What Happened to Jamaica? Democratic Socialism and A Tale of Two Islands

Did you know that in 1971, the United States to Jamaica currency exchange rate was $1 USD to $0.77 JMD, nine years after Jamaica’s independence from Britain? In 1992 it was $1 USD to $22 JMD. In 2019 it’s $1 USD to $136 JMD. (Source)

I came across an interesting study a few months ago. I’ve been wanting to discuss it ever since. It was a comparison between the trajectories of Jamaica and Barbados and their economies. They particularly looked at the effects of socialism in Jamaica, compared to fiscal conservatism in Barbados. In their paper titled “Institutions vs. Policies: A Tale of Two Islands”, economists Peter Blair Henry and Conrad Miller were rebutting the idea that the economic performance of one country is due to the type of institutions and infrastructure that it has. They instead pointed out that the types of policies implemented have the more significant effect.

 

The Historical Infrastructure of Jamaica and Barbados

To begin, countries that were well off tended to have well established property rights, with varying degrees of state intervention. And that was contrasted with places that relied on central planning (aka communism). The two islands of Jamaica and Barbados were appropriate to compare because both were British colonies, and had similar social institutions, infrastructure, and systems of governance in place. These were a Westminster Parliamentary democracy, constitutional protection of property rights, and legal systems rooted in English Common Law. By the way, one of the first things noted was that these countries that had colonial rule, because of the left over structure, all fare better in the present than those that had not been colonies, or where the colonizers did not place strong emphasis on property rights. I bring this up because many people do not want to accept this, how colonization positively impacted long-run economic development. Both countries also had a majority African descendant population after independence. So that’s why they are similar. But they went down different paths. They compare the time period from between 1960 to 2002 (Jamaica became independent in 1962, Barbados 1966), where Barbados’ GDP per capita grew 3 times as fast as that of Jamaica.

Later Differences in Economic Growth

Now, they attributed difference in GDP growth to a difference in macro-economic policy, particularly fiscal conservatism on the part of Barbados. After independence, Jamaica was led by the Jamaica Labour Party (JLP), and experienced economic growth. However, due to rising social tension including rising unemployment and income inequality, the people caved. The paper attributes the social problems at the time to strong unions that prevented wages from decreasing and adjusting to the excess labor from agriculture. Agricultural labour would no longer have been as competitive in price to attract workers due to the strong growth in the tourism and bauxite sectors. (I had a hard time understanding this concept and assume the authors meant not as competitive in terms of payment for labour). The authors used the term Dutch disease, which you could look up to understand more what happened, since the bauxite and tourism industries were growing so fast. So due to these social concerns, the People’s National Party (PNP) was elected with the promise of “social justice” and “self-reliance”, what is termed as democratic socialism. There was income redistribution, nationalization of private companies, job creation and housing plans, import tariffs, food subsidies for basic items, and policies that caused international investment to basically say bye bye.

They particularly focused on the 1970s and the gas crisis, noting that both countries experienced the same external shocks. And that Barbados held to their fiscal conservatism even when there were riots, while Jamaica went on a budget surplus.

 

Fiscal Conservatism in Barbados vs Socialism in Jamaica

To go into a bit more detail, I’m just going to read from the paper because, as economists, they explain it better than I can:

I love this line from the paper: “Whatever merits the PNP’s economic program may have had, it was expensive.” They paid for most of this by borrowing from the Bank of Jamaica. This led to inflation and by 1980 inflation was at 27% per year. So, now, the people feeling these effects, voted the PNP out. Big emphasis on voted again. The common thinking was to blame what was happening on outside events, particularly the oil price shock of 1973. But when compared to Barbados, there is a different story. Barbados also experienced inflation, but they avoided nationalisation, and limited government spending, even though they also borrowed from the national bank. They also approached the IMF but did not devalue their currency because they pegged their currency to the us dollar (b2 to us1). But to do this they had to negotiate with employers, unions and workers, and ultimately got them to cut wages (by 9%) and not increase them until there was an associated increase in productivity. There was also discussion about future price increases by firms. (I’m not sure what they meant by firms; I believe they meant private companies delivering products). The Bajan government faced A LOT of resistance, especially with the wage cuts, all the way up to the Privy Council (the highest court), but were able to come to an agreement with the people. So, the authors conclude that by doing this they in essence devalued their currency since they cut real wages, but this restored external competitiveness and profitability, without creating an inflationary spiral. And then the economy recovered quickly, with GDP growing by about 3 percent per year from 1975 to 2002. They also noted that currency devaluation was something the IMF suggested in order to stimulate production and return the economy to full employment.

Now, could Jamaica have done the same thing, because ultimately the government had to win over the people? Notice that I am not trying to paint the economy or the IMF or whatever as big bad evil people. But noting that these things were voted for.

 

To Blame ‘Neocolonial Forces’ is Factually and Morally Wrong

So, sometime after that I came across an article which made me want to make this content all over again.

I will just give the first few lines in order to give an idea of the paper:

‘“The imposition of structural adjustment programs in the Third World since the 1970s has been characterized as a war against the poor, a process of [neo] recolonization” (Turner, 1994: 37). This statement is particularly applicable to the country of Jamaica. The island has been susceptible to a variety of neocolonial acts including the presence of multinational corporations, structural adjustment programs, and loan organizations that have sucked Jamaica’s economy dry. This neocolonial presence has devastated the population in more ways than one. It is apparent that neocolonialism has had and continues to have a large impact on society as a whole in Jamaica. This influence will be shown by presenting a historical portrayal, forms of neocolonialism in the country, and attempts to resist such domination.’

So basically, it blamed current affairs on the legacy of slavery and colonisation. They focused a lot on pain and suffering and unfairness, and the soul of people, rather than the result of tangible actions and their measured outcomes. They talked about musical resistance (I’m a big fan of that actually but it’s not a concrete solution). They also talk about the economy only through a lens of exploitation. So instead of the bauxite industry giving jobs to people who needed it, they did not provide benefits to the workers in the ways the author (orator) thought were fitting. Contrast this with the discussion about wages, and unions and differences between Jamaica and Barbados economic policy mentioned in the paper from the economists. The authors of this second article also called US. capitalists neo-colonial forces. Also contrast these sentiments with the account of Manley’s ‘social justice’ and ‘self-reliance’ and the resulting flight of foreign capital from Jamaica which negatively impacted the economy. The author regarded the deal with the IMF as the culprit, not Manley’s visions or social programs, and had no resistance to the fact that these programs that brought the indebtedness and original crisis came before the need to involve the IMF. Actually, the author of this second article approved of Manley because he was ‘resisting’.

I saw this article referenced elsewhere on one of those pro-black people blogs from a writer in Africa. This is the type of rhetoric that leads to Zimbabwe kicking out all the farmers. I fully think there are cases of force, especially with military intervention in foreign countries that can affect development. But there is no mention of the citizens’ decisions or responsibility in the matter.

And I really wanted to juxtapose these two ways of looking at what happened in Jamaica. There tends to be truth in everything. Yes, it’s true that there was slavery and class divisions and that they have an influence on history. No it is not true that that’s why things are the way they are today, because there are other factors at play. There’s a big jump in logic that is made over and over and over again. And I may be talking to the wind, but I ask people to please step back. One way of looking at things is very wishy-washy, dependent on the identity of the person, and assuming things about peoples feelings then assuming those things about people (which could be true) are an explanation for the current state of affairs. But the other, at least, does not have as much of a questionable, and shifty grounding.

The Economic Trend Continues Today

Furthermore, I did a bit more research on Barbados. And they are doing very well in comparison to other Caribbean countries. But their economy has declined in terms of GDP since then too, and they are still not at the level of many first world countries if you look at per capita GDP. But there are plenty of other places in the world than the tip tops that Barbados is doing really well in comparison to (including non-black countries since they love to make this comparison). But here are very practical reasons for a difference in outcomes between two very similar countries who had similar starting points. I say practical because the other articles contained no data, but contained world views. I believe that emotions are very healthy, particularly for individuals to figure out how to be at peace with them, but the sway of them when it comes to looking at these things, is clouding our vision. This is true of anyone trying to figure out how to deal with social inequality, because I believe most people want to help others. It’s the difference between something personal and subjective and something objective. Apart from this paper

 

The Lack of Economic and Financial Education in Jamaica Beyond Colonisation and Independence

Now, when I was in school, no one really taught us about this. We learn about the Tainos, the Spanish, the British, the Maroons, slave rebellions, emancipation, all the other labourers who came and Independence and the rich heritage of Jamaica. But then they stop right there.

When I took Sociology in sixth form, Jamaica was signing a new IMF deal with stricter regulations on Jamaica’s economy because your debtor is your master. They decided where funding should be cut, some of which was in education. Now, that really sucks. But nobody really talked about why Jamaica was in this debt in the first place. Furthermore, it wasn’t discussed that this debt was something that people wanted in the past. They just weren’t thinking far into the future or didn’t understand the ramifications. It is also what I call the result of expectation from the government to hand over what others have, and simply displaying selfishness.

I also was speaking with someone recently on the topic of debt and Puerto Rico came up, due to their being impacted by a hurricane. And I said it was probably a similar situation to Jamaica. I don’t know if the people in Puerto Rico also voted away their future for free stuff. But there was an emphasis on the suffering of the people but none on the cause of the situation. There are also some pretty popular videos on debt and Jamaica on YouTube, that put no responsibility on the people.

When Greece had it’s debt crisis, was it blamed on neo-colonialism? No, because they don’t have that automatic answer.

 

Democracy and the Vote is Dependent on the Country

Now, I’m not saying that the government sometimes acts without the will of the people, but I also think that no one talks about how these countries come to be indebted in the first place, particularly democracies, which is through the vote. That thought led me to considering something even more fundamental.

I began to think of democracy as a whole. So even if the majority is voting for something that is detrimental in the long term, it is the minority who really suffer, because they are overwhelmed by the majority. And also the children of both the majority and minority suffer, because they feel the consequences. And social democracy in one country will not work out the same in another country. One can’t assume people can pay off debt when the human capital doesn’t exist to pay it off/is not productive enough. I always used to think that literacy and education is the way for countries to change, for their human capital to be built up first. But there’s a cultural aspect that lends itself to this. For example, people will pull their children out of school because they can’t afford it, or they want them to work. And others will say solve this with free stuff, free school etc., but that’s exactly what gets countries into a mess of debt. And they have to do things like pull them out of schools they can’t afford because they have a lot of children so the education cannot happen… You see where I’m going. It is a cycle of culture. Furthermore there is a biological aspect to this. There are different mating patterns between different group. I am not talking about race, though there is a correlation, but just looking at income levels and life spans. It makes me ask, is there a growth trajectory that has to occur for a country? Because if people are already receiving the benefits of free things, before going through that process of generating income and the human capital being built up before they have that level of wealth for a redistribution phase, the cultural system cannot handle it. Now I am not arguing for government programs or government intervention in the economy. (I know what I’m saying sounds a lot like marxism, first capitalism then socialism then communism. Except it has never occurred organically). I’m really against them in general. But I’m speaking about it in the terms of what if, because they are so consistently discussed. Hence, assuming that I’m okay with socialism in its various forms, can you apply it to every society at every stage? I don’t think so. And I think regardless of the culture, a focus on education is still the best bet. But a lot of people talk about places in Europe that make socialism work. And that won’t work out the same in another country.

 

Looking at Another Negative Effect on the Country: Emigration

Other than this, I think the biggest thing to consider is corruption especially when it comes to crime. As I think, apart from poor economic decisions, that is a major detractor for keeping people in the country in order to build up human capital as well as having people from outside wanting to invest. And I think Jamaica is a very corrupt country. And I could make this about the government because it is, but that’s pretty abstract. Corruption is about the individual, and the choices that he or she makes. This also made me think about brain drain and immigration, and how that hinders the building of human capital. But keep in mind threshold and voting in a democracy. I also think that one could say all they want that another person should do this or that, but it won’t make a difference if the incentives are not there. Until those incentives change, either external incentives for countries who accept immigration (which there is most likely to always be even though the countries may change), or internal ones I’ve been talking about, people will go to where they can do their best. Whatever the emotional appeals, people respond to incentives. And on a personal level, I do not like the idea that where a person is born means they owe something to that place, not to individual people or communities but to the nation state. People are not slaves to the state.

 

Conclusion

Now the thing is, even if it’s true that the people have debt that they actually did not sign up for, either the minority in the vote, or the children of the generation who did the voting, if we always excuse what comes from bad decisions, without the feedback from the consequence, how does it change?

Even when there are history books, it seems to not be enough to create change.

 

 

Disclaimer: I am not an economist. I am just curious about the world I live in.

Video and audio versions available.

References:

Papers : institutions vs policies. main paper http://www.nber.org/papers/w14604.pdf
Henry, P. B., & Miller, C. (2008). Institutions vs. policies: A tale of two islands (No. w14604). National Bureau of Economic Research.

Bank of Jamaica provides an excel file with the historical to current USD to JMD exchange rates, from 1971: http://boj.org.jm/foreign_exchange/fx_historical_rates.php

I’ve only included snippets of this but here is more detail. However it does take a Neo-Marxist approach as a warning for those who think like me.
Stephens, E. H., & Stephens, J. D. (1986). Democratic socialism in Jamaica: the political movement and social transformation in dependent capitalism. In Democratic socialism in Jamaica: the political movement and social transformation in dependent capitalism. Macmillan. https://link.springer.com/content/pdf/bfm%3A978-1-349-18173-5%2F1.pdf

Article about neocolonialism (from a speech): https://debate.uvm.edu/dreadlibrary/borelli02.htm
Borelli, Dori, (2002). Neocolonialism in Jamaica: History, practices, and resistance.