As this year slips into the next, few persons pondering the state of the globe and Caricom’s place in it, will admit that among the events that might have occurred would be a global economic recession being compared, in terms of its potential, to the Great Depression that started in 1929, and never really disappeared until well into World War II. And the length of that depression is well worth pondering by Caricom citizens as we are being advised from the centre of the global economy, the United States, that there should be a turnaround by at least the year 2010. So our first thought, as we in Caricom move from 2008 to 2009 is whether, given the track record of those in the dominant countries responsible for these forecasts, we should believe their present forecast about a recovery, if they were unable to give us much of a hint about what is now upon us.
And as we look, again from our small corner, at the world’s economic centre, it is also useful to bear in mind that the present Chairman of the Federal Reserve Bank of the United States, Mr Bernanke, is a professional economist who had spent a good part of his academic and professional life studying and writing on the Great Depression – its causes and the path towards recovery. As the present crisis evolved, however, he did not seem to be particularly surefooted as to how the United States should proceed as the financial meltdown transformed itself, to his apparent surprise, into a general economic meltdown in that country.
In an environment in which the official gurus of the great United States itself seem to have got it wrong, it might be tempting for us in the Caribbean to excuse ourselves for the general state of the economies in our region, and to foist responsibility for what is now going here, on the ‘global economic crisis.’ But, as we move from 2008 to 2009 this would be wrong. For we know that one of the great disappointments of 2008 was, indeed, the continuing decline of many of our economies, with governments giving us few hints as to how a reversal of that decline should take place. And the fact of the matter is that, however much we now talk of the global decline, the real effect of the economic recession in the United States and Britain has not yet taken its toll on us.
It is true that the signs already are that the region’s tourism industry will be seriously affected, as the force of the recession has hit the US and the United Kingdom almost at the beginning of our tourism seasons. This is serious in the sense that countries which have had balancing economic activities, as with the Windward Islands and the banana industry, have been well aware that the future for such activities is likely to continue to be downwards rather than upwards. Particularly in Jamaica, the last set of heavy rains have forced the largest banana exporter – Jamaica Banana Producers – to go out of business in terms of its production in Jamaica. And the country cannot claim that its bauxite-alumina industry has ever really recovered from the decline that occurred at the end of the 1970s, even while noting that Russia, one of whose major companies is a part owner of the Jamaican industry today, is itself already feeling the effects of the American meltdown, and is reducing production and exports of bauxite and alumina from Jamaica. In Guyana,with the country’s dependence on sugar exports at a time of concern about the effects of the WTO decisions on the industry, and with the bauxite industry still somewhat in the doldrums, the global recession can only come as a further depressant.
Yet, these facts only go to show us that the global recesssion is really serving, in our case, to exacerbate a now well-recognised condition of decline or stagnation. It can hardly be targeted as a cause of decline. Caricom countries have been well aware, for example, that the change in Europe’s commitments to the international trade and production system, under the new jurisdiction of the WTO since virtually the middle of the 1990s, would change the structure of agricultural production and exports in this region, this leading to a major decline in the prospects for agricultural employment. Indeed in Jamaica, Jamaica Banana Producers, aware of this, decided some years ago to “take in front before in front take them,” as we say. For they began to diversify both the location of banana production (to Central America) and the output from banana production, in the process increasing the value added from the crop for example, by the manufacture of banana chips in factories which they have established as far away as Wales. Ironically the company was able to geographically diversify into manufactures in Europe by taking advantage of subsidies given to companies by the European Union wishing to invest in the underdeveloped regions of that continent.
As we face the full brunt of the American-led recession in the coming year, therefore, it seems to us that Caricom countries would do well not to spend too much time blaming the ‘global economy’ for what is happening here. First because, as we have been suggesting, the gradual decline has been occurring in most economies for some time now; and secondly, because there have been no real signs that our governments have sought to come to grips with that gradual decline through much policy innovation. Indeed, an interesting exception to this might be said to be Barbados, where after serious difficulty in the first half of the 1990s, successive governments took decisive steps in terms of economic policy, and in terms of ensuring public support for the steps to be taken (including the so-called Social Contract between government, business and labour), which led for most of the successive period to a recovery of economic growth. It now seems that in the present circumstances, that country faces the immediate future with more confidence than the rest of us, even when it is conscious of the slender base of natural resources on which its economy rests.
So the point that we would make here is that our Caricom countries do not seem to have focused, in all the previous years of decline, on the appropriateness of medium-term economic and social policy to economic recovery. This, in turn, seems to have led to a certain negative psychological attitude about the prospects for effectively weathering the present economic storm (or tsunami as we have even more frighteningly taken to referring to it). A recent editorial in a sister Caribbean newspaper, the Jamaica Gleaner, speaks recently of “a concept which [Finance Minister] Mr Shaw does not like but which the Government had better embrace if Jamaica is not to hop and skip merrily over the precipice. It is this: Jamaica is facing a crisis… It is critical… for the Government to place the country on a ‘war’ footing and for Mr Golding to transform a necessarily shuffled and reshaped administration into a CRISIS Cabinet.” But even that newspaper, noted for its realism, does not face the issue of whether a “crisis Cabinet” can be a one-party cabinet and have the national support that an economic crisis of the dimensions that it describes in the editorial requires.
We note also that the Government of the Bahamas, a country whose economy is built on tourism and financial services, and which has hitherto been inclined to stand aloof from Caricom as an economic system, has, virtually for the first time, been making its predicament known to the region – a region with which it obviously recognizes it now has more in common, and can share policy experiences with, as other countries themselves have moved to these economic activities.
In the face of all of this, however, we see no real indication that Caricom, as a grouping, has been urgently taking serious steps to discuss its countries’ predicament as a collective predicament of the smallest countries in the hemisphere, and to seek to create a platform for engaging with other states and institutions in terms of needed assistance for the immediate and medium-term future. We would be surprised if Caricom, as an institution, presented a substantial and detailed picture of its own prospects for the future, and its collective policies for adjustment to the new trade, production and finance circumstances, at the series of meetings held in Cuba and then Brazil during this month. If so, we have heard nothing about it, though we know that the Council on Trade and Economic Development (COTED) has met on the crisis.
No serious analysts in the international institutions, or in countries of significance to our future in the hemisphere or beyond, will accept, as we approach them, that we have a major problem now that we have not had for some time. Unless we can, as a small sub-region, provide ourselves, at these various conclaves, with a visibility (visually and what we propose in terms of medium-term policy rather than short-term assistance), we will not find a place in their deliberations about the future of the global economy or the hemispheric economy.
It is interesting that at the meeting held between the EU and Brazil on December 22 to discuss EU-Brazilian co-operation, present (at the top table, so to speak) along with President Sarkozy and President Lula was the President of the European Commisson, Mr Barroso. Where has the presence and voice of Secretary General Carrington been in the face of our recent difficulties?