GENERAL LC/CAR/G.652 2> F p i A 22 June 2001 SUBREOICNAI^HO roT îfe, ORIGINAL: ENGLISH j Ac.-;; ^ CARIBBfcANDOcUMf»,îT'\ ; u ,n An Analysis of Economie and Social Development in Barbados: A M odel fo r Sm all Island Developing States UNITED NATIONS ECONOMIC COMMISSION FOR LATIN AMERICA AND THE CARIBBEAN Subregional Headquarters for the Caribbean CARIBBEAN DEVELOPMENT AND COOPERATION COMMITTEE i ACKNOWLEDGEMENT The Economic Commission for Latin America and the Caribbean (ECLAC) Subregional Headquarters for the Caribbean wishes to acknowledge the assistance o f Professor Andrew S. Downes in the preparation o f this report. FOREWORD The contemporary international system which has, as its hallmarks, the intensified globalisation of international relations and the entrenched philosophy of economic liberalism, has confronted small island developing States with a number of major challenges. The globalisation of markets, for example, has brought in its wake, a number of impacts that strike at the very core of the domestic structures of these States, even as they pursue strategies, internally as well as externally, towards their sustainable development. In this regard, the drive to competitiveness that is to be generated by domestic structures but exercised and even evaluated, at the international level, involving institutions such as the WTO, constitutes a major challenge. Amid all these strictures, these States continue to pursue a more profitable insertion into the international economic system. The adoption, in 1994, of a Programme of Action for the Sustainable Development of Small Island Developing States under United Nations auspices, was envisaged to have heralded a new dispensation in which the international community would cooperate with these insular entities in a number of critical areas, towards their sustainable development. Nevertheless, even as the implementation of Agenda 21the major outcome of the 1992 Earth Summit and its progeny, the SIDS Programme of Action, were reviewed by the United Nations General Assembly in 1997 and 1999, respectively, it was all too evident that the commitments adopted at those major global conferences remained to be fulfilled and that, in a very real sense, small island developing States would increasingly have to rely on their own financial, human and other resources. Moreover, the basic concept of vulnerability, on the basis of which small island developing States are identified as being entitled to special forms of treatment, has come under challenge from significant sectors of the international community. Against the background of this less than favourable international environment, we are presented with a case study of a small island developing State, Barbados, one of 23 covered by the Subregional Headquarters of ECLAC for the Caribbean, which, according to official evidence adduced, has managed to take decisions and to implement policies that have vastly advanced its economic and social development over the past four decades. The study reviews the significant economic and social progress of Barbados over that period, drawing particular attention to achievements in the diversification of the country’s productive apparatus and the transformation of its historically monocultural profile based on sugarcane, to one of a modem, competitive, service-oriented economy, with tourism and financial services as major components, combined with a modest manufacturing sector. Overall, the study specifically depicts, in the context of significant and steady growth in national income and GDP, a pattern of effective macroeconomic management that, apart from the period of the oil shock of the 1970s, has maintained low inflation rates and a stable exchange rate. The necessity of recourse to an IMF structural adjustment programme is also reviewed, as is the return to macroeconomic stability in 1993, after what is described as “three years of economic decline” . Significantly, since that period, the record is one of satisfactory growth rates, accompanied by falling levels of unemployment. Fundamentally, the case study highlights the effectiveness of the country’s policy-making and other institutional structures, in the context of the principles of universalism and social welfare as a citizenship right espoused by the Barbadian Authorities. The reformist position and incremental approach that is evident in the area of health care and the increasing attention paid to certain groups such as the youth, the elderly and the disabled, are also the subject of careful examination. Housing policy, necessarily developed in the context of rising demand and relative land scarcity, has been identified as a challenge, even as innovative approaches are pursued. The persistence of poverty, affecting some 13 per cent of households, is nevertheless fully recognized. iv In reviewing the country’s pursuit of developmental initiatives, the role of civil society, including NGOs and, significantly, the communications media, is underlined. Overall, accounting for the impressive degree of social and economic development that has been achieved in Barbados, we identify the effectiveness of a range of social, political, economic and institutions. Such structures provide for investment in human resources, the establishment of well-functioning social infrastructure and the maintenance of political stability, among other aspects. Ultimately, as the progress towards sustainable development across the Caribbean subregion is evaluated, these, together with the indispensable financial component, are among the most salient factors that account for the uneven performance that is the major observation in this regard. This case study constitutes a welcome addition to the literature on the progress of small island States towards sustainable development. As an organisation entrusted with the implementation in the subregion of the SIDS Programme of Action and taking into account its day-to-day performance of the role of Secretariat for the CDCC, the Subregional Headquarters of ECLAC for the Caribbean presents this publication in the context of the exchange of experiences, which remains a most powerful element in South-South cooperation. The policies pursued by the small island developing State of Barbados, as carefully examined as they have been in this study, might be approached by policy-makers of other small island developing States not only of the Caribbean but also and of other geographical regions, as models from which useful lessons might be derived. In this very spirit of cooperation, ECLAC proposes to bring this case study to the attention of the Association of Small Island States (AOSIS). V Table of contents Acknowledgement .................................................................................................................... i Foreword..............................................................................................................................iii Executive Summary...............................................................................................................vii Section 1 : Introduction............................................................................................................. 1 Section 2: Economic analysis................................................................................................... 5 2.1 Economic development planning: Strategies and policies ..................................................5 2.2 Economic growth and structural change......................................................................... 11 2.2.1 Agriculture......................................................................................................18 2.2.2 Manufacturing................................................................................................. 18 2.2.3 Tourism .......................................................................................................... 19 2.2.4 Other services .................................................................................................. 21 2.3 Labour force, employment and unemployment ................................................................ 21 2.4 Income inequality and poverty ...................................................................................... 26 2.5 Macroeconomic management........................................................................................ 29 2.5.1 Inflation.......................................................................................................... 29 2.5.2 Fiscal management........................................................................................... 32 2.5.3 Balance of payments ........................................................................................ 35 2.5.4 Structural adjustment policies ............................................................................ 37 2.6 The impact of changes in the external economic environment .......................................... 42 Section 3 : Social analysis .........................................................................................................46 3.1 The social policy and institutional framework .................................................................46 3.1.1 The institutional framework .............................................................................. 49 3.2 Social policy development ........................................................................................... 53 3.2.1 Health policy ..................................................................................................