POVERTY IN THE COMMONWEALTH CARIBBEAN: CAN WE BREAK ITS PERSISTENCE?

Ralph Henry

May 28,2001 (Kairi Consultants Limited,

Tunapuna, Trinidad and Tobago mail@kairi. com)

INTRODUCTION

For close some three decades now, the Caribbean, and in particular, the Commonwealth Caribbean have been engaged in research on poverty in the region. Initial academic interest was subsequently followed by initiatives by multilateral institutions like the Caribbean Development Bank, the World Bank and the InterAmerican Development Bank. The latter two were motivated by an underlying philosophy of the role of markets and the capacity of Caribbean countries to adjust to the regime of the international market place. Structural adjustment implied the need to address some disjuncture in their internal structures that, at the end of the day, was presumed to cause the poverty that existed. Meanwhile, to some academic thinkers the word 'structural' connoted something entirely different as the explanadum of persistent poverty (Beckford, 197 1 ).

This paper will review the most recent experience in levels of poverty in the Region and assess the degree to which these countries have developed the economic structur- eradicate poverty, especially against the backdrop of the change taking place in the i iternational economy, or anticipated changes in trade rules in the first decade of the 21'' century Some of the measures that they may need to adopt will be addressed and their current capacity or willingness to adopt them will be noted. The commitment of many of the trading partners of the Commonwealth Caribbean to WTO and to freeing up of trade rules creates particular problems for countries that have been weaned on preferential trading relationships and which, for their continuing development have to depend on the international economy as heavily as is the reality of Caribbean economies.

An essential thesis of this paper is that industrial and trade policy is a key factor in the eradication of poverty in the Ccimmonwealth Caribbean. as Lewis had noted, but needs to be set in the context of a full comprehension of the international economy and its course An examination of the sectors that have been promoted would show that they constitute considerable range in addition to the avowed objective of the diversification of agriculture, there have been initiatives in respect of minerals, light manufacturing, tourism, off-shore finance, and information processing The experience to date suggest that the Caribbean has rather allowed itself to be acted upon, rather than to take the actions necessary to engage the rest of the world in ways

appropriate to its endowments. That failure consigns substantial sections of its population to poverty. It will be argued that there may well be a convergence between those that held the radical thesis on change and the liberal thinking of the IFI: at the same time they might have been wrong in their interpretation of what needed to be done.

The paperwill therefore address some of the weakness in industrial and trade policy in the context of the sea change to which the region has to adjust in the early 21" century, the outlines of which were evident more than a decade ago, but which failed to elicit the requisite policy response of the countries to the detriment to their populations. Some of the coping strategies by poor and even the not-so-poor will be noted.

EARLY ECONOMIC POLICY:

Self-government and independence were achieved by the Commonwealth Caribbean in the second half of the 2oLh century. The island legislatures embarked very early on the development of economic policy to transform the economies of these countries that were founded on the monoculture of sugar plantations. Jamaica established industrial incentive legislation at about the same time that Lewis (1950) developed his thesis on the industrialization of the British West Indies, and undoubtedly, its policy makers were aware of his position.

The formal strategy was the encouragement of light manufacturing industry to create new poles of growth in the economy. The market for new industry was deemed to lie abroad in the very countries from which foreign investors were expected to come. At the time, Lewis' recommendation constituted a radical approach to the development of the English speaking Caribbean. Lewis (1958) was to rue the fact that the countries generally failed to take on board the major recommendations that he made.

The second half of the 20& century was to witness shift and turns in economic policy among the countries. Import substituting industrialization (ISI) at the national level and then at regional level is what evolved from the interpretation of the Lewis strategy, and while contributing to some degree of industrial development and reorganization, remained constricted by market size and the failure to build on whatever capacity had been created, to launch into the international market. Foreign investment took advantage of the formation of CARIFTA and CARJCOM to secure market integration rather than industrial integration of resources and endowments. Moreover, the domestic capital failed to deliver the entrepreneurs fully seized with the tricks of the trade anticipated by Lewis (1 950) and even to this day, there are few domestic firms of that early phase that could identified among extra-regional exporters.

Along the way, the Commonwealth Caribbean was to embrace some semblance of resource based industrialization (RBI) in the countries with minerals - bauxite in Jamaica and Guyana, and oil and gas in Trinidad and Tobago At the very least, revenues from the mineral sector were seen as critical in mobilizing the financial resources needed for the transformation of the economy Trinidad and Tobago made considerable headway in

transformins its infrastructure with the largess that came from oil. However, when the bottom fell out of the oil market, this country found itself faced with the essential Caribbean problem of how to earn foreign exchange from alternative activity when one of the exports sectors suffers decline in price in international markets.

Socialist oriented transformation, with state control of the economy, was also attempted in Jamaica and more so in Guyana, with desultory (disastrous) results. By the early 1980s, the three larger countries found themselves having to accept IF1 influenced programmes in the face of fiscal and balance of payments crises. Some of the smaller countries had embarked on tourism led growth, which was one of the elements in the strategy recommended by Lewis: in effect, it was a special variant of the resource based strategy, in that it sought to utilize the amenity resource of sun, sea and sand. The performance was somewhat more encouraging.

POVERTY REVISITED:

The fundamental objective of all these approaches has always been transformation of these economies such that they could provide more employment, new but sustainable sources of foreign exchange earnings, and a higher quality of life for the populations of these countries. Poverty reduction and alleviation have always been part of the subscript of such policies. While most of the countries drew their inspiration for industrial development out of the work of Lewis, it was the poverty that Lewis had researched in the 1930s that prompted his first major work, Labour in the Caribbean.

This work had described in some detail the vulnerability of the Caribbean worker. Lewis's characterization of the Caribbean was to receive official corroboration in the Moyne Report following the riots and the social and political conflagration of the late 1930s. While the Moyne Commission focused largely on palliatives, the new Governments had seen their role in the context of the development of the respective countries. Transformation, industrialization, diversification, were therefore all about the reduction of poverty in the region.

As with other parts of Latin America and Africa, the work of the IFIs in the 1980s - the lost decade- prompted critical review as the lot of the poor worsened in a number of countries that had pursued structural adjustment and stabilization programmes. In the Caribbean, Jamaica was the first to undertake a formal structural adjustment programme with the IMF and the World Bank participating. Trinidad and Tobago and Guyana were to follow soon thereafter.

It is perhaps not a coincidence that Jamaica is now the country with the longest series of studies on poverty in the Commonwealth Caribbean Poverty assessment has been h l l y institutionalized in that country and the Planning Institute of Jamaica has been conducting annual studies and publishing results since the early 1990s. Its latest published study relates to the year 1999. The other countries have done studies of a more occasional periodicity.

Ct'hile the World Baqk has been instrumental in the first set of studies, the Inter-American Bank has also been Involved, and the Caribbean Development Bank has been sponsor in some six countries. While the Bank has not made the provision of loans contingent on poverty assessment exercises, it has encouraged countries to prepare bench-mark studies on social and economic conditions with a view to rationalize its programme of assistance.

For five of the countries, the results of poverty assessments have been published. Most of the studies have employed a methodology utilized by the World Bank. Thus, the results are broadly comparable, even though there might have been divergence in the quality of data, given differences among the populations of these countries in their receptivity to data collection on sensitive topics like their incomes and expenditures at the household level. Table I presents some of the findings drawn from the CDB studies and those sponsored by the other agencies.

Table I Poverty and Inequality Estimates for Seven Selected Countries

The studies have tended to report levels of individual poverty in excess of 20 percent of the population and in some cases in excess of one third of the population. All of these studies have been done in the 1990s. Thus, it can be argued that after decades of 'development' the Commonwealth Caribbean still experiences high levels of poverty. Moreover. consistent with the thesis of this paper, the strategy or the approach to industrial policy formulation and to industrial development may well leave the Cdmmonwealth Caribbean mired in considerable poverty in the early 21" century. The question that immediately derives from this is whether the structuralist argument advanced by Beckford (1971) some thirty years ago is still valid in explaining persistent poverty.

Country

TCI-1999

Grenada - 1998

St. Lucia - 1995

Belize - 1996

SVG- 1996

Jamaica -1 999

Guyana

Trinidad and

Tobago

Headcount

25.9

32.1

25.1

33.0

37.5

16.9

43.2

21 .O

Gini

0.37

0.45

0.50

0.51

0.56

EXPORT-ORIENTED GROWTH AND TRANSFORMATION:

Whatever the previous ideological stance of the respective governments, by the middle of the decade of the 1980s, in the face of problems in the larger countries, there was a sharpening of focus on EOI. All of the countries adopted some variant of an export-led model of transformation and largely abandoned programmes that were not cast in this mode. Thc; attempts to get the price of labour and other inputs right were seen as critical to survival.

Important Lessons: Most importantly, the experience of the first thirty years in policy formulation within the Commonwealth Caribbean itself had taught a few lessons. The first was that the countries could not escape approaches that depended on a high level of participation in the international economy through competitive exports. Secondly, some of the work in the late 1970s and early 1980s recognized the impact of the technological revolution and suggested that Commonwealth Caribbean needed to develop the information sensitivity to take advantage of niches in which, through technological monitoring and selective application, it could participate actively in the growth industries of the late 20" century and could cope with change as and when it manifested itself in product cycles (Farrell, 1980).

Further refinements were detailed in differentiation of final product in export markets in the context of:

New products and services as the output of new technology Traditional products and services in which new production technology and processes could secure market space through the lowering of the costs of production New characteristics in traditional products and services that could allow for differentiation and thus market niche creation

In all of these three areas, there was the technological imperative that needed to be mastered through the development of an infrastructure for human resource development through training and education, the acquisition of information on the frontiers of knowledge, and the development of capacity for R&D and internal application of new knowledge to production, whether derived from local or external sources. Some of the requirements were outlined by a number of observers (Pantin, Henry, Farrell ).

It could be argued that while the structural adjustment programme returned all the governments to a similar stance in respect of the development of exports, there is little evidence that the other important lesson of the role of technology in restructuring competitive capabilities was fully grasped. The renewed export initiatives focused on employment growth pure and simple, to reduce unemployment and poverty, with little attention to issues relating to product cycle and to advancement on the technological ladder.

The third lesson was that while the countries of the region could not eschew trade preferences, the achievement of secure markets and sustainable sources of foreign exchange earnings had to be based on more than preferential arrangements. The Lome agreement protected banana and sugar, and provided much by way of technical assistance and support, but had created few new areas of market entry. The Caribbean Basin, Initiative allowed for some considerable growth in employment, but was restrictive in opportunities for advancement to levels for higher value in the production system.

Manufacturing Experience: Export processing operations became an attractive method and the special privileges afforded under the Caribbean Basin Initiative (CBI) were expected to provide ready possibilities for countries willing to make rapid adjustment of their internal productive base. While light manufacturing, and in particular, garment production, became an important focus in export promotion, there were other sectors that attracted the attention of policy makers - electronic components assembly, and information processing which could utilize unskilled and semi-skilled labour. Off-shore finance was also promoted in so far as it could provide revenues for governments seeking the finance for infrastructure and other aspects of development.

Jamaica invested heavily in attracting foreign investment into its free zones and very quickly, a number of firms set up operations mainly for final stage garment stitching, and to a lesser extent, for CMT (cut, make and trim), all of which absorbed a considerable amount of labour and eased the unemployment problem. In the Eastern Caribbean, while there may not have been free zones on similar scale, the praxis was basically the same. The most elementary component of the Lewis's strategy had reemerged as the foundation of economic transformation. Caribbean labour could be utilized in the international division of labour in areas where its lower costs make it competitive in respect of certain stages of the production cycle.

The lower relative wages for unskilled labour in Caribbean location was the formal argument. Back of this, however, were three factors, that made Commonwealth Caribbean countries and the circum-Caribbean attractive at that moment. The Multi-fibre agreement structured trade in garments and established quotas for the entry of product into metropolitan economies that could no longer compete with countries like China and South Korea in the production of garments. North American firms could retain market space not exhausted by the quota arrangements, by sending off-shore. the activities where lower cost Caribbean labour could be utilized in the more labour intensive activities, while other aspects of production could be accomplished in domestic plants.

Cheap labour could be secured either by sending such operations to the Caribbean or by utilizing sweat shops in the metropolitan economy, dependent on undocumented workers entering as illegal immigrants. In effect, cheap Caribbean labour could compensate for inefficiency in the textile/garment production nexus in the United States economy by providing such firms with a ready supply of low cost labour. In the case of Europe, the off-shore was i.: the countries of North Africa, and for awhile Eastern Europe.

Another intervening variable in this equation was the unequal march of technology. The technological revolution had started to impact the garment industry and such systems like FMS, CIM, and CAD made inroads into areas that utilized considerable amounts of labour. However, in the final sewing of garments, the technology was found wanting because of the nature of cloth itself, that was not as amenable to the elimination of extensive labour inputs in final stages of production (Hoffman, 1985).

The third factor was the failure cjf most countries to create industry on a scale adequate to absorb an expanding labour force. The existence of high unemployment prompted governments to utilize any possible avenues to attract industry, with the result that they all engaged in competition among themselves in providing fiscal incentives. Devaluation of the currency was also a method of bringing general wage rates in line. In the Windward Islands, the devaluation route was effectively ruled out, since there is need for unanimity among the members for any devaluation of the Easter Caribbean dollar.

Sticky wages led to the disappearance of some of the industry that had been established and by the end of the decade of the 1990s, there had been a total hollowing out of the manufacturing industry in some of the countries of the OECS states. The competition came from the, establishment of massive export processing operations in places like the Dominican Republic, and also to the formation of NAFTA that gave Mexican maquildoras an advantage over the Caribbean. In the process of the commoditisation of manufactures, the Commonwealth Caribbean has been particularly disadvantaged (Kaplinsky, ). Jamaica has witnessed a decline in export processing activity, with firms departing to other locations.

St. Lucia, which had achieved some degree of diversification beyond export agriculture (Bananas) with Tourism, and Manufacturing, has seen the latter sector shrink at the same time as bananas went into decline. Countries like Dominica and St. Vincent with a very rudimentary manufacturing base and with a declining banana industry have been quickly visited by increasing poverty.

The poverty levels of selected countries in the 1990s have been illustrated in Table I. Growth rates have slowed in some of these economies but in some cases, the rates still remained good by international standards. The Windward Islands, however, have been badly hurt by the decline in the difficulties that have beset banana exports to the EC. St. Vincent and the Grenadines for which there are poverty data, and Dominica, have been more dependent than St. Lucia and Grenada on banana exports for foreign exchange earnings. In both of the latter cases, exports have fallen by more than one half of the levels that existed at the beginning of the decade of the 1990s.

Yet it could be argued that the Commonwealth Caribbean has displayed some degree of reorganization of industry over the last three decades. Except for Guyana. Dominica and St. Vincent and the Grenadines, the share of agriculture in GDP has declined to less than ten percent. In the case of Guyana, Agriculture contributed as much as 42 percent of GDP in 1999 (CDB, 2001). This was down from 49 percent in 1995. However, the share of

merchandise exports contributed by Agriculture is higher in a few other countries besides these three. St. Lucia and Grenada still display considerable reliance on earnings from export agriculture. In the case of St. Lucia, bananas are significant and indeed, St. Lucia is the largest producer among the Windward Island countries. In the case of Grenada, spices and cocoa are the main agricultural exports.

Export Agriculture and Diversrflcation: One of the features to be noted about export agriculture is the fact that there continues to be a high concentration on one or two crops. Thus, even where a considerable level of foreign exchange earnings derive from export agriculture, there continues to be high vulnerability, given the concentration on one crop. Bananas, and sugar are the main exports, and in the case of Guyana, Rice has to be added to the picture. In the case of Jamaica, Trinidad and Tobago and Barbados, it can be argued that substantial subsidies are provided to maintain sugar as a source of foreign exchange and employment in the economy. Most of the key exports are marketed under special protective regimes.

The experience with bananas is instructive. The first hurdle that emerged in the 1990s was the unification of Europe. Bananas had been marketed under the Lome Protocol and allowed protection for Windward Island Bananas in the UK. The decade started with the countries enjoying considerable buoyancy in the sector. However, the European Community was committed to unification with the implication that the Community needed to adopt a consistent regime for banana imports.

The EC members that had had less of a colonial experience, and in particular, Germany, were not well disposed to the continuation of high levels of protection. They usually sourced their imports of bananas from cheaper dollar banana countries in Central and South America. While countries like France and Britain were more indulgent, the course was clear for greater competition for Windward Island bananas in its main market.

Unfortunately for these countries, the early 1990s was also a period when the UK pound enjoyed favourable parity with the US dollar to which the Eastern Caribbean Dollar is tied. Earnings in pounds when converted into dollars made earnings from bananas very attractive in the early 1990s. The result was that Windward Island policy-makers failed to take appropriate action and could not translate to their domestic populations the sense of urgency that was required in the reorganization of the banana industry in the sub-region Indeed, the policy-makers and the populations at large suffered something akin to money illusion, in that they refbsed to believe that the banana industry was facing a crisis, in spite of the attractive ;rices that reigned in the market

Valuable time was lost in the reorganisation of the industry. Moreover, the diversification that was necessary to accompany the reorganization has barely been addressed as part of agr!cultural policy. The establishment of a supportive infrastructure, and the creation of distribution channels do not seem to have figured in the planning process. The result has been that marginal banana farmers have had to adjust to wrenching economic change largely unaided by the State. Throughout the Windward Islands, a programme for certified

banana farmers or certifiable banana farmers was introduced, but there has been little in store for the farmer who cannot measure up to the demands of the new regime and has to leave the industry.

There is obviously poverty that has been caused by this failure in industrial policy.. Studies done on the social impact of the restructuring of the banana industry in St. Lucia and St. Vincent and the Grenadines are not public documents, but whatever has been revealed in public suggests that the impact has been devastating in the respective countries. Moreover, the macro-economic data establish that there has been little by way of compensating sectoral growth in other areas fiom which ex-banana farmers and workers could have benefited. Within agriculture itself, there is little evidence of any major increase in non- banana agriculture. Nor is there evidence that W D E C O , the main organization capable of getting new produce into the international market place, has been engaged in this particular function.

Whatever concessions are secured in the short term for bananas, the reality is that increasingly, all arrangements have to be WTO compliant. WTO members are required to eliminate all non-tariff measures and to replace them with tariffs. Moreover, tariffs are now subject to graduated reduction for developed and developing countries. In providing some continuing protection for bananas fiom the Windward Islands vis-a-vis Central and South American producers, the EU has had to face retaliation from the United States and from Ecuador. The former's interests are driven by American transnationals, while the latter derive from the role served by banana exports in the foreign exchange earnings of that country.

A range of EU exports were slapped with punitive duties all within the context of WTO provisions, following on the ruling that the protection provided by the EU constituted an unfair practice. While the EU and the United States have achieved some measure of agreement, clearly, it is no longer possible for the Windward Islands to secure the level of protection to which they had been accustomed and within which they were able to sustain this vital industry. The moral of the story then is that they would have been far better placed had they undertaken radical changes in the first half of the 1990s. The partial reorganization of agriculture has resulted in the alienation of good agricultural land to other uses, not necessarily in the best long term interests of the country.

The acute problems that have emerged in the Windward Islands are well exemplified in the case of Dominica. While no formal studies ha\.e been done of poverty in Dominica, the signs of acute poverty are self-evident in any searching analysis of the macro-economic data. Tables I1 and 111 provide information on the structure of the economy and on the main exports. Agriculture still accounts for 20 percent of GDP, but contributes through bana~as the major merchandise exports of the country. The coconut industry contributes substantially through the manufacture and export of soap However, the structure of main exports has remained largely unchanged for a decade, and although tourism has improved its shdre of GDP and has scme significance, its growth has been inadequate to compensate

for the massive reduction that has taken place with banana exports that have been reduced by more than one half over the period.

TABLE I/: GROSS DOMESTIC PRODUCT, DOMINICA

Source Canbbea~i De\8elopment Bank. 2000

TABLE 111: PRlNClPAL EXPORTS ($MA/), DOMlNCA

1997

431.5

565.0

GDP at constant 1990

pnces (tmn)

Cunent factor cost

1989

347.8

337.6

1998

446.2

598.4

1988

351.7

319.2

Sectoral Composition

F~nanc~al&Bus~ness

Serv~ces

Government Servlces

Other Serv~ces

Less Imputed Serv~ce

Charge

1988

Bananas

1996

422.9

543.3

126

18.6

1 0

4 8

1020

f995

410.3

510.2

1990

369.8

369.8

I996

491

1989

; 7 9

14.0

19 8

1.1

6 3

1997

4 6 3

1990

831

1991

8 1 3

1991

377.8

407.4

14.9

18.7

1.1

7 6

1993

651

1992

814

I993

395.4

456.4

1992

388.1

435.9

f994

403.8

494.1

15.2

19.8

1.0

8.5

1994

5 5 4

1995

444

14.9

18 4

1.0

8.0

14.8

18.5

1.0

7 7

14.6

19.6

1.4

8.2

15.2

18.4

1.5

9.1

14.7

18.6

1.5

8 5

14.0

18.4

1.4

7 8

f4.0

18.8

1.4

7 6

COPING STRATEGIES:

The relative failure of Caribbean policy makers to eradicate poverty and reduce unemployment has stimulated coping strategies among the populations of the Region. However, Caribbean people have responded not only to poverty conditions but also to perceptions of relative lack of opportunities created by the economic structures of their respective countries. Thus, not only the poor, and in some cases, the non-poor, respond to the economic realities entirely outside of the framework actively manipulated by policy makers, or in some cases, in spite of their actions. A few of the strategies employed are noted here:

Emigration Informal sector Underground Economy Music and Entertainment

HOG: ;hold Soap

Toilet Soap

Emigration: Ever since the end of slavery, the people of the Commonwealth Caribbean have been mobile. The difficulties in some countries in the recent past has prompted significant movements within the region and outside the region. Guyana has been the source for flows to Trinidad, St. Lucia, St. Kitts, BVI and even to the Turks and Caicos Islands. These flows have included both professional and skilled and unskilled workers. North America, and in particular, the United States, have been the main extraregional destination. Jamaica has been the main sending country from the Commonwealth Caribbean to North America. Table IV provides some information from the Department of Immigration and Naturalization in the United States.

12.1

13.2

15.6

13.2

Ant~gua Barbuda

Bahamas

Barbados

Cuba

Dorninlca

Dominican Republic

Haiti

Jarnalca

St Kitts/Nevis

St Lucra

St Vincent

i r ~ n ~ d a d and Tobago

Table IV: lmmiqrants bv Reuion and Countrv of Birth

21.1

19.7

163

15.5

1 92 Caribbean 112.357 1 88,932 1 115,351 1 140.139 1 97,413 1 99,438 1 103,804 1 96,788 1

of Which

93

37.8 33.7 32.9

94

19.4

22.9

95

30.6 34.5

The decline in the latter part of the decade of the 1990s has more to do with policy in the United States than with a decline in propensity of the population to migrate. According to some recent data compiled by the IADB, the remittance income to Jamaica has been considerable and represented about 12 percent of the GDP of the country. It is estimated that some US $78 1 m was repatriated to Jamaica and this was equivaleqt to 63 percent of the income earned from the Tourism Sector, which is the largest earner of foreign exchange for the country. The IADB found that on a per capita basis, Jamaica receives the - highest inflows of remittances for any country in the Americas. Ir is a moot point the extent to which measured poverty in Jamaica is attenuated by the inflows to households from relatives abroad. Household decision making may include the relocation of some members to other countries, and investments in human capital may be motivated with migration in mind. While hard data on the other countries may not be as readily available, the effect on the respective countries is similar.

Informal Sector: The growth of informal sector activity has been remarkable over the last twenty years. It still poses a challenge in statistical data gathering in the region and countries have not been able to report systematically on the sector. Casual empiricism reveals the presence of informal sector workers in some economies on a larger scale than in others, partially reflective of underlying problems of labour underutilization, and probable poverty at the household level. In that regard, there is less unemployment and underemployment in St. Kitts and Nevis than in St. Vincent.

On the other hand, informal sector activity has not only created the base for entrepreneurship within an economy, but has also led to the stimulation of new activity within a country and between and among countries. Higglers have played a significant in internal distribution in Jamaica. They have also been engaged in external trade. A similar phenomenon has been evident in the Eastern Caribbean.

Trade in bananas that do not make it to the European markets is handled by these hucksters. In other words, they link right back to the agricultural sector and have been responsible not only for bananas but for other agricultural exports. Similarly, Guyanese hucksters are engaged in 'outward higglering', bringing supplies fi-om Guyana to markets in Barbados, Trinidad and the Leeward Islands. The institution of the informal sector allows for the absorption of labour services and may help to reduce or mitigate poverty in some households. Most participants enter informal sector activity because of unemployment and poverty, but may effectively take themselves out of poverty.

( ~ ~ U ' L ' ~ X ~ I ' O I I ~ I U ' E C ~ P ~ O ~ ~ There is a growing presence of an underground economy in some countries of the region, the most significant element of which is in the distribution of narcotics and illegal drugs. While its emergence cannot be attributed to poverty, it can be argued that poorer people may find it less difficult to resist participation in illegal activity in the underground economy

The industry can be divided into two categories marijuana and cocalne distribution. Marijuana production is largely directed at the domestic market and latterly, at the

subregional level. Cocaine distribution is linked to the South American industry. The cartels in South America have been using the Caribbean Islands as transshipment points. Their geographical proximity to South America, and their coast lines that are a challenge to patrol, provide considerable cover for clandestine operations. Nationals of the countries who have become, involved may receive payment in kind, which is then marketed in the domestic economy. One significant example has been commercial production and distribution of marijuana. Such activity has been very open in St. Vincent, and in some districts, are the only form of agriculture that will attract younger farmers.

Although poverty assessment surveys are not designed to pick up marijuana production, community focus group discussions have revealed that it is a reality in that country. Production is known to be undertaken in St. Kitts and Dominica. Documentation on Jamaica is considerable and that country is deemed, internationally, to be an important producer of marijuana, in addition to being a transshipment base for cocaine coming from South America. The Dons have provided employment for retinues of security personnel and other operatives, and offer attractive income mainly to lower income youth.

Preliminary results of a study of Trinidad, by a staff member of the Planning, Research and Development Institute (PRDI) in Tobago suggests that there is an association between poverty and unemployment on the one hand, and involvement in the distribution of marijuana. The study utilized police records on arrests. Some 74 percent of those arrested for possession of marijuana were unemployed. Of course, the Police may be more vigilant in respect of the unemployed, with consequential bias in these findings.

While there is no clear connection between poverty and drug running, the temptation of quick and large earnings can entice the more venal among the poor and the unemployed in these countries where a substantial section of the population and the work-force may find themselves trapped in unemployment.

Mz.lsic and Entertainment: Up until recently, policy makers in the Region, with few exceptions, hardly noticed the emergence of a growth industry that has been able to secure foreign exchange earnings for participants. Reggae, Soca and Calypso are art forms that have traveled outside of the region. The Trinidad Carnival has been copied and is now the base for the largest street festivals in the North Atlantic. The Reggae and Soca Artistes and the Calypsonians, many from humble beginnings who have pioneered and created market that now provides substantial linkage effects in the tourism product of Jamaica. The irony of all this is that the fiscal incentives and other benefits provided to foreign and organized domestic capital dwarf anything that has been allowed to Music and Entertainment Sector in its early development.

Po.sitit!r Le.s.sons: There are positive experiences from the more recent past in so far as countries have been able, if not to eliminate poverty, at least, to reduce unemployment and possibly to reduce poverty or provide some indication of a substantial improvement in economic conditions. These may be divided into two groups. In the first, natural endowments have been utilized in the face of an increase in demand for the output, to

grow the economy along a positive course. In the second, there has been a much more initiative in repositioning the country to make it competitive in the years ahead.

The first category includes countries that have depended heavily on international tourism using their amenity resource of sun, sea and sand. Tourism, for all its fickleness, is an income elastic industry and has seen considerable growth with the expansion of world income and moreso the incomes of the North Atlantic countries. Islands like St. k t t s and Nevis and Antigua have benefited. Trinidad and Tobago belongs to this category. It has used the recovery of oil and gas prices and the revenues deriving therefrom to improve the infrastructure for growth and transformation.

In the second category one can place Barbados, which has adopted a vibrant model of human resource development, possibly more cognisant than most of the modalities involved in making its workforce adaptable to a changing technological environment and thus, more potentially competitive in the international economy of the 21" century. Barbados is currently reorganizing its educational system and is already more advanced than its meighbours in the use of information technology across a wide swathe of the population and the work-force. In that regard, it is better placed to locate itself in the higher valued added areas in the international division of labour and thus to protect its population against unemployment and poverty in the fbture.

BREAKING PERSISTENT POVERTY

Strong Export Industries: Reducing and eliminating poverty in the Commonwealth Caribbean depends in the final analysis on the capacity of the countries to earn their keep in the international economy through building strong export industries. In the smallest countries, the task will be one of developing them in sequence with the country taking its exit from dying industries and niches and embarking on growing markets. The large countries are afforded a better opportunity for developing range. All of this is premised on deepening regional integration, given that that too has to be compliant with WTO rules that have circumscribed the space for protection and preferences.

Human Resolirce Development: Given the export bias of development strategy, there is need for an infrastructure to keep Caribbean products and services constantly competitive. This means far more than the expansion of education and training opportunities It has to embrace most of the work-force in systematic upgrading. The challenge is best demonstrated in the requirement that banana farmers in the Windward Islands have to be upgraded to be scientific farmers producing new product. or preparing them to transfer to occupations in the early 21" century. This has to be achieved in a short order even though the educational base of farmers may need considerable upgrading

R&L) R&D has to be a continuing activity among these countries with the creative application of results where possible Moreover. given the small size of these countries, and of the resion as a mhole, at best, they could be at the frontiers of knowledge in only a few areas They h a ~ e to utilize world knowledge on a real time basis and have to have

their R&D supported by continuing infusions of new knowledge from the rest of the world. Creaticn, access and application are the main factors here, and is very much driven by human resource development.

Trade Negotiations: Markets are seldom perfectly competitke. Substantial concentration exists in a number of sectors in the international economy. While the countries of the region have to build competitive industry, they need to be sensitive to the fact that market will still be influenced by their capacity to negotiate presence. On the other hand, little can be expected by way of preferences, and the constant preoccupation with preferences deflects policy-makers from getting to the hndamentals of Caribbean competitiveness.

The region has now created the Regional Negotiating Machinery. This has to be armed with the information to secure market space or to eliminate barriers in the negotiation process. In undertaking its role, it has to recognize that the sociology of production and finance tended to exclude activities and groups that have been most capable of creating market niches and the wherewithal for product differentiation. There is need to correct for that bias in the sociology, as is now being done in Music and Entertainment where the Caribbean product is distinct and can find a niche and enjoy an element of monopoly rent.

CONCLUSION

In the final analysis, trade and industrial policy in the Commonwealth Caribbean is at the hlcrum of poverty reduction and eradication. The circumstances of some of the poor have to be corrected by transfers, but for most and for generations, the issue is about creating people who are competitive in what they can produce for the international community at every point in time, and can quickly adjust to the production of new goods and services when viability declines with existing products and services. Failure in that regard in the 2 1" century will guarantee persistent poverty.