I posted this question to myself, yesterday, as I was riding the bus from Kingston to Montego Bay. I’m convinced that the answer is yes, but I am also clear that it may not help in getting to workable solutions.
What made my mind wander there was the clearer fact that part of Jamaica has suffered through what economists and social scientists would know as ‘Dutch disease‘, to quote the Financial Times (my stresses):
‘Dutch disease is the negative impact on an economy of anything that gives rise to a sharp inflow of foreign currency, such as the discovery of large oil reserves. The currency inflows lead to currency appreciation, making the country’s other products less price competitive on the export market. It also leads to higher levels of cheap imports and can lead to deindustrialisation as industries apart from resource exploitation are moved to cheaper locations.
The origin of the phrase is the Dutch economic crisis of the 1960s following the discovery of North Sea natural gas.’ Another term often used is ‘resource curse‘.
Although the foreign currency inflows associated with the rise of mass tourism were accounted for as if they accrued to the whole country, the reality was and is that these inflows were concentrated in the tourism centres, mainly to the western end of the island. That’s true, even if one accepts that the net retention from tourism is well-below 100 percent of revenues. Much of the foreign currency receipts and its local currency equivalents flow through the hands of local people.
The expected impact of such inflows is to lead to currency appreciation, and that is broadly the picture of what happened in Jamaica, even though it might have been manifested in a stability of the exchange rate, rather than a depreciation caused by other economic problems, namely a huge fiscal deficit and rising external debt burden. So, one can see that the Jamaican dollar for a long time remained artificially stronger than it should have been. Not surprising to many economists, that position was unsustainable, and sharp depreciation that was stored up had to occur eventually.
Some of the other attendant problems that the Jamaican economy faced, such as high and protracted unemployment, are consequences of this over-appreciated exchange rate, as pointed out by renowned economist and Nobel prize winner, Joseph Stiglitz. One of the findings of how this phenomenon permeates economic and social behaviour in a country is that such ‘richly-endowed’ countries experience dismal performance. One reason being:
‘…the prospect of riches orients official efforts to seizing a larger share of the pie, rather than creating a larger pie.
The result of this wealth grab is often war. At other times, simple rent-seeking behaviour by officials, aided and abetted by outsiders, is the outcome.’
I think the rent-seeking behaviour by officials is one of the clearest things about Jamaica: it’s what many refer to when they talk about having a high perception that corruption is rife. Jamaica’s anemic economic growth and the spoils system of the entrenched two-party system fit well with the notion of eating more of the existing pie without putting more pies in the oven.
The other thing, ‘war’, is less evident to many, but those who have seen it, such as anthropologist Herbert Gayle (who describes ‘games of war’ with vendettas and retaliation), have pointed out how many aspects of Jamaica’s wave of violence is akin to that of countries at war. I’m one of those who see ‘crime’ in Jamaica as more reminiscent of ‘civil war’ than of ‘ordinary’ crime, and the preferred solutions cannot work unless one addresses the implicit or explicit attack on the State.
To me, these are some aspects of the misunderstanding and consequent misdiagnosis of what Jamaica has been experiencing. Jamaica is not just another developing country, so it cannot have workable solutions that treat it as such. It’s relevant paradigms are not the average of development countries, or even those in the English-speaking Caribbean, or some some set of constructed groups. It’s paradigm should at least be resource-rich economies, and within those, the ones that had below-average incomes.
That the Dutch disease phenomenon was understood as it pertained to tourism, we see that Jamaica used one of the tried and tested means of neutralizing the foreign currency inflows by creating a special fund for some of the inflows, through the Tourism Enhancment Fund (TEF). But, TEF is only tapping the merest dribble of potential tourism-related inflows, the rest of which flow around the private sector and the public finances. So, for the most part, no effective neutralization of the inflows has taken place beyond what the central bank may try through its ‘smoothing’ operations in the foreign exchange market.
Now, some may argue that foreign tourism should be seen as a natural resource in the same way as a discovery of oil or copper or even the existence of our bauxite reserves. Though that may be true, the notion of the impact of foreign tourism as a Dutch disease phenomenon has been examined in the case of one country where it was likely to be present, Spain, and the rise of its mass tourism markets.
Anyone who visits Montego Bay and knows the rest of Jamaica would be hard pressed to say that the north coast strip bears any resemblance to the rest of the country, and it shouldn’t. It is truly a world apart–or really several interconnected and disconnected worlds (as the recent comments by the WTO’s Secretary General touched on with the idea of five star resorts in three star communities). Much as the areas that were the beneficiaries of development in bauxite and alumina were also highly atypical (look at road and housing developments, especially, in such areas). That such areas did not ‘erupt’ and manifest other social problems was a piece of luck brought about by the relative isolation and small size of the communities involved.
A common adage in economic and financial analysis of malfeasance is ‘follow the money’. It would not have been difficult to try to understand the money trail that was being created in Jamaica by mass tourism and make some simple deductions about the problems that were likely to show up. But, a word of caution. The impact of the massive inflows of foreign currency did much to change the mindset of anyone close to that process. Simply put, more money was sloshing around and like bears to a honey pot, everyone could think something nice was there for them. That could easily be seen as leading to a trend towards exploitation because that was likely the easier way to tap into those flows. It’s a short step from that mindset to that which sees Jamaica as a base of exploitation and (for the moment) an easy place to run the latest schemes, in this case lottery scamming (even though that began as an ‘accident’ out of legitimate business). But, that latter was made easier because Jamaica had been rapidly brought into the web of globalization, manifested by much easier access into and out of the island, both physically and through telecommunications. That the money-making potential of that was seen and was well-understood in the so-called underworld and by certain politicians shouldn’t come as any surprise, whether spontaneously done or spurred by a raft of international contacts. By the time others cotton on to what is underway it’s far too late to roll back the time (excuse the mixed metaphors). But, down be lulled into thinking that Montego Bay has a ‘crime’ problem. Crime is not fundamentally what needs to be fixed.
The World Travel and Tourism Council estimated that the total contribution of tourism and travel to Jamaica was about 30 percent of its GDP in 2016, and the total contribution to employment was just over 27 percent. I’l leave you to deduce whether tourism is a major driver in what’s going on in Jamaica.