Presentation to the Nassau Institute/Atlas Economic Research Foundation conference, Taking Small Nations to Greatness, Friday, June 9, 2006.
A group of small, picturesque independent islands, dependent territories, and sovereign states make up the Caribbean Basin. Their small size, isolation from markets, yet dependency on trade, and susceptibility to natural disasters make the prosperity they have achieved both precious and precarious. Some of the region's societies have done well. Others haven't. What accounts for the differences?
Isolation results in economic pressures that make survival in the Caribbean difficult. Even so, the region's geographic placement between two continents makes it a natural crossroads for trade and smuggling. Geography and climate can produce natural disasters that sap productivity and promote disorder. Where governments are weak and under-funded, needed services are lacking. Meanwhile, some states clearly have a destabilizing influence on their neighbors.
Mr. Stephen C. Johnson
The good news is that it's possible to develop an economic model that will allow a population to survive and prosper on an island. The Bahamas proves it as one of the Caribbean region's most prosperous states. The Bahamas has only 300,000 people, yet its population generates $5 billion in economic activity annually, amounting to $16,000 per capita, approaching industrialized nation levels. That's twice what the rest of the Caribbean produces with greater population density and resources.
But achieving that kind of prosperity is not easy. As Bahamians know, certain life sustaining crops don't grow where the soil is poor or limited. So a survival or subsistence economy is a poor choice. Upon that, modern ways of living assume that people will consume goods and services. Consumer economies require trade to sustain them. Isolation by sea makes trade difficult. Trade requires energy, which costs more if you don't have the resources or the means to develop it. Trade is even more precarious if your population is not educated enough to know how to access markets to offer something neighbors might want.
Not every state in the Caribbean has found a sustaining formula (banking and tourism) like The Bahamas. Consider Haiti which generates $3.9 billion in economic activity per year with 8 million people. That's about $450 per person-an incredibly low output. Yet when poor Haitians migrate to the United States they do quite well. They labor hard to advance themselves economically and socially. Why can't they do that in Haiti?
Geographer Jared Diamond provides some clues in his recent book Collapse. Haiti's island, Hispaniola, was originally colonized by Spain. But when Spain's power declined, the French established control over the western end. The French cut the timber to make plantations and imported huge quantities of slaves from Africa. When the slaves revolted and threw the French out, they established subsistence farms to avoid going back to the hated plantation system. Such plots might have made sense then, but won't support a population of 8 to 10 million. Over time they have contributed to the further decline of Haiti's forests and plant life. Moreover, traditional subsistence farmers do not welcome modernization and seem hostile to immigrants who might challenge the prevailing order.
The Dominican Republic, on the other hand, languished until the 20th century until dictator Rafael Trujillo industrialized it to enrich himself. Democracy eventually came along and Dominicans were able to flexibly capitalize on these advances. It still has forests. Once poorer than Haiti, inhabitants of the Dominican Republic wonder what it is they can do now for their impoverished cousins on the western side of the island.
Cuba has rich land, some minerals and oil, and in the early 1900s developed a prosperous, though undemocratic, society. By 1950, its social indicators placed it at the top of all Latin American states. Since the Castro revolution, Cuba replaced markets with a command economy based on what its dictator wanted to barter. The Castro regime now imports twice what it exports ($5 billion versus $2 billion) and, except for the 1990s, has been heavily dependent on aid from other countries-first the Soviet Union, and now Venezuela.
Jamaica relies on tourism but 20 percent of its labor force still works in agriculture, which makes up only 7 percent of the economy. Its unemployment rate is 15 percent. It imports more than it exports. Jamaica survives, but has yet to find its groove. Throughout the rest of the region, the gradual loss of trade preferences for key crops such as bananas and sugar and limited economic diversification are contributing to decreased economic growth. Tourism and remittances are now the largest sources of income.
Maritime isolation increases the cost of trade, but ironically facilitates smuggling. Vast tracts of ocean are hard to patrol and rugged coastlines tough to police. Where governments are ill-supported by poorly performing economies, law enforcement is weak. Poorly-paid public servants are more susceptible to bribery and participation in smuggling activities. No surprise, then, that Haiti is sometimes described as a narco-state even though it produces no drugs, but because it has become a major transfer point for cocaine coming out of Colombia and Venezuela. Haiti simply does not have the resources to apprehend traffickers. Jamaica is also impacted because it is more directly in line with routes from South America to markets in the United States.
Surveillance to control drug running costs a lot to maintain. In the early 1990s, the United States set up a network of over-the-horizon radars along its Gulf coast to track airborne and maritime traffic. It was transferred from Customs and Immigration to the Air Force which largely dismantled the system because drug interdiction is not its mission and it had to make budget decisions. Now there's a surveillance gap.
Smuggling arms is another threat. At various points in recent history, combat weapons have flowed into both the Dominican Republic and Haiti to support various causes, rebellions, and regimes. Moreover, they now go to gangs and criminals in Haiti, the Dominican Republic, Jamaica, Puerto Rico, and Guyana. Lethal arms that remain unaccounted for present a danger to public safety and order. Without order and predictability, investment and prospects for prosperity suffer.
Further to the south, law enforcement has declined in Venezuela where the government now considers political disloyalty more dangerous than violent crime. Drug trafficking, kidnapping, and homicides surpass levels now experienced in Colombia, worsening the impact of criminal networks operating throughout the tropics.
Meteorologists tell us that hurricane season began June 1. Hurricane Ivan did $3 billion worth of damage in Grenada while Tropical Storm Jeanne took 3,000 lives in Haiti. The Bahamas have been regularly bashed. These periodic disasters limit investment, ruin infrastructure, and make populations vulnerable to criminal enterprises that feed off disorder and lack of adequate policing in their wake.
Underperforming economies, crime, and natural disasters have ripple effects that take a toll on governance. Where the tax base is low or strained by extraordinary needs, scarce resources are available to provide public services, ensure the rule of law, and guarantee public safety. On the one hand there is chaos as in Haiti. On the other, there is tyranny in Cuba where the government uses regimentation to compensate for a chronically underperforming economy.
Even where governments tend to function relatively well, there are economic vulnerabilities. Security costs money. Some analysts, like Professor Ivelaw Griffith of the Institute for National Strategic Studies at National Defense University in Washington, worry about weak fortifications around the oil and liquified natural gas facilities in Trinidad and Tobago, minimal protection surrounding refineries in the U.S. Virgin Islands, and sketchy security measures for the 2007 World Cricket Cup-all potential terrorist targets. Ensuring the sustainability of these economic workhorses requires dedicated funds to protect them.
As in every civilization at every point in human history, there are societies that are stable and friendly, some that are not, and there are always potential invaders waiting to plunder the weak. The Caribbean seems relatively blessed with a multitude of friendly societies that seem to cooperate with each other to a fair degree. But there are those that do not or cannot. Cuba-has been under dictatorship now going on 50 years. During the 1970s and 1980s, as a Soviet client state, it supported revolutions throughout Latin America. When the Soviet Union collapsed, it was no longer able to do so. Now, refinanced by Venezuelan oil profits, Fidel Castro is able to play a coordinating role in directing the revival of a bellicose Latin American left. Russia still plays a role, not giving but selling arms to Cuba and newly re-aligned states. Cuban doctors, sports trainers, and security specialists are being deployed in record numbers to Latin American countries, in part to showcase Castro's brand of socialism, but also, in part, to uncover political frailties and identify targets of opportunity to weaken and subvert democratic systems.
Venezuela-Hugo Ch?vez came to office claiming to help the poor, but instead rewrote the constitution to maintain himself in power, has eliminated checks and balances, muzzled the media through draconian laws that make it a crime to even mildly insult public officials even though calling names is his personal hallmark. Outside his borders, Ch?vez threatens non-leftist states. He is friendly with the Revolutionary Armed Forces of Colombia, meddles in political campaigns in countries like Peru, and practices petro-politics by cutting production to jack up oil prices, then offers concessions to foreign leaders loyal to him. More worrisome, he is buying large quantities of rifles to arm a separate partisan army outside the Venezuelan armed forces, and recently announced the purchase of Russian Sukhoi fighter-bombers-most useful for attacking another country, presumably Colombia. But other countries such as Guyana, Trinidad and Tobago, and Aruba might be at risk.
Haiti-does not pose a military threat as Cuba and Venezuela do. But its weak state with limited authority and law enforcement could allow the country to become a major hub of transnational criminal activity. Nations that have donated to Haiti and helped it in the past must continue to help the new government of President Rene Preval establish durable institutions and a grass-roots democracy.
These countries present another kind of threat to their neighbors-mass migration. Castro's eventual death could provoke an exodus of rafters from Cuba. A loss of oil revenue in Venezuela would bring on economic collapse, sending waves of migrants throughout Latin America and the southern Caribbean. And failure of Haiti's new government to advance beyond the chaos that existed under President Jean Bertrand-Aristide will lead to a renewed outflow that could impact the Dominican Republic, The Bahamas, and the United States.
Beyond Mere Survival: Freedom and Prosperity
No society is safe from pressures and threats. Perhaps that is what makes the success of countries like The Bahamas so much more remarkable. Lacking resources and a huge labor force, it is nonetheless free and prosperous. It shows that the keys to going beyond survival and developing a self-sustaining, prosperous society are largely in one's head. Those keys are knowledge, flexibility, and respect for each person's freedom to innovate. Without such virtues, there is no future, no freedom, no prosperity.
Click here for more information about Mr. Johnson, Senior Policy Analyst for Latin America, The Heritage Foundation.
Click here for more information about The Heritage Foundation.
The views expressed are those of the author, and not necessarily those of the Nassau Institute (which has no corporate view), or its Advisers or Directors.
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