Industrialization in the

Caribbean
 Question
Is Caribbean society industrialized?

How would you know for sure?

 From ‘How’ to ‘Why’
In the previous section we examined how the
process of industrialization had taken place in
the North.

When we turn our attention to the Caribbean

the question becomes “Why has the region not
become an industrial centre?
 Structure of the Unit
The first set of discussions examine the issues
regarding industrialization raised over the years: the
early independence period; the closing decades of the
20th century.
In the first section we examine the salient issues
through the work of Arthur Lewis

In the second section we look at the work of a

number of theorists for an explanation of the factors
that hinder the transformation of the region from
agricultural/partial industrialization to full
industrialization.
 Early Issues
The whole debate on development in the region has
in a sense been equated with industrialization
Recall early years of political independence were
spent trying to get development as industrialization
going.
Central to this era was the work of Arthur W. Lewis.
He saw the problem as one of lack of saving and
investment that would enable capital formation.
In addressing this issue Lewis asked how is it that a
country that is saving and investing 4 to 5 percent of
its national income, increases that ratio to 12 - 15
percent or more?
 Lewis’ Dual Model of
Economic development
Answer: savings must increase relative to national
income. This only possible if the earnings of those who
save increases relative to national income. Note, ‘those
who save,’ not the entire population.
Where Marginal productivity =0. Price of labour close
to subsistence wage.
Unlimited supply of labour exists in the subsistence
sector, therefore unlimited supply of labour exists at the
subsistence wage
Industrialization by Invitation: considerable inflow of
foreign capitalists and capital was needed to add capital
to this labour.
Rationale for Dual Economy
Model
Why?: A): the region had an unlimited supply of
labour where the population is so large relative to
capital and natural resources, that there are large
sectors of the economy where the marginal
productivity of labour is negligible, zero, or even
negative’ (Lewis 1983, 141)
The overpopulated agriculture sector could serve in
the interest of developing the industrial sector (no
choice to be made between agriculture and industry)
 Dual Economy Model
Lewis advocated shifting the concentration of labour
from the agricultural to industrial sector

He also expected that this process would increase the

price of food as fewer farmers would be producing
goods for the increasing number of non-agricultural
workers.

This would necessitate some increase in industrial

wages, which in turn, reduces the comparative advantage
of less developed regions
 Dual economy model
The simultaneous development of agriculture and industry
Surplus labour in agricultural sector can serve as a ‘hidden
reserve’ which could be tapped for industrialization
If industrialist could pay the cost of migrating, above that of
the agricultural sector then they could hire all the laborers
they needed at constant wages, as long as surplus existed

The capitalist sector expands through the reinvestment of

the economic surplus, pulling labour out of the subsistence
sector.
Increases in the savings and investment will eventually
bring sustained growth driven forward by the capitalists.
 Industrialization by Invitation
Lewis also said that in order to develop the industrial sector,
there was a need to invite foreign industrialists to establish
operations so that local capitalists could learn.

Foreign investment was needed to bridge the gap and

generate employment in the ‘medium run’. The potential
benefits included technology, sharing of
expertise/knowledge and the investment of much needed
capital.

Such pioneering activities (setting up of infant industries)

required incentives to overcome the handicaps of setting up
since the initial costs may be high
 Industrialization by Invitation
Some of these include temporary monopoly rights,
subsidies, tax holidays, provision of low rental factory
space with all the necessary amenities (e.g. good roads,
water supply, sewerage systems, electricity, etc).

These incentives, along with the relative low cost of

wages were crucial in attracting foreign investors to the
region.

The ascription of such a leading role played by the

foreign investors was ridiculed by the New World
economists, namely Lloyd Best who coined this strategy
approach “Industrialization by Invitation”.
Critique of Lewis’ Theory
In reality the modern sector has been unable to absorb
all of the surplus labour from the traditional sector.
Production has tended to be capital intensive; trade
unions have distorted the cost of labour; firms have
shied away from labour and its problems.
Slums and the development of an informal sector
have been the results.
The full potential of agriculture in the larger
territories of the region remains unrealized.
Created a dependence on our traditional agricultural
and extractive industries to earn foreign exchange.
Late 20 th century attempts
at Industrialization
Export Processing Zones (EPZs) e.g. T&T
Expected gains from these zones have not
been forthcoming
Foreign exchange contributions and linkages
with other sectors in the economy have been
limited along with technology transfer
Social and Industrial relations are
characterized by abuse, indignity, inequality
and a host of other negatives
 Lewis Model Revisited
Factors to consider:
Need to develop an indigenous technology (Norman
Girvan).
Economic liberalism under the aegis of the
international financial institutions.
Caribbean seems to be locked into a global industrial
process at the very bottom of the structure, engaged
in basic productive efforts (Pt. Lisas?).
It relies on the fact of abundant cheap labour or
energy rather than technological development and
innovation.
 In Search of Further Answers

Why have we remained monocrop, primary

exporting countries dependent on handouts
and goodwill of our industrial neighbours,
with absolute poverty threatening to sink us?
Why have we found it necessary to make a
virtue out of the fact that our people are
unskilled? Compare to S. Korea, India, China.
Why haven’t we been able to move ahead and
become advanced industrialized countries?
In Search of Further Answers
Carlota Perez (1984) – suggests that the successful
embrace and diffusion of new techno-economic
paradigms requires an accommodating socio-
institutional framework.
Dennis Pantin (1994) – It is institutional arrangements
that account for the failure to change economic policy in
the light of Lewis’ warnings in the 1950s.
Social and economic institutions built around: merchant
capitalism; rentier mentality on the part of national
political leaders; export of primary agricultural produce.
Institutional and Policy contexts
Merchant Capitalism concerned with buying and
selling rather than, innovation, the development
and application of new technology to productive
efforts. Retards institutional change.
In recent times the excessive debt burdens that
have placed us in the hands of the international
financial institutions have led to economic
liberalization and deeper debt crisis. This further
reduces local control over economic policy. No
longer always able to protect local industries,
offer subsidies in age of ‘free market’.
 Further Answers: Export
Oriented Industries
 Keith Nurse (1992):
 The developmental value of the export-oriented
industries of the region is very much limited in
terms of value-added, linkages, foreign exchange
earnings and technological multipliers.

 EOI has improved the employment situation in the

region , however the bulk of the activity is in
assembly line industries (apparel and electronics)

 Regional firms operate mainly as sub-contractors

and are restricted in that role
New era offers constraints as well
as possibilities
Irony is that the new era also offers new
possibilities for: (1) late industrialization
(These have been effectively exploited by
countries such as Brazil, India and China);
(2)development of a post industrial,
knowledge based economy.
 Next Week
Gender and work: The case of the Caribbean
We will look at the ways in which gender
affects work in the Caribbean.
Discussion on the concept of the sexual division
of labour.
Explain the distinctiveness of the concept of the
division of labour in the Caribbean and illustrate
how it affects the labour market.