Anthropologist Marshall Sahlins has argued that, seen from a global perspective, the economic history of the Caribbean can be conceived as the history of European cultures’ obsession with “soft drugs,” mainly coffee, tobacco and sugar, but especially the latter. In fact, after the end of the idea of building an economy based on exporting metals during the early colonial period, much of the Caribbean economic history between the 18th and 20th centuries was based on the production of those soft drugs for consumption in European markets. Perhaps no other business has been more lucrative than those that found their markets in the western world and no other product was capable of generating the demand and profitability in European markets as were the so-called soft drugs. The same could be said today of the hard drugs (such as cocaine, heroin), which are also produced mainly in developing countries to meet the demands of consumers in developed countries.

In any case, the history of the Caribbean can also be seen as a history of experimentation by the West with economic models that had never before been put into practice. In that sense, the Caribbean zone can be seen as an excellent natural laboratory used by the western colonial powers to test methods of producing and distributing various goods. The geography of the islands provided ideal conditions (a contained and small setting where the variables could be more easily controlled and manipulated) for experimentation with new models of this kind. The Caribbean was, for example, the laboratory where the system of sugar plantations using slave labor imported from Africa was put to the test. In more recent times, it was also the laboratory where the most ambitious models of industrialization, modernization and the elimination of poverty in the history of humanity were put to the test, in many cases framed by a high level of utopianism. Many of these projects, in fact, were aimed at discovering “economic miracles” that could be imported to other parts of the world and the utopian nature of these projects is perhaps not separate from the utopianism underlying other projects in the history of the Caribbean during the colonial era, such as the search for the city of El Dorado or the Fountain of Youth. It was about finding a production model that would produce the greatest possible quantity of goods at the lowest possible cost and in the shortest possible period of time and, because it would not otherwise be possible, without the problem of worker revolts that had occurred in Europe. The Caribbean, as U.S. anthropologist Sidney Mintz has argued, was capitalist before the world was capitalist and was global [Mintz uses this term in an economic sense, as a synonym for globalization of markets or neoliberalism] long before the world was global.

The 20th century is full of examples of economic projects put into practice in the Caribbean in experimental form with the goal of creating economic miracles. One such project was the economic reform installed by Rexford Guy Tugwell on the island of Puerto Rico during the era after the Great Depression of 1929. The Caribbean economies had suffered form the economic impact of the Depression and a large sector of the population lived in poverty, unemployment and underdevelopment. Social unrest and the threat of labor protests (particularly among sugar cane cutters) were the order of the day. When Franklin D. Roosevelt was elected U.S. president, he created what was called his Brain Trust, consisting of three of the nation’s leading economists: Rexford Tugwell, Raymond Moley and Adolph A. Berle, Jr. They played a key role in the creation and implementation of the New Deal during the period from 1931 to 1936. Later, Tugwell was named governor of Puerto Rico, a post he held from 1941 to 1946. Tugwell found a territory submerged in poverty and unemployment. Tugwell was a liberal economist and reformist and was the most radical member of Roosevelt’s Brain Trust. On several occasions he was accused of being socialist. He believed in government intervention to contain the excesses of capitalism toward the mass of workers and, as an expert in agricultural economy, his ideology was tied to his concerns for the rural working class, poverty and underdevelopment in general. This led to one of the most ambitious projects to modernize an underdeveloped country that had been undertaken to that point in the Caribbean. This effort’s strategic influence would be felt throughout the Caribbean region. In his vision of economic reform for Puerto Rico, the issues of land ownership and distribution and agricultural reform played a central role. In fact, Tugwell had visited Puerto Rico before he became governor as a representative of the U.S. Department of Agriculture in 1934, when economic reforms were implemented that included the famous “500 acres law,” which limited the amount of land an individual could hold as private property.

Tugwell’s policies would be continued by later administrations after he left as governor of Puerto Rico, and many of his ideas informed the major economic reform proposals of the administration of the first democratically elected Puerto Rico governor, Luis Muñoz Marín. The series of initiatives was collectively known as Operation Bootstrap. The intent was to bring about a transition from an economy based on agriculture to one based on manufacturing and industries such as needlework, tuna processing, pharmaceuticals, and high technology, with the goal of providing jobs to the unemployed workers who were likely to revolt.

During the era of Tugwell and Operation Bootstrap, Puerto Rico was often pointed out as an economic miracle that could serve as a model for other underdeveloped nations, but both in Puerto Rico and in the other Caribbean countries, poverty and social unrest persisted. And it was just this poverty and social unrest that motivated another of the most ambitious and utopian economic projects in the history of the region: the Cuban Revolution of 1959.

One effect of the prolonged persistence of the communist government on the island was to transform the Caribbean region into an experimental zone where ideological and economic debates played out between the left and the right, between socialism and capitalism. In such a small place as Puerto Rico or Cuba – the former, an unincorporated territory of the United States, the most capitalistic country in the world, and the latter, the country with the greatest state intervention in economic issues in the world – it was nearly inevitable that the ideological debate would spread throughout the Caribbean region, and it still does today. These ideological struggles and the experimental and utopian projects that they produce also left an unmistakable mark on the academic literature related to economic themes by social scientists and economists and generated theorization and the development of new concepts, models, theories and ways of thinking. The Caribbean thus became the site where many of the great economic debates of the 20th century emerged. It was in the Caribbean that economist Kari Polanyi Levitt conducted his studies of development and industrialization in the 1970s. It was also in the Caribbean that U.S. sociologist Oscar Lewis developed his theory of a “culture of poverty,” a study about the cultural patterns that conditioned the economic behavior of Caribbean subjects. When conditions such as poverty and unemployment extend for long periods of time, Lewis argued, the anti-labor behavior of unemployed subjects settles into the culture, where it is later passed on from generation to generation. Therefore, according to Lewis’ theory, anti-labor behavior and the “culture of poverty” will remain present in the population even when the structural conditions that caused the unemployment disappear. Further, the Caribbean has also been the setting where multiple anthropological studies have been done about the economic behavior of populations descended from slaves and poor rural laborers in general. It was in the Caribbean that anthropologists Julian Steward, Eric Wolf and Sidney Mintz introduced the perspective of the political economy into the anthropological debate and where Mintz developed his theory of the corporate land-and-factory combine. It was also where anthropologist Lambros Comitas developed his theory of “occupational multiplicity.” The concepts of both Mintz and Comitas were destined to document the hybrid forms of labor and political participation assumed by rural workers in the transition from pre-capitalist to capitalist modes of production.

These ideological struggles also spread through the Lesser Antilles and left a mark on academic research and literature. In fact, these academic debates were most intense in the small islands, particularly in the British islands, and especially among a handful of economists at the University of the West Indies, particularly on the Mona campus in Jamaica and St. Augustine in Trinidad and Tobago. The list of Caribbean economists from this subregion is a long one and includes intellectuals educated at the most prestigious schools in Britain, such as the London School of Economics and Oxford University, several of whom were knighted by British royalty and one, Sir William Arthur Lewis, of St. Lucia, won the Nobel Prize in Economics in 1979. Among these economists were Sir Meredith Alister McIntyre (Grenada), Eric Eustace Williams (Trinidad and Tobago), Lloyd Algernon Best (Trinidad and Tobago), Eric St. Cyr (Grenada), William Gilbert Demas (Trinidad and Tobago), Clive Yolande “C.Y.” Thomas (Guyana), Dennis A. Pantin (Trinidad and Tobago), and Havelock R. Brewster (Guyana). Important theories in contemporary economic thinking emerged from this group of economists, who also reflected the major economic concerts in the small islands. Among these were the theories by Eric Eustace Williams on the effects of slavery and about the reasons for abolition. Williams made two main arguments in his work: first, that the British Industrial Revolution was made possible by slavery and the exploitation of the colonies; and second that slavery and the slave trade were abolished only when the economic benefits of plantation and slave economies were no longer profitable, thus contradicting the theories that credited the moral, humanitarian or altruistic ideals of the British. Slavery eventually became an obstacle for the development of paid labor under industrial capitalism and that was the true reason that slavery was abolished, Williams argued. These ideas were later developed in his best-known work, titled Capitalism and Slavery, published in 1944 by the North Carolina University Press.

Another outstanding member of this group was Sir William Arthur Lewis, who based his dual sector model, also known as the “Lewis model,” on the Caribbean populations in the Lesser Antilles and won the Nobel Prize in Economics in 1979. According to the Lewis model, when a nation experiences a transition from a traditional, archaic, subsistence or pre-capitalist economy to a capitalist or industrial economy, the transition is marked by a division between two social sectors: a pre-capitalist sector and a capitalist sector. The pre-capitalist sector becomes an almost unlimited source of labor, which allows the capitalist sector to increase earnings without having to increase workers’ pay. The capitalist sector will continue to add more workers from the pre-capitalist sector until a point is reached where the labor surplus disappears. This inflection point is known as the “Lewisian turning point.”

Another of the great theories developed in the British Lesser Antilles was developed by Lloyd Algernon Best, father of plantation economy theory, which established that the basic structures of the sugar plantation economy during the era of slavery remained unaltered in the contemporary capitalist economies of the Caribbean. The plantation economy theorists (including Eric St. Cyr) were interested in understanding the legacy of the plantation system in contemporary Caribbean economies. In his 1968 foundational essay on the topic, titled “Outlines of a Model of the Pure Plantation Economy in the journal Social and Economic Studies” (Vol. 17, No. 3: 283–323), Lloyd argued that “The legacy of institutions, structures and behaviour patterns of the plantation system are so deeply entrenched that adjustment tends to take place as an adaptation within the bounds of the established framework.” These structures and patterns of behavior, say Lloyd and his colleagues, keep the Caribbean economies trapped and act as obstacles to change. Therefore the figure of the escaped slave was reclaimed as the symbol of the culture of resistance and as a fundamental hope for change from within the system. The culture of resistance of the escaped slave was mainly reflected in what Lloyd called the “residentiary sector,” or in the residential production activity that emerged after the abolition of slavery. In fact, plantation economy theory departed from Arthur Lewis’ model precisely due to the fact that it tried to find in this residentiary sector the potential for changing the prevailing structures. The Lewisian turning point presumes that the workers will submissively integrate into the formal labor market without resisting or playing a role in the process.

At the same time, the plantation economy theorists also tried to show the continuity and reproduction of the traditional structures of the plantation economy in central economic sectors of contemporary Caribbean economies, such as petroleum, gas, bauxite, bananas, sugar and tourism. Factors such as the fact that natural resources continue to be controlled by foreign investors or that the earnings of these foreign investors are repatriated to their home countries, among others, demonstrate the structural similarities between multinational corporations and the sugar plantations and slaves. Similar to the plantation economy theorists, economist C.Y. Thomas of Guyana would argue that the “means of production” of the plantation economy and slaves did not disappear with the abolition of slavery and that the basic structure is still present in those countries.

Because of their small size, the British islands also served as the stage for debates about the peculiarities of the economies of small islands or countries, which emphasized their geographic condition (small size), over cultural and historical factors, as the determining factor in the possibilities for economic growth and development in the era of globalization. The concern over “the small” was seen as early as the 1960s when William Gilbert Demas (in 1966) published his best-known work, The Economics of Development in Small Countries with Special Reference to the Caribbean. But the same concern still exists today and was a central theme of the work by Havelock R. Brewster and Anthony Hughes, Lowering the Threshold, published in 2002. It addressed the problems faced by the smallest, most vulnerable underdeveloped economies in the struggle to attract foreign capital in the era of globalization. The work also showed the ever-present, sometimes pessimistic concern about what they saw as the competitive disadvantages imposed on small nations in the era of globalization, as well as a proposal for overcoming the problem through regional integration.

In any event, the Cuban Revolution also had important effects on the political scene, which led to important economic consequences. One effect of the continual presence of a revolutionary government in Cuba since 1959 was a growing influence of Marxist-communist ideology in the Central America and Caribbean region, as well as the rise of pro-Cuban leaders in the Caribbean and Central America during the 1970s, such as Michael Manley and Edward Seaga in Jamaica and Maurice Bishop in Grenada, but even more importantly, the successful Sandinista Revolution in Nicaragua in 1979 and the emergence of the Marxist guerrilla group, the Farabundo Martí National Liberation Front in neighboring El Salvador during the early 1980s. (In more recent times, there is the Bolivarian Revolution led by Hugo Chávez in Venezuela and the revolutionary government that has regained power in Nicaragua through democratic means). The United States remained interested in counteracting the Cuban and Soviet influence in the region, but only in extreme cases did it use military means to achieve that objective. Economic measures were adopted to fight poverty and unemployment and to win support for anti-Soviet policies. In the context of this ideological struggle, the United States created the Caribbean Basin Initiative (CBI) in 1983 and the Free Trade Area of the Americas (FTAA) in 2010, which created a free trade zone with customs preferences equal to those of Mexico and Canada under the North American Free Trade Agreement (NAFTA). These initiatives have had an impact on the economic development of at least 24 countries in the Caribbean region. It was also in the context of this ideological struggle that Cuba and Venezuela created initiatives such as the Bolivarian Alliance for the Peoples of Our Americas-Peoples Trade Treaty (ALBA-PTC, for its Spanish acronym) in 2004 and Petrocaribe in 2005 — both initiatives aimed at counteracting the influence of the United States through policies aimed at fighting poverty and social exclusion. The Petrocaribe initiative created an energy cooperation agreement between Venezuela and 14 countries in the Caribbean Basin under which Venezuela allotted the member countries up to 185.000 barrels of oil a day under preferential financing terms.

Perhaps one of the most important economic challenges that many Caribbean economies face today is their high dependence on export products. Export products account for about 70 percent of the total gross domestic product (GDP) of the Greater Antilles and more than 50 percent of the exports are raw materials, such as petroleum and metals — Cuba’s two largest export products, in that order. But there are problems with the export portfolios: a high dependence on export products along with low diversification (both in products and in buyers). A high level of dependence on export products, especially raw materials, is one of the reasons that some economists classify the Caribbean economies as “vulnerable” or “at risk.”

Remittances from family members living abroad also play an important role as a source of income for Caribbean economies. The leading country in remittances is Cuba, where the amount is estimated to reach between $800 million and $1 billion per year (in an $18 billion a year economy). Remittances provide nearly 60% of the Cuban population with access to U.S. dollars.

Tourism has been one of the few industries that have shown sustained growth since the 1970s and has come to play a central role in many of the Caribbean island economies. One of the major impacts of the Cuban Revolution, in this case an unintended impact, was the displacement of tourists from the United States to other islands in the Caribbean. Tourism income also represents the largest source of revenue in the region as a whole, beyond that generated by petroleum, offshore banking or any other source of income. In the U.S. Virgin Islands, for example, tourism represents more than 70% of gross national product (GNP) and provides more than 70% of jobs. In general, tourism accounts for approximately 30% of the GNP of the Caribbean region as a whole. In countries such as Cuba, by the middle of the 1990s the revenues from the tourism industry surpassed those from sugar. The same pattern can be seen for the region as a whole.

The introduction of tourism, however, has not brought about the desired improvement in terms of hiring of human resources or reducing unemployment. The transition from economies based on agriculture to economies based on manufacturing and service industries (tourism), as well as the opening of markets through free trade agreements (NAFTA, CARICOM, CBI, etc.), has revealed the lack of skills and training in broad sectors of the island populations and has created a huge mass of unskilled, unemployed or underemployed workers and sectors that are highly dependent on aid from the welfare state or on payments sent home by emigrants abroad. In fact, some economists argue that the creation of open markets (such as NAFTA) has had a negative effect on Caribbean economies and has revealed the problem of training and competitiveness of human resources. The opening of markets has resulted in increased levels of poverty, unemployment and sharp social inequality. Rates of social inequality and unequal distribution of wealth in the Caribbean islands continue to be among the highest in the world and poverty and unemployment continue to be a central problem in many Caribbean economies. The most drastic case in the region is that of Haiti, were 80 percent of the population lives below the poverty level and the unemployment rate is 40.6%, followed by Dominica at 25.0% (2002 data). For this reason, many economists believe that investments in human resources (education, training, and health and nutrition) are essential for the economic growth and development of the Caribbean region.

Finally, looking toward the region’s future, some economists argue that because of their small size (at least for the smaller islands) it will be highly difficult, if not impossible, for some of these nations to survive as independent states in the 21st century. Eventually, they argue, residents of many of these islands will have to resort to migration and dependence on remittances from abroad for their survival and their governments will, in turn, depend on transfers and aid from powerful countries and international organizations to balance their budgets. There are concerns about the roles that small nations will play in the world, or about their competitive inequality in a global economy. Proposals for regional integration will also continue to be put forth as necessary to overcome this problem.


Author: Luis Galanes
Published: June 13, 2012.

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