices, and runoff from golf course fertil izers and pesticides all lead to the deterioration of coral reefs. Damage to coral reefs from pollution, boat anchors, and tourists partaking in underwater activities such as SCUBA
133 and snorkeling not only destroys an endangered ecosystem, but also leads to decreased fish populations and shoreline erosion, since reefs absorb wave energy and buffer shorelines from currents, waves and storms. Environmental effects from tourist expansion not only affect the quality of the tourist product, but also spread into o ther industries such as fishing, which has been a traditional local industry throughout the Caribbean. When there are environmental changes, more than likely there have been social changes, and by the late 1980s changes in the traditional pattern of Barba dian life were evident. The first four drug arrests in Barbados (for marijuana) occurred in 1971 just as mass tourism was getting underway three of the four individuals arrested for buying drugs were tourists (Gmelch 2003, 23). Since the late 1980s, ther e has been a tremendous rise in the presence of illegal drugs in Barbados, and today drug trafficking is considered one of the greatest threats to national security. In an ethnographic study on tourism and ethnic relations in Barbados, Valkeners (2007) hig hlighted several important social changes associated with the rise of mass tourism: (i) strong increase in the standard of living; (ii) real estate market transformation from local and informal to a commercialized worldwide business; (iii) infrastructural development (i.e., roads, ports, sanitary facilities), especially in tourist areas that enjoy buried overhead cables and street lights; (iv) altered working hours, which often means working on Sundays and foregoing church service and the elaborate Sunday F ood one of the few times families traditionally eat together, (v) increased work opportunities for women; (vi) local feelings of colonialization by tourism delivering a service is for many Bajans associated with servitude; (vii) cultural misunderstanding a nd impoliteness between tourists and locals;
134 (viii) and the rise of sex tourism and the beach boy phenomenon.'' Many of these social changes are an effect of the new employment opportunities in tourism. However, tourism employment should be regarded as a dual narrative. Not only were thousands of jobs created for about half of Barbados' labor force, which has led to the increase in living standards and new employment opportunities for women, but tourism employment also entails a gendered work environment t hat often reduces women's autonomy, the expanding sex and drug trade that has accompanied tourist expansion, and the frustrations of working in a seasonal, servile, and sexually exploitative service industry. In a survey study on gender and work in Barbado s' tourist industry, Levy and Lerch found multiple differences between male and female tourism workers. While men are generally unionized, occupy higher, more stable positions, receive more formal training, and are better paid, women workers have jobs that offer less job security, pay, and stability, which makes it more difficult to balance domestic and productive work roles (1991, 82). Although employment may offer a limited set of options for women, Levy and Lerch conclude that tourist employment does off er advantages over traditional agriculture or traditional unpaid work Furthermore, Levy and Learch offer options to enhance work related opportunities for women in the tourism employment, such as increased formal training, aggressive recruitment of women at the management level, flexible hours or scheduling to allow for more autonomy in the integration of work and home obligations, and pensions for retirement income (Levy and Lerch 1991, 83). Due to the different opportunities for men and women in tourism employment and tourism's core component of social encounters between hosts and guests, social change is practically inherent in tourism development. However, these changes will not
135 necessarily be negative, so long as feelings of acceptance, equal opportuni ty, and participation outweigh feelings of exploitation among locals and allocation of resources remains balanced. Access to resources remains a sensitive issue in Barbados. Among many of the social tensions between locals and tourists, issues have arise n over the problems of public access to beaches and th e allocation of scarce resources such as water. With the industry's rapid expansion, many seaside hotels blocked the view of the sea for large stretches of shoreline. Locals responded with the movement Windows to the Sea which sought to permanently establish a number of openings to the sea and guarantee public access, both physically and visually to co a stal regions (Mycoo 2006, 500). Although all beaches in Barbados are public, many hotels attempt to ci rcumvent this by erecting barricades, such as boulders, along the beach under the false argument that they are preventing beach erosion (Greenidge 2006, 39). Scarce water resources have also been an issue during tourism development. Tourist season inconven iently coincides with the dry season in the Caribbean, and with more than a million visitors arriving to Barbados each year, locals often face increased prices or restrictions on water usage during tourist season, while hotels and cruises take in tremendou s amounts of water. The Barbados Water Authority estimate that in 1978, Bajans used 10 gallons of water per day, while current use levels stands at 60 to 63 gallons a day for residents and 179 gallons a day for hotel guests (Drosdoff 2004). The increasing water supply deficits have forced the formal adoption and regulation of water demand. Starting in 1997, the government required all buildings, other than houses, that have a gross roof area of 93 square meters or more to install a rainwater storage tank fo r secondary uses (Mycoo 2006, 503).
136 However, as Mycoo highlights, these regulations do not apply to buildings predating the 1997 amendment that launched the policy. In the last twenty years, Barbados' tourist product has undergone profound changes: cruis e passengers now outnumber stay over tourists, tourism growth has slowed tremendously (and has often been negative in the last decade), and the all inclusive concept has become more and more popular among large hotels. While the all inclusive ( AI ) concept has remained limited in Barbados, it has definitely received mixed opinions. Tourists enjoy the relative ease of one prepaid package price that covers practically all aspects of the trip: airport transfers, all meals, accommodation, entertainment, drinks, alcoholic beverages, sports facilities, water sports, gratuities, and government taxes. However, there is a debate over the economic impact of the all inclusive packages on the economy. While some argue that AIs have better performance (indicated by occupa ncy rates) and strong economic benefits to the economy, others contend that AIs economic benefit is much less than that of traditional hotels due to extensive leakages. Gmelch points out, many Barbadian locals who are positive about tourism are deeply rese ntful of the all inclusive (2003, 11). Since the late 1980s, eleven of Barbados' large hotels have gone all inclusive, and several more are planning to follow (Gmelch 2003, 11). Gmelch argues that the AI impact on local businesses that are dependent upon a tourist clientele is devastating, since tourists have no need to leave the resort or spend money in the local economy. In the cruise industry, it is becoming more evident that the revenue earned from cruise tourists is inadequate relative to the level of investment spent on port infrastructure and the environmental costs (Ministry of Barbados 2010,16). While the economic effects of AIs may be debatable, simple policies
137 such as incentives or requirements to use local inputs would clearly enhance the local economy. Barbados has benefited from tourism's economic benefits for the greater part of a century. During the 1950s, 1960s, and 1970s, strong growth in the tourist industry provided Barbados with the employment, growth, and revenue to keep the economy a float during the shocks of the 1970s. The 1980s marked an important transitional period for Barbados' tourism industry: traditional stay over tourism began its steady decline in growth that would continue through to the present day; cruise tourism began to experience high growth; environmental, social, and cultural effects of tourism began to garner attention, and the stay over market was altered so that Europeans began to embody a greater share of tourist arrivals. These four trends have continued to the p resent day: by the end of the 1990s, cruise tourists outnumbered tourist arrivals, European tourists outnumbered American tourists, and the government began initiatives towards adopting a greater role in tourism planning by releasing the Green Paper in 200 1. The change to capture a greater European market share through increased marketing has been important in maintaining greater economic benefits through the maturing industry. In the immediate future, Barbados' tourism industry will need to make substanti al adjustments to prevent negative growth of tourist arrivals, maximize utility from popular cruise passengers, and strengthen efforts at reducing social and environmental externalities. While it is improbable that Barbados will experience the tourism grow th that characterized the industry's inceptive boom due to increased competition worldwide and market saturation, Barbados should focus on finding niche
138 markets and ways of increasing benefits on existing markets if it is to continue to depend upon tourism for economic growth. The Jamaican Tourist Product It is odd to think that Jamaica, a country with one of the highest per capita murder rates in the world, is a key tourist destination that is often marketed as a paradise.' Jamaica has shared many of the same benefits and frustrations with tourism development as Barbados, including conflicts of resource allocation, beach access, environmental degradation, gender issues, and social frictions between hosts and guests. While tourism is a substantial emplo yer and a largely unregulated macroeconomic contributor for Jamaica too, its tourist product is distinct in three ways: the dominance of the all inclusive hotel, the market composition dominated by American tourists, and greater arrivals for stay over tour ists than cruise passengers. Tourism in Jamaica is largely an enclave activity marked by all inclusive resorts, many of which are foreign owned. The 2009 Annual Travel Statistics published by the Jamaica Tourist Board (JTB) show that Jamaica has 62 all inclusive hotels with 15,313 rooms compared to 112 non all inclusive properties with 5,237 rooms including guesthouses, villas, and apartments (67). All inclusive hotels are the most dominant category of hotel based on room stock, and also have substantia lly higher occupancy rates throughout the year at 64.9 percent, relative to non all inclusive at 39.5 percent (JTB 2009, 64). The United States has been Jamaica's largest market share of visitor arrivals but in the last decade Jamaica has sought to diversi fy its tourist market towards visitors who will bring greater economic benefit to Jamaica through longer average stay
139 of nights. American visitors, on average, stayed 7.9 nights; Canadians stayed an average of 9.6 nights; and arrivals from the United Kingd om recorded an average length of stay of 16 nights (JTB 2009, xxii). Jamaica began formal tourism policy and planning earlier than Barbados with the 2002 release of a Tourism Master Plan. The critical objective of the Master Plan was to move the industry on to a path of sustainability through the achievement of five main objectives: (i) growth based on a sustainable market position, in line with market trends and based on Jamaica's heritage natural, cultural, historic, and built; (ii) enhancing the visito r experience by increasing the type and quality of attractions; (iii) enacting community based development with bottom up planning; (iv) promoting an inclusive industry that spreads the benefits of tourism more equitably and promotes gender equality; (v) s triving for environmental sustainability through the preservation of the natural habitat (2002). The release of this policy came after two decades of strong growth in visitor arrivals in the 1980s and 1990s (much due to the development of the all inclusive product) and the quick realization of the industry's weaknesses. Due to the nature of the enclave, all inclusive resort tourism, the wider tourist product outside of the hotels is poor. The paradox of enclave tourism becomes evident: while enclaves develo p a specific area distinct in quality to attract tourists, the poor visitor experience outside the hotel deters visitors from coming due to the desire of a tourist product beyond a beach and a hotel. While the Master Plan is a step in the right direction the government has limited means in actually financing renewed tourist development with a public debt averaging
140 between 130 145 percent of GDP since the early 1990s; present development prospects have been suppressed under the weight of servicing this ma ssive debt (IMF 2006, 3). However, by partnering with the private sector, recent initiatives have been carried out and include: (i) the establishment of Resort Boards and special patrols in tourist areas to combat crime and harassment; (ii) infrastructural upgrading projects on the North Coast; (iii) investment in new hotels; (iv) and establishment of the Tourism Enhancement Fund to carry out improvement of the local tourism product in the island's main resort destinations and support implementation of othe r aspects of the Tourism Master Plan (JTB 2009, 21). While the Master Plan is clear in its intentions to use tourism as a "tool for economic and social uplifting of the people of Jamaica," a large obstacle to the redirection of Jamaica's tourism is not in reaching growth targets, but rather in changing the local attitude toward tourism (JTB 2002, 12) According to Bartlett, The difficulty today is that, after more than a century of tourism in Jamaica, the vast majority of our people continue to see the ind ustry as an enclave. We are continually being baffled by the fact that, despite the obviously positive macro economic benefit impact of the tourism industry [sic] social and community considerations continue to raise their heads and to create negative atti tude that intrude everywhere. They influence the quality of service and sometimes frustrate the plans of governments and investors for tourism development (2006, 18). While Bartlett sees the "difficulty" being the attitude adopted by the local population, local discontent with a tourism industry is not specific to Jamaica by any means. The deeper problem is grounded in the development of Jamaica's tourist product as an all inclusive enclave, which has produced adverse social impacts and a negative feedback from the community. Tourism development originated and remained concentrated in a handful of strips on the north side of the island, far away from the extensive poverty and
141 violence in Kingston. Due to the lack of a regulatory framework or adequate planni ng, suboptimal social conditions arose such as the exclusion from shorelines, environmental degradation, and rising levels of crime, sex tourism, and HIV/AIDS. In fact, by 1993, all but nineteen of the island's 488 miles of c oastline had been privatized (M iller 2006, 39 quoted in Goodwin 2008, 9). Unequal development and a bias towards promoting tourism despite the costs passed onto the local community need to be addressed. The Future of Tourism for Development There is no easy answer for how to make to urism a greater contributing factor in development for Barbados, Jamaica or the greater developing world. In the cases of Barbados and Jamaica, socioeconomic and environmental problems arose through the industry's rapid, unregulated expansion. Barbados exp erienced the tourism expansion in the 1950s, 1960s, and 1970s, while Jamaica's launching point should be considered in the decades of the 1980s and 1990s. While Jamaica's tourism development technically started in the 1950s and 1960s, it largely regressed during the 1970s under Jamaica's socialist experiment. The industry was resuscitated in the 1980s through the adoption of the all inclusive concept and the assistance of widespread marketing in North America. Due to the key social components of tourism, such as local food, music, environment, history, and culture, it is truly the local people who create the heart of the tourist product.' Therefore, the success of tourism for development is dependent upon the local people. Just as development needs to ce nter on the increased welfare of people over growth, the local people must be made the centerpiece when utilizing tourism for development, not visitor arrivals. While it is incorrect to claim that the reason why
142 tourism development has failed to be the cat alyst of socioeconomic development needed in Jamaica is the adoption of an enclave, all inclusive tourist product, it would also be a mistake to refute it. Jamaica's tourist product has affected national development to some degree, and it is largely visibl e through the negative externalities tourism development has exerted on national development. While the recent formation and enactment of Jamaica's Master Plan for Tourism appears to be a step in the right direction, policymakers must balance goals of tour ism development with national development, and they must start by placing the Jamaican people at the center of the development strategy. In order for tourism to succeed in Jamaica, it requires the permission of the people (Robinson, quoted in Bartlett 2006 17). While the local opinion of tourism may be pessimistic, policymakers need to realize how the costs of tourism development bred these negative feelings and take active measures to ensure regulation attempts to curb the social, environmental, and econo mic costs of tourism in the future. Such regulation requires the role of the state. Although this thesis is critical of the all inclusive, enclave tourist product, it recognizes the role these institutions can play in improving the tourist product. For e xample, all inclusives purchase more food and beverages than traditional hotels due to higher occupancy levels and the guaranteed provision of meals, snacks, and beverage as a prepaid package deal. If all inclusives use local inputs over foreign imports, l eakages would be greatly reduced and linkages would be strengthened. Actually, Jamaica could even benefit from increasing enclave tourism; however, it would be a different type of tourist: university students. By partnering with American colleges and unive rsities to create sister school associations or study abroad' programs, Jamaica could greatly
143 benefit from a new tourist demographic that is notoriously talented at spending money. The traditional semester abroad in a European country such as France and S pain is becoming financially impractical with a depreciating US dollar, and there could be a promising market opportunity in attracting university students to the Caribbean. Finding ways to work with existing conditions to increase social benefit is the art of policymaking, and the success of Jamaica's enrichment of tourism development will not only depend upon the acceptance of the local people, but also tactful policymaking. Due to the fiscal handicap of debt servicing, policymaking will be even more c hallenging and may depend on the success of private public partnerships and the revival of a domestic entrepreneurial class. While Jamaica still faces many challenges in managing tourism for national development, Barbados may be finding itself in a similar ly precarious position. Although Barbados has made impressive advancements in socioeconomic development over the past six decades, the island may be in a vulnerable position of being unable to maintain socioeconomic advancement if its two economic buoys f loat away: offshore finance and tourism. Offshore finance emerged as a new economic activity in the 1990s and soon became second to tourism in economic importance. Although Barbados claims it is a low tax regime, not a tax haven, recent sanctions from the United States, the European Union, and the Organization for Economic Cooperation and Development have announced recently crackdown on tax evasion and money laundering. How the offshore finance industry will fare in the next few years may depend largely on these external sanctions.
144 The financial sector rose to importance as the growth in tourist arrivals began to contract. Barbados managed to offset the economic loss of decreased growth by attracting a greater percentage of European tourists, specifically from the UK. These tourists tend to bring greater economic benefits as long stay, luxury tourists. However, as Barbados saw an increase in the European market share, it also saw an increase in cruise tourism. The popularity and affordability of cruise tour ism coupled with increased market competition from new tourist destinations springing up worldwide, may force great changes on Barbados's tourist product. Cruise tourism fails to generate enough revenue to offset the high costs of port infrastructure. The swelling of cruise passengers is putting stress on local resources and the environment, and it may even negatively affect traditional stay over tourist arrivals if Barbados continues to receive such quantities of cruise passengers. If Barbados wants to con tinue to depend upon tourism for economic growth and development, it cannot merely depend on increasing arrivals, but must encourage increased spending among visitors, so as to maximize tourism's contribution to the economy. According to the Barbados' Mini stry of Tourism, the number of visitor arrivals, both long stay and cruise, currently exceed carrying capacity. Efforts must be channeled into finding ways to attract high value tourism to limit the need for increased arrivals. Such efforts will require co ordinated tourism policy and planning, something Barbados has failed to address since the industry's inception in the 1950s. While an official tourism framework is currently being drafted, how Barbados will respond to the current social, economic, and envi ronmental deficiencies and apply a state driven policy reform to its tourism industry may result in an ideal design or an ineffective disappointment. States attempting to pursue development initiatives by
145 developing a tourism industry should be paying clos e attention to Barbados to see how this small island will manage and reform its tourist product with the challenge of tourism dependency. Will Barbados continue to serve as a model for small island developing states?
146 An nex 1 Macroeconomic Indicators for Barbados and Jamaica Annual Economic Growth (%) 1960 2009 Barbados Jamaica Barbados Jamaica Year GDP growth (annual %) GDP per capita growth (annual %) GDP growth (annual %) GDP per capita growth (annual %) Year GDP growth (annual %) GDP per capita growth (annual %) GDP growth (annual %) GDP per capita growth (annual %) 1960 .. .. .. .. 1985 0.5 0.o 2.9 4.3 1961 7.7 7.4 .. .. 1986 9.4 8.9 1.9 0.8 1962 9.1 8.6 .. .. 1987 1.0 0.5 7.9 7.2 1963 5.1 5.5 .. .. 1988 6.3 5.8 4.0 3.7 1964 5.0 4.6 .. .. 1989 5.0 4.7 7.2 6.3 1965 11.4 11.0 .. .. 1990 4.8 5.0 4.2 3.5 1966 4/0 3.7 .. .. 1991 2.9 3.0 4.8 4.1 1967 10.6 10.4 1.8 0.6 1992 5.0 5.0 2.0 1.2 1968 6.9 6.7 5.7 4.6 1993 1.0 1.1 9.4 8.6 1969 7.5 7.2 5.6 4. 4 1994 4.0 4.2 1.4 0.6 1970 9.5 9.1 12.1 10.6 1995 1.5 1.9 2.3 1.5 1971 3.9 3.4 2.5 1.0 1996 1.8 2.3 0.1 1.3 1972 1.3 0.7 18 16.2 1997 6.4 7.0 1.1 2.1 1973 1.3 0.7 5.5 7.0 1998 4.1 4.7 2.3 3.2 1974 4.7 5.2 4.2 5.7 1999 2.6 3.1 1.0 0.4 197 5 4.0 3.5 0.3 1.6 2000 2.3 2.7 0.9 0.3 1976 0.1 0.4 6.7 7.8 2001 5.1 4.9 1.3 0.7 1977 4.4 4.1 2.6 3.6 2002 3.5 3.6 1.0 0.5 1978 6.1 5.9 0.1 1.1 2003 .. .. 5.0 4.7 1979 7.7 7.4 1.1 2.2 2004 .. .. 1.4 0.9 1980 4.7 4.4 5.7 7 2005 .. .. 1.0 0.6 1981 3.2 3.6 2.6 1.2 2006 .. .. 2.7 2.2 1982 5.0 5.4 2.1 0.3 2007 .. .. 1.4 0.9 1983 0.2 0.3 1.9 0.1 2008 .. .. 0.5 1.0 1984 3.4 2.9 1.5 3.2 2009 .. .. 3.0 3.5 Source: World Bank Indicators, 2010.
147 Annex 1 Macroeconomic Indicators for Barbados and Jamaica (cont.) Total Unemployment 1980 2009 (% of total labor force) Source: World Bank Indicators, 2010 Barbados Jamaica 1980 11.4 27.3 1981 10.8 25.0 1982 13.7 26.7 1983 15.0 26.4 1984 17.1 25.6 1985 18.7 25.0 1986 17.9 23.7 1987 17.9 21.0 1988 17. 6 18.9 1989 14.1 16.8 1990 15.0 15.7 1991 17.1 15.7 1992 22.9 15.4 1993 25.6 16.3 1994 23.0 15.4 1995 19.7 16.2 1996 14.7 16.0 1997 14.6 16.5 1998 12.3 15.5 1999 10.4 15.7 2000 9.3 15.5 2001 9.8 15.0 2002 10.3 14.3 2003 11.0 11.7 2004 9.8 1 1.4 2005 9.1 10.9 2006 8.7 9.6 2007 7.4 9.4 2008 8.1 10.6 2009 11.4
148 Annex 1 Macroeconomic Indicators for Barbados and Jamaica (cont.) Inflation, Consumer Prices (annua l %) Barbados Jamaica 1961 6.7 1962 1.4 1963 1.8 1964 2.0 1965 2.6 1966 1.9 1967 3.6 3.0 1968 7.5 5.9 1969 5.8 6.3 1970 7.3 14.7 1971 7.5 5.3 1972 11.9 5.4 1973 16.9 17.7 1974 38.9 27.2 1975 20.3 17.4 1976 5.0 9.8 1977 8.4 11.2 1 978 9.5 34.9 1979 13.2 29.1 1980 14.4 27.3 1981 14.6 12.7 1982 10.3 6.5 1983 5.2 11.6 1984 4.7 27.8 1985 3.9 25.7 1986 1.3 15.1 1987 3.3 6.7 1988 4.9 8.3 1989 6.2 14.3 1990 3.1 22.0 1991 6.3 51.1 1992 6.1 77.3 1993 1.1 22.1 1994 0.1 35.1 1 995 1.9 19.9 1996 2.4 26.4 1997 7.7 9.7 1998 1.3 8.6 1999 1.6 6.0 2000 2.4 8.2 2001 2.6 7.0 2002 0.1 7.1 2003 1.6 10.3 2004 1.4 13.6 2005 6.1 15.3 2006 7.3 8.6 2007 4.0 9.3 2008 8.1 22.0 2009 3.6 9.6 Source: World Bank Indicators, 2010
149 Annex 2 Growth of Arrivals in Barbados 1956 2009 Total Tourist Arrivals % Growth Total Cruise Passenger Arrivals % Growth Total Visitor Arrivals % Growth 1956 17,829 .. 12,391 .. 30,220 .. 1957 23,773 33.3 10,802 12.8 34,575 14.4 1958 24,945 4.9 12, 145 12.4 37,090 7.3 1959 30,249 21.3 17,044 40.3 47,293 27.5 1960 35,535 17.5 24,172 41.8 59,707 26.2 1961 37,060 4.3 26,943 11.5 64,003 7.2 1962 44,058 18.9 24,658 8.5 68,716 7.4 1963 50,597 14.8 27,184 10.2 77,781 13.2 1964 57,625 13.9 41,671 53.3 99,296 27.7 1965 68,418 18.7 52,664 26.4 121,082 21.9 1966 79,104 15.6 51,593 2.0 130,697 7.9 1967 91,565 15.8 45,451 11.9 137,016 4.8 1968 115,697 26.4 75,981 67.2 191,678 39.9 1969 134,303 16.1 80,899 6.5 215,202 12.3 1970 156,417 16.5 79,635 1 .6 236,052 9.7 1971 189,075 20.9 79,159 0.6 268,234 13.6 1972 210,349 11.3 100,086 26.4 310,435 15.7 1973 222,080 5.6 116,469 16.4 338,549 9.1 1974 230,718 3.9 119,524 2.6 350,242 3.5 1975 221,486 4.0 98,546 17.6 320,032 8.6 1976 224,314 1.3 99,4 06 0.9 323,720 1.2 1977 269,314 20.1 103,077 3.7 372,391 15.0 1978 316,883 17.7 125,077 21.3 441,960 18.7 1979 370,916 17.1 110,073 12.0 480,989 8.8 1980 369,915 0.3 156,461 42.1 526,376 9.4 1981 352,555 4.7 135,782 13.2 488,337 7.2 1982 303,795 13.8 110,753 18.4 414,548 15.1 1983 328,338 8.1 102,519 7.4 430,857 3.9 1984 367,652 12.0 99,166 3.3 466,818 8.3 1985 359,135 2.3 112,222 13.2 471,357 1.0 1986 369,770 3.0 145,335 29.5 515,105 9.3 1987 421,859 14.1 224,778 54.7 646,637 25.5 19 88 451,482 7.0 290,993 29.5 742,475 14.8 1989 461,259 2.2 337,100 15.8 798,359 7.5 1990 432,092 6.3 362,611 7.6 794,703 0.5 1991 394,222 8.8 372,140 2.6 766,362 3.6 1992 385,472 2.2 399,702 7.4 785,174 2.5 1993 395,979 2.7 428,611 7.2 824,590 5.0 1994 425,623 7.5 459,502 7.2 885,125 7.3 1995 442,107 3.9 484,670 5.5 926,777 4.7 1996 447,083 1.1 509,975 5.2 957,058 3.3 1997 472,290 5.6 517,888 1.6 990,178 3.5 1998 512,397 8.5 506,610 2.2 1,019,007 2.9 1999 514,614 0.4 432,854 14.6 947,468 7 .0 2000 544,696 5.8 533,278 23.2 1,077,974 13.8 2001 507,078 6.9 527,597 1.1 1,034,675 4.0 2002 497,899 1.8 523,253 0.8 1,021,152 1.3 2003 531,211 6.7 559,119 6.9 1,090,330 6.8 2004 552,502 4.0 721,270 29.0 1,273,772 16.8 2005 547,534 0.9 563, 588 21.9 1,111,122 12.8 2006 562,558 2.7 539,092 4.3 1,101,650 0.9 2007 572,937 1.8 616,354 14.3 1,189,291 8.0 2008 567,667 0.9 597,523 3.1 1,165,190 2.0 2009 518,564 8.6 635,746 6.4 1,154,310 0.9 Source: Barbados Ministry of Tourism; CARICOM Regional Statistics.
150 Annex 3 Growth of Arrivals in Jamaica 1956 2009 Total Tourist Arrivals % Growth Total Cruise Passenger Arrivals % Growth Total Visitor Arrivals % Growth 1956 118,130 .. 43,798 .. 164,790 .. 1957 115,004 2.6 46,660 6.5 162,692 1. 3 1958 122,624 6.6 47,688 2.2 175,678 8.0 1959 144,652 18.0 53,054 11.3 214,253 22.0 1960 226,945 56.9 69,601 31.2 296,352 38.3 1961 224,492 1.1 69,407 0.3 289,346 2.4 1962 206,838 7.9 64,854 6.6 276,212 4.5 1963 202,329 2.2 69,374 7.0 272,129 1.5 1964 232,190 14.8 69,800 0.6 288,663 6.1 1965 190,013 18.2 56,473 19.1 256,819 11.0 1966 228,141 20.1 66,806 18.3 296,597 15.5 1967 235,025 3.0 68,456 2.5 329,046 10.9 1968 258,460 10.0 94,021 37.3 355,837 8.1 1969 276,929 7.1 97,377 3.6 363 ,176 2.1 1970 309,122 11.6 86,247 11.4 375,488 3.4 1971 359,323 16.2 66,366 23.1 430,773 14.7 1972 407,806 13.5 71,450 7.7 499,256 15.9 1973 418,257 2.6 91,450 28.0 510,932 2.3 1974 432,987 3.5 92,675 1.3 583,420 14.2 1975 395,809 8.6 150,433 62.3 537,303 7.9 1976 327,706 17.2 141,494 5.9 448,688 16.5 1977 264,921 19.2 120,982 14.5 413,565 7.8 1978 381,818 44.1 148,644 22.9 541,395 30.9 1979 426,540 11.7 159,577 7.4 559,963 3.4 1980 395,340 7.3 133,423 16.4 535,012 4.5 1981 406,355 2.8 139,672 4.7 600,785 12.3 1982 467,763 15.1 194,430 39.2 677,916 12.8 1983 566,151 21.0 210,153 8.1 797,190 17.6 1984 603,436 6.6 231,039 9.9 864,944 8.5 1985 571,713 5.3 261,508 13.2 850,220 1.7 1986 663,593 16.1 278,507 6.5 955,749 12.4 1987 7 38,827 11.3 292,156 4.9 1,106,559 15.8 1988 648,873 12.2 367,732 25.9 1,092,927 1.2 1989 829,288 27.8 444,054 20.8 1,214,493 11.1 1990 989,275 19.3 385,205 13.3 1,479,748 21.8 1991 1,006,804 1.8 490,473 27.3 1,656,321 11.9 1992 1,057,182 5.0 649,51 7 32.4 1,686,769 1.8 1993 1,105,382 4.6 629,587 3.1 1,700,418 0.8 1994 1,098,287 0.6 595,036 5.5 1,703,465 0.2 1995 1,147,001 4.4 605,178 1.7 1,805,179 6.0 1996 1,162,449 1.3 658,178 8.8 1,874,148 3.8 1997 1,192,194 2.6 711,699 8.1 1,865,884 0.4 1998 1,225,287 2.8 673,690 5.3 1,989,628 6.6 1999 1,248,397 1.9 764,341 13.5 2,156,008 8.4 2000 1,322,690 6.0 907,611 18.7 2,163,027 0.3 2001 1,276,516 3.5 840,337 7.4 2,141,935 1.0 2002 1,266,366 0.8 865,419 3.0 2,398,962 12.0 2003 1,350,285 6.6 1,132,596 30.9 2,450,058 2.1 2004 1,414,786 4.8 1,099,773 2.9 2,550,629 4.1 2005 1,478,663 4.5 1,135,843 3.3 2,815,657 10.4 2006 1,678,905 13.5 1,336,994 17.7 2,858,409 1.5 2007 1,700,785 1.3 1,179,504 11.8 2,793,048 2.3 2008 1,767,271 3.9 1,092,2 63 7.4 2,689,620 3.7 2009 1,831,097 3.6 922,349 15.6 2,753,446 2.4 Source: Jamaica Tourist Board Statistics; CARICOM Regional Statistics.
151 Annex 4 Tourism's Economic Contribution for Barbados and Jamaica 1988 2010 Barbados Direct Contribution to GDP % share Total Contribution to GDP % share Direct Contribution to Employment % share Total Contribution to Employment % share Capital Investment % share 1988 13.4 39.2 13.4 38.6 2.2 1989 13.8 40.7 13.8 40.2 4.4 1990 13.0 39.1 12.9 38.3 6.5 1991 12.2 36.6 12.1 35.8 6.4 1992 13.5 41.6 13.2 40.3 7.4 1993 14.7 45.6 14.4 44.1 8.7 1994 15.9 48.9 15.7 47.6 9.6 1995 15.5 43.9 15.3 42.7 24.5 1996 15.1 48.9 15.0 47.5 29.8 1997 13.7 46.4 13.7 45.0 35.3 1998 12.9 42.6 13.0 41.7 22.7 1999 11.9 39.3 12.1 38.6 1 6.5 2000 12.9 41.5 13.1 40.9 13.2 2001 12.6 41.0 12.7 40.3 14.9 2002 12.3 41.6 12.4 40.7 19.5 2003 12.8 42.6 13.0 41.9 20.8 2004 12.6 41.6 12.8 41.0 18.1 2005 13.8 44.5 14.1 44.2 16.3 2006 15.3 48.6 15.8 48.6 15.0 2007 16.0 50.8 16.6 50.9 15.0 200 8 14.9 47.9 15.5 47.9 15.4 2009 13.8 45.7 14.2 45.3 16.4 2010 14.1 46.6 14.4 46.2 17.9 Source: WTTC Statistical Database. Jamaica Direct Contribution to GDP % share Total Contribution to GDP % share Direct Contribution to Employment % share Total Contr ibution to Employment % share Capital Investment % share 1988 7.9 23.0 7.1 21.0 2.2 1989 7.2 21.7 6.5 19.7 3.4 1990 8.5 24.9 7.7 22.8 6.2 1991 9.2 27.5 8.3 25.2 5.9 1992 10.2 30.2 9.2 27.7 6.4 1993 8.8 26.4 8.0 24.2 5.3 1994 9.2 27.4 8.4 25.1 5.0 1 995 8.3 25.3 7.5 23.2 7.7 1996 7.6 24.5 6.9 22.4 10.5 1997 7.3 23.9 6.6 21.8 13.8 1998 7.6 25.4 6.8 23.2 11.1 1999 7.9 25.5 7.2 23.3 8.2 2000 8.1 24.9 7.3 22.8 5.3 2001 7.6 23.6 6.9 21.5 5.8 2002 7.1 23.0 6.4 21.0 5.5 2003 8.2 24.5 7.4 22.4 7.1 20 04 8.3 26.4 7.6 24.2 6.4 2005 7.9 25.6 7.2 23.4 6.8 2006 8.6 26.7 7.8 24.5 5.3 2007 8.2 25.7 7.5 23.5 6.4 2008 7.9 24.3 7.2 22.2 9.6 2009 8.4 26.7 7.6 24.4 10.3 2010 7.6 24.4 7.2 22.9 9.3 Source: WTTC Statistical Database.
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