According to Biddle and Stephens (1989) dependency theory “contends that third world countries which are economically dependent on core capitalist countries will develop foreign policy positions consistent with the interests of core countries” . It also posits that wealthy nations grow economically at the expense of the poor nations due to the prevailing imbalanced and unequal relationship. The economic dependence brings about this phenomenon due to the existing “structures of dependence that produce economic and political; elites in the peripheral countries whose interests coincide with those of multinational corporations and core country political elites” (Biddle & Stephens, 1989). The theory emerged as a critique of the modernization theory that classified all countries to assume similar development trajectories and levels. The dependency theory, therefore, sought to highlight that many third world countries did not share elements of the primitive versions of the developed states. These countries had their distinct structures, features and narratives that made them be in a situation of being the weaker participants in the global economy.
Advanced in 1949 by Raul Prebisch and Hans Singer, dependency theory sought to highlight the inequalities posited by globalization over the years. The two proponents observed that terms of trade deteriorated over the years for many third world countries in contrast to their developed countries (Biddle & Stephens, 1989). Many of the underdeveloped countries continue to face unfair terms which have seen them have less purchasing power when it comes to acquiring manufactured goods in exchange for a given amount of raw materials (Beckford & Rhiney, 2016). Nevertheless, the theory alludes to elements of theories of imperialism and Marxism that had postulated that through capitalism inequality would exist where the wealthy parties will continue being wealthier at the expense of their poorer counterparts.
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Jamaica is one of the third world countries that continue to be dependent on not only the U.S but also international financial institutions such as the World Bank and IMF. The dependency emerged after various shifts in economic policies targeting the country’s transition into the interdependence precipitated by globalization. Since attaining its independence in 1962, Jamaica witnessed an unparalleled growth in GDP at an average of 5.4% (Beckford & Rhiney, 2016). The growth stemmed from two primary sources. Firstly, the country enjoyed the robust export market in the US in the 60’s with much of its raw materials (mainly aluminium bauxite) absorbed in the US industrial cycle. The rising incomes of the masses in the North America region saw an influx of tourists in Jamaica hence boosting economic growth.
Background
The economic growth in the 50’s and 60’s in Jamaica was characterised by “industrialization by invitation” . This saw the country adopt import-substitution policies that focussed on foreign direct investments and the promotion of traditional exports. This saw the economy expand. The business elite in Jamaica embraced the pro-western policies as they enabled them to exploit the vibrant bauxite export business. The business elite through their influence ensured that foreign investors had their way in the Jamaican economy, therefore, precipitating inequalities brought about by the dependency ties. The 1962-1972 decade oddly was characterised by high economic growth and the unemployment rate that rose by 13% (1962-10.2% and 1972-23.2%). However, after People’s National Party took over under Michael Manley, the economy underwent a major change in economic policies geared towards self-reliance and social justice. The socialization of the economy saw reduced direct foreign investment, capital flight and negative advice information provided to tourists. The shrinking economic fortunes saw the country opt for IMF aid which projected the current dependence model that continues to characterise the country’s economy. As it stands, Jamaica enjoyed a debt service ratio of 32.7% in 2016 in comparison to 12.2% in 1976 (The World Bank, 2018).
Shift in Policy
The Jamaican economy is best captured with its historical background. After 1937-38 West Indian Labour rebellion, the country experienced gradual decolonization through elaborate strategies by the British. In 1944 the country enjoyed self-government but achieved full independence in 1962. The country witnessed a clash in economic policies with the leading parties namely; People’s National Party (PNP) and the Jamaica Labour Party (JLP) adopting different perspectives. The former was more radical socialist economic policy while the latter tilted towards conservative economic policies (Beckford & Rhiney, 2016). The trouncing of PNP in the 1962 elections saw the implementation of conservative economic ideologies. The pro-west foreign policy brought about investment in key sectors of mining and tourism
The country witnessed growth mainly due to the elite’s preference for pro-West foreign policy. The elite being chief beneficiaries of the dependency tie tend to ensure that the domestic policy is conducive to the western forces at play. The business elite was mostly grounded in the western capitalistic ideology which was soundly founded on ensuring key business interactions prevailed without taking into consideration the demographic dynamics at play. The political elite in the 50’s and 60’s was ambiguous as it adopted both pro and anti-Western stance when it came to the economic policy of the time. This highlighted the contradictory aspect of the dependent development in Jamaica (Biddle & Stephens, 1989). The contradiction was based on the outcomes of the relationships between the west and the domestic economy. The public witnessed high levels of unemployment and inequality. With the direct foreign investment in the bauxite industry through industrialization by invitation, other primary sectors such as agriculture were neglected with many Jamaicans moving to urban centres in search of industrial jobs. The influx of populaces in urban centres brought about grievances against the regime as well as the political elite.
The 1972 election ushered in PNP back into power which rode on the public dissatisfaction with the JPL economic policies. PNP opposed industrialization by invitation which had been a recipe for disaster in the previous decade. Manley adopted a “structural dependency critique of the international economic system and underdevelopment” (Biddle & Stephens, 1989). The regime focussed on ensuring that the country’s foreign policy was in sync with the national economic development. By focussing on the creation of a regional block namely the Commonwealth Caribbean Free trade area into the customs union (CARICOM), Manley sought to create regionally based solutions instead of relying on the western investments and markets. Additionally, Manley focussed on forging the Third World solidarity which was anchored on the need to diversify his country’s trading partners.
The bauxite policy further buoyed the Manley administration where control was wrestled from the Trans-National Corporations (TNCs). This was geared towards ensuring that development in relation to bauxite mining was set according to the countries priorities rather than the private entities. Manley sought to create a producers’ cartel involving various third world countries that were chief producers of the mineral. In short, in the Manley era three things were achieved: 1) Attempts to promote Third World solidarity, 2) Promotion of diversified trade pursuing linkages with other new markets other than North America and Britain, 3) blatant attacks on aluminium mining TNCs that had interests in mining bauxite.
The initiatives led to a reduction in foreign exchange which was further aggravated by the 1973 oil price inflation. This made it hard for the regime which was forced to take IMF loans to enable the country cover the surging expenses associated with fuel-based imports from gasoline to fertilizer. Sourcing loans locally was not tenable therefore the PNP government resulted in pursuing loans from international institutions such as IMF (Biddle & Stephens, 1989). The country’s economy was still vulnerable given that it had only emerged from the grasp of the colonizers merely twenty years ago. To turn around the economy, the country had to pursue long-term development plan that could have focussed on resources and infrastructure. However, IMF was not interested in such an engagement demanding short-term repayment. This saw cost costs in strategic industries that could have driven growth in the long run.
Inequality Embedded in Free Trading Policies
The trade imbalances as a result of the dependent ties to the financial institutions through debt saw the Jamaican farmers the brunt of cheap imports. The inflation of local agricultural products made imports attractive with many businesses and local market opting to buy foreign agricultural products. Much of the local produce namely potatoes, carrots and onions were replaced by imports by-products drawn from the United States (Beckford & Rhiney, 2016). Framing also dwindled with more people opting to move into urban centres and other countries in search of greener pastures. The neglect of fertile agricultural land was a major blow for the agricultural sector hence create greater opportunities for imports to compete and dominate the local market
The contradictory gap caused by the trade imbalance also saw the emergence of the banana wars that affected the country’s major agricultural export. The American multinational companies sought to bring down the long-term banana trade between Britain and Jamaica. This is because that it was cheaper to produce the products in Jamaica than any other country within the Caribbean. The 95% of the world’s banana market was dominated by the aforementioned multinationals which explain the push for collapse for the Great Britain market (Beckford & Rhiney, 2016). With the eventual collapse, the banana production was exploited by private entities at the expense of the Jamaican farmers.
Inadequate Research and Development to Guide Economic Policies
Much of the policies generated during the first two administration eras were characterised by populism and biased positions held by the political elite. The Manly administration lacked a comprehensive understanding of globalization and its predatory nature, especially to the Third World countries. The lack of research guided economy brings about stagnation and emergence of businesses that are not geared to compete on a global platform in the 21st century; innovation economies are key to ensure that world countries benefit extensively from the globalized economy. According to Thomas Friedman in his book The World is Flat: A Brief History of the Twenty-First Century the global economy presents equal opportunities for innovative players. However, this boils down to the utilization of the ten flatteners.
The infant Jamaican industries may, therefore, do well to approach the global economy as a competitive platform. There is the need to embrace the global dynamics which can be linked to the Globalization3.0 which advocates for workflow software geared towards IT engagements on the economic front (Friedman, 2005). The Jamaican government, therefore, should endeavour to empower its masses with IT related tools to ensure that they can effectively become global employees as more companies focus on outsourcing as a competitive strategy. In this light, innovative outsourcing companies in Jamaica providing affordable and quality labour are key.
The country further lacks mechanisms to promote protectionism policies that are in tune with the existing economic realities. This means that there is need to institute platforms of engagements where infant industries can thrive through support from international entities or have business policies that protect the entrepreneurs from unfair competition stemming from foreign lands.
Free trade/Outsourcing Versus Innovation
Free trade and outsourcing tend to promote disparities in the global economy. This is because each country is endowed, differently when it comes to technology. Many third world countries such as Jamaica lack the appropriate infrastructure that may support free trade, outsourcing and technological innovation. It continues to signal the ills of globalization. Free trade benefits those that are highly skilled or properly positioned at the expense of the less-skilled masses. Free trade, as observed in the case of Jamaica, tends to benefit big companies and elites at the cost of households who continue to witness a declining GDP share (Biddle & Stephens, 1989). Outsourcing, on the other hand, promotes the exploitation of skilled labour with wage inequality observed on the global economy as companies seek to reduce operational costs. Additionally, outsourcing brings down job opportunities in countries that are deemed to be high-waged especially for low-skilled workers. On the flipside, outsourcing promotes economic development in developing countries that are usually low-waged countries. Outsourcing initiatives see many skilled workers drawn from poverty or a state of unemployment.
Innovation, on the other hand, seeks to alleviate inequality on the global platform. This is because with innovation comes better ways of producing goods and services. This, in turn, brings about low prices and production costs (Friedman, 2005). With enhanced affordability, many people can effectively enjoy products without incurring additional costs. Jamaica in the recent has benefited from innovation that has characterised virtually all sectors promoting efficiency and quality.
However, within a nation innovation may lead to expanded inequality. This is because with innovation many jobs are eliminated which are mostly occupied by the working and middle class. The elimination of these jobs, therefore, leads to reduced household incomes while at the same time enhancing corporate revenues. The individuals behind the innovation, therefore, reap more at the expense of the working and middle class laid off as a result of innovation (Friedman, 2005). It is prudent to strike a balance when incorporating innovation in key sectors. It must be guided by a structured plan which ensures that the economy manages to absorb the emergent shocks.
References
Beckford, C. L., & Rhiney, K. (2016). Globalization, agriculture and food in the Caribbean: Climate change, gender and geography . UK: Palgrave Macmillan.
Biddle, W. J., & Stephens, J. D. (1989). Dependent Development and Foreign Policy: The Case of Jamaica. International Studies Quarterly , 33 (4), 411-434. doi:10.1163/2468-1733_shafr_sim190140112
Friedman, T. L. (2005). The world is flat: A brief history of the twenty-first century . New York: Farrar, Straus and Giroux.
Stiglitz, J. E. (2007). Making globalization work . New York: W.W. Norton & Co.
The World Bank. (2018). Debt service (PPG and IMF only, % of exports of goods, services and primary income) | Data . Retrieved from https://data.worldbank.org/indicator/DT.TDS.DPPF.XP.ZS?locations=JM&view=chart&year_high_desc=false
