ECON3501CARIBBEAN ECONOMIC DEVELOPMENTUNIT 4 – ECO

ECON3501
CARIBBEAN ECONOMIC
DEVELOPMENT
UNIT 4 – ECONOMIC GROWTH
RESOURCE MATERIALS
of Caribbean Political
Economy: The Legacy of George Beckford. Kingston. Ian
Randle Publishers
Underdevelopment in the Plantation
Economies of the Third World. UWI Press.
Economic Development. Pearson
Education & Addison-Wesley
sh (2004). In Defence of Globalization,
Oxford University Press

Management: Caribbean
Perspective Kingston: Ian Randle Publishers
- UNDP, Human Development Report. World
Bank-World
Development Report
2
ECONOMIC GROWTH
in the
output that an economy produces over a period of time based on
per
capita. That is, an increase in GDP or GNI per capita.
what an
economy can produce if it is using all its scarce resources.
shown by an
outward shift in the economy’s production possibility frontier
(PPF).
3

PER CAPITA STATISTICS
Per Capita is used to refer to a unit or each
person within a population.
A country’s economic growth and comparison
of living standards among countries can be
expressed using GDP per capita or GNI per
capita information.
GDP or GNP divided by its population.
of the well-being for the average person.
Bahamas, The
2019 34,863.70
Puerto Rico
2019 32,873.70
Turks and Caicos Islands
2019 31,353.30
St. Kitts and Nevis
2019 19,935.00
Curacao
2019 19,689.10
Barbados
2019 18,148.20

Trinidad and Tobago
2019 17,398.00
Antigua and Barbuda 2019 17,112.80
Uruguay
2019 16,190.10
Panama
2019 15,731.00
Top 10 countries in the Latin America and Caribbean
region for 2019 based on figures from Worldbank.org
4
https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locatio
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ns=ZJ-PR
ns=ZJ-TC
ns=ZJ-KN
ns=ZJ-CW
ns=ZJ-BB
ns=ZJ-TT
ns=ZJ-AG
ns=ZJ-UY

ns=ZJ-PA
THE PRODUCTION POSSIBILITY FRONTIER
(PPF)
Q
u
a
n
ti
ty
o
f
C
o
m
p
u
te
rs
P
ro
d
u
c

e
d
Quantity of Cars Produced
3,000
1,000
2,000
2,200
A
700600300
0
1,000
B
C
D
Production
possibility
frontier
Unattainable
Efficient, Attainable
Inefficient

The Production
Possibility Frontier
(PPF) represents the
points at which an
economy is most
efficiently producing its
goods and services and,
therefore, allocating its
resources in the best way
possible.
PRODUCTION POSSIBILITY CURVE
2000
700
A.B
A’2300
850
Q
u

a
n
ti
ty
o
f
C
o
m
p
u
te
rs
P
ro
d
u
c
e
d
Quantity of Cars Produced
PPF1
0
3,000

4,000
1000 1500
PPF2
• When the PPF curve
shifts outwards, we know
there is growth in the
economy.
• Alternatively, when the
PPF shifts inwards it
indicates that the
economy is shrinking.
• A shrinking economy
could be a result of a
decrease in supplies or a
deficiency in technology.
ECONOMIC GROWTH
resources and

improvements in technology, or in another way, an increase in
the value
of goods and services produced by every sector of the economy.
increase in a
country's GDP
(Gross Domestic Product).
final goods
and services produced within a country in a given period of
time.
7
ECONOMIC GROWTH
Components of GDP
interested in the composition of GDP
among various types of spending.
components: consumption (C), investment (I),
government expenditure or spending (G), and net
exports:
Y = C + I + G + (X - M)
This is the expenditure approach when calculating GDP

8
MEASURING ECONOMIC GROWTH
monetary value of all the goods and services
produced by the nationally owned factors of
production.
come receipts from overseas
operations minus (-) income payments to
foreigners
Depreciation. 9
MEASURING ECONOMIC GROWTH
10
STAGES OF ECONOMIC GROWTH

ntieth century Development
Studies
was Walt Whiteman Rostow
assumption that "modernization" was characterized by the
Western
world (wealthier, more powerful countries at the time)
underdevelopment.
11
12
subsistence, agricultural based
economy, with intensive labor and low levels of trading, and a
population that does
not have a scientific perspective on the world and technology.

resulting in very low labor
productivity and little surplus output left to sell in domestic and
overseas markets
-off: Here, a
society begins to
develop manufacturing, and a more national/international, as
opposed to regional,
outlook.
percentage of national income
or GDP. Some external funding is required - for example in the
form of overseas aid or
perhaps remittance incomes from migrant workers living or
working overseas 13
-off: Rostow describes this stage as a short period of
intensive
growth, in which industrialization begins to occur, and workers
and
institutions become concentrated around a new industry.

ring industry, political and social institutions start
to develop
with a bit more growth in savings and investments.
productivity and
wealth in manufacturing and other industries but a lesser
concentration
on agriculture characterized by low, real incomes and lower
levels of
productivity. 14
of time, as standards
of living rise, use of technology increases, and the national
economy grows and
diversifies.
dependent on factor inputs for growth
towards making better use of innovation and technology to
bring about increases in real per
capita incomes.

believed that Western
countries, most notably the United States, occupied this last
"developed" stage.
Here, a country's economy flourishes in a capitalist system,
characterized by mass
production and consumerism.
expenditure. There is a shift towards tertiary
sector activity and the growth is sustained by the expansion of a
middle class of consumers.
15
ROSTOW’S THEORY IN CONTEXT
ustrialization, urbanization, and trade in the vein of
Rostow's model is still seen
by many as a roadmap for a country's development.
in this way and is now
a notable player in the global economy. Singapore is a southeast
Asian country with a
population over 5.8 million, and when it became independent in
1965, it did not

seem to have any exceptional prospects for growth.
manufacturing and high-tech
industries.
population considered "urban."
It is one of the most sought-after trade partners in the
international market, with a
higher per-capita income than many European countries.
16
CRITICISM
on a
successful path to economic development for some countries.
However,
there are many criticisms of his model.
alist system, scholars
have
criticized his bias towards a western model as the only path
towards
development.

critics
have cited that all countries do not develop in such a linear
fashion -
some skip steps, or take different paths.
17
CRITICISM
- down," or one that
emphasizes a trickle-down
modernization effect from urban industry and western influence
to develop a country as a
whole.
"bottom-up" development
paradigm, in which countries become self- sufficient through
local efforts, and an urban
industry is not necessary.
desire to
develop in the same way, with the
end goal of high mass consumption, irrespective of the diversity
in priorities that each

society holds and different measures of development.
economically prosperous countries, it
also has one of the highest income disparities in the world.
18
CRITICISM
geographical
principals: site and situation.
ual chance to
develop,
without regard to population size, natural resources, or location.
ports, but
this would not be possible without its advantageous geography
as an
island nation between Indonesia and Malaysia.
19
CLASSICALS - GROWTH THEORY

the productivity of labor
and the ratio of productive
and unproductive labour
would influence economic
growth in an economy.
20
Malthusian Theory
- Thomas Robert
Malthus.
population and limited resources will eventually bring
economic growth to an end.
on increases arithmetically (1,2,3,4,5 etc.) and
Population increases geometrically (1,2,4,8,16,64 etc.)
21

The Basic Idea
increased productivity and increased real GDP per capita.
person will be temporary because prosperity will induce a
population explosion and the population explosion will decrease
real
GDP per person.
22
23
and
eventually decreases real income to less than subsistence real
income.
income,

some people cannot survive and the population decreases.
income (real
GDP per capita) is always pushed back toward the subsistence
level.
KARL MARX - GROWTH THEORY
that Economic
Growth would be dependent on Labour and
influenced by accumulated capita but more so through the
exploitation of labour under capitalism.
= Profits
1. Increase the length of the work day
2. Increase the intensity of work effort (to produce more goods
in a given time)
3. Increase monitoring of workers (to ensure they do not slack
off)
4. Reduce wage bill( lower wages or hire women and children to
replace men to pay them less)
lower costs and increase profits to stay in business.

eventually end through the revolution between the
Bourgeoisie (merchants/factory owners) and Proletariat
(exploited workers).
-
24
GROWTH THEORY
will increase as long as
technology keeps advancing.
and
technological change are influential but are not themselves
influenced
by real GDP growth.
y, growth will persist.
25
GROWTH THEORY

Population Growth
death rate decreases.
rate of
population growth
is independent of the rate of economic growth.
classical
economists.
26
GROWTH THEORY
Technological Change
gical change
influences
the rate of economic growth, but economic growth does not
influence the pace of technological change.
or

something other than economic events,
enous or autonomous – determined
independently from the
economic system.
27
GROWTH THEORY
The Basic Idea
the
new technologies.
Investment and saving increase, so capital per hour of labor
increases.
28
GROWTH THEORY
prosperity will last

but the
growth will not unless technology keeps advancing.
occurs to
lower real GDP per person.
29
GROWTH THEORY
se
capital accumulation brings
diminishing returns, which slow the growth rate of real GDP
and slow the level of
saving and investment.
population and real GDP per
person stops growing.
A Problem with Neoclassical Growth Theory
technological change.
30

GROWTH THEORY
most economically efficient
manner in face of globalization.
resources and to search
for new ways to ensure that this is done.
argued that losses in one
industry will be compensated by gains in another industry.
important for nations and the
world to achieve greater economic efficiency.
31
GROWTH THEORY
ical Improvement
many countries to
make progress towards integration efforts.

countries that became
more technologically advanced and are now making moves to
pursue
technological growth through research.
services has
forced many firms to invest more in technology, research and
development.
32
GROWTH THEORY
h Theory
greater
productivity and perpetual economic growth.
grows
because of the choices people make in the pursuit of profit.
33

GROWTH THEORY
about
market economies:
roys profit.
34
GROWTH THEORY
and how hard to
study.
—and at which
technology
advances—is not determined wholly by chance.
technology and how

intensively they are looking. 35
GROWTH THEORY
36
to increase
profit, people constantly seek
either lower cost methods of production or new and better
products for which people
are willing to pay a higher price.
ries at the same time – technical
knowledge is potentially
a ‘public good.’
GROWTH THEORY
stagnate under the
pressure of population growth.

the fastest population
growth and therefore they will be the first to stagnate.
of the world
economy over the past few decades.
37
GROWTH THEORY
will grow
and at a rate that is determined by the pace of technological
change.
es, and
capital is free
to roam the globe seeking the highest available profits.
GDP/capita
and national growth rates will converge.
38

GROWTH THEORY
nce among the rich countries.
unconditional
convergence, in which all poor countries grow more rapidly
than richer
countries, the growth rate of developing countries has been
substantially above that in developed countries for the past 20
years
and seems likely—but not certain—to remain so.
imminent
for all countries.
39
KEYNESIAN - GROWTH THEORY
etarists, Keynes believed in
Active fiscal and monetary
policy to stabilize the economy and realise economic growth.
would be ideal to realise
economic growth.

product, firms would find a
means to supply.
be realised.
components of Aggregate Demand =
Aggregate Expenditure = C+I+G+ X-M
lieved in the use of Functional Finance
40
MONETARIST - GROWTH THEORY
intervention.
- Long run monetary
neutrality. Expansionary
Monetary Policies would not realize Economic Growth in the
long-run since the economy
is at its full potential. Increasing the money supply would only
reap inflation.
may affect economic growth

which includes: Technological Advancement and increases in
the size and productivity of
the labour force.
-neutrality
where Expansionary
Monetary Policies could realize Economic Growth in the Short
Run due to excess capacity
in the economy.
41
ECONOMIC GROWTH DETERMINANTS
including
buildings, machinery, equipment, etc.
nly made possible when there is savings
taking place
within the economy.
and hence
growth.

governments are
having difficulty meeting. This inhibits the economic growth
rates of
Caribbean Economies.
42
consumption.
be
saving out of their income in lower levels or not at all.
loans and
to promote investments.
43
Economy

world and the
Caribbean is no exception.
resources;
skilled labour and
sufficient and efficient physical capital.
region to seek
better lives for themselves in more developed countries (Brain
Drain).
44
able Productive Resources
trained, then it is far easier to
get better results in a faster time from workers.
ntries are endowed with beautiful
beaches, waterfalls and

mountains. These countries need little to beautify them and
make them ready for tourist
attraction.
skills, Caribbean countries are
seriously lacking when compared to developed countries.
45
However, it requires
investment in research and development so that the nation and
its citizens can
benefit from new production processes and products.
in research and
development and bring about improved technology, they cannot
access relevant
new technologies in sufficient quantities, and in a timely
manner.

slow economic
growth rate.
46
ces
efficiently,
then it will not only fail to achieve full employment but it will
also fail
in achieving economic growth.
tion
to get
the most from them and contribute to the production of more
goods and services.
47
level in order

to foster growth.
technology existing
within a nation, a population size which is too small or too
large, will hinder
growth.
fully utilized.
of labour will
be exhausted and some people will be contributing little or
nothing to the
economy. 48
W. ARTHUR LEWIS - ECONOMIC DEVELOPMENT
velopment with Unlimited
Supplies of Labour.”
-
Developmental economics that
explains the growth of a developing economy in terms of a
labour transition between two
sectors, a traditional agricultural sector and a modern industrial
sector.

surplus labour from
traditional agricultural sector is transferred to the modern
industrial sector
r time absorbs the surplus labour, promotes
industrialization and
stimulates sustained development.
operations of the Manufacturing
Sector.
49
model, the traditional agricultural sector is typically
characterized by low
wages, an abundance of labour, and low productivity through a
labour intensive
production process.
higher wage rates than
the agricultural sector, higher marginal productivity, and a
demand for more
workers initially.

process that is
capital intensive, so investment and capital formation in the
manufacturing sector
are possible over time as capitalists' profits are reinvested in the
capital stock.
50
manufacturing sector,
regardless of who actually transfers, general welfare and
productivity will
improve
labour in
agriculture.
improve while total
industrial product increases due to the addition of labour
productivity and wages
in the manufacturing sector.

51
The end result of this transition process is that:
tural wage equals the manufacturing wage,
manufacturing
marginal product of labour,
workers
no longer have a monetary incentive to transition.
52
W. ARTHUR LEWIS-
ECONOMIC DEVELOPMENT
to be sufficient to incentivise a
movement between the sectors and, whereas the model assumes
any differential will result

in a transfer.
unlimited capital formation in
industry.
extent of the model is rarely
realized.
he model does provide a good general theory on
labour transitioning in
developing economies.
rural migrant labour can
stimulate industrial growth.
53
ECONOMIC GROWTH CONSTRAINTS
rastructure:
networks,
energy, power and water supplies and telecommunications
networks.

low value-
added primary commodities. The prices of these goods can be
volatile
on world markets.
tment.
-income countries, high levels of poverty
make it
almost impossible to generate sufficient savings to provide the
funds
needed to fund investment projects. This increases reliance on
overseas borrowing or tied aid.
mited financial markets:
markets
such as banking, money and credit systems, insurance markets

and
stock markets.
55
ight is the uncertain and rapid movement of large
sums of money
out of a country.
- lack of confidence in a
country's
economy and/or its currency, political turmoil or fears that a
government
plans to take privately-owned assets under government control
56
the exercise

of authority manages scarce resources well, improve economic
outcomes
and the quality of life for a country’s people.
growth by
inhibiting inward investment and making it likely that domestic
businesses
will invest overseas rather than at home.
57
BENEFITS OF GROWTH
58
everything to be
produced.
all.
higher quality, etc. could be equated
with an
increase in living standards.

are poor
by means of income distribution – taxes and benefits, etc.
BENEFITS OF GROWTH
Improved standards of living associated with increases in the
availability of luxury goods:
– roads, rail, energy, water, communication
networks
associated with a ‘decent’ standard of living
59
BENEFITS OF GROWTH
60
Welfare associated with well-being:

those not necessarily
able to help themselves – often on the margins of society.
Welfare includes:
– sickness, disability, etc.
– maternity, holidays,
– homes for the elderly
redistribution - taxes
COSTS OF ECONOMIC GROWTH
61
ts

the population as a whole
pollution – often developing
countries do not have the infrastructure to cope with the waste
generated nor
the legislation or regulation to influence those who produce it.
- occur when the consumption or
production of a good
causes a harmful effect to a third party.
nmental degradation – over farming reduces
productivity of the soil,
deforestation and damage to eco-systems.
62
through allocating resources

to the
sources of growth – capital goods
goods are
available – often these consumer goods represent the basic
essentials
of life
63
64
ECON3501
CARIBBEAN ECONOMIC
DEVELOPMENT
TECHNOLOGY, TRAINING AND EDUCATION FOR
DEVELOPMENT
RESOURCE MATERIALS

of Caribbean Political Economy: The
Legacy of George Beckford. Kingston. Ian Randle Publishers
Underdevelopment in the Plantation Economies
of the Third World. UWI Press.
Management: Caribbean Perspective
Kingston: Ian Randle Publishers
Bank-World Development
Report
2
TECHNOLOGY
production, and utilization of goods and services, and in the

organization of human activities.
r is the term used to describe the
processes by which technological knowledge moves within or
between organizations.
which this occurs between countries.
3
TECHNOLOGY
knowledge that is transferred can assume
various forms.
and animal
organisms), services and people, and organizational
arrangements, or codified
in blueprints, designs, technical documents, and the content of
countless
types of training.
implicit knowledge –

i.e. knowledge that has not been fully codified, and remains
embodied in the
skills of people.
owledge may vary in a further important
way. At one
end of the spectrum, the transfer involved can be concerned
with the
knowledge for using and operating technology. 4
TECHNOLOGICAL INVENTION VS. INNOVATION
with the knowledge
necessary for changing
technology and innovating.
– refers to the creation of a product
or introduction of a
process for the first time.
different kinds of design and
engineering knowledge required to replicate and modify
technologies.
- refers to the improvement on or
making a significant

contribution to an existing product, process or service.
5
TECHNOLOGY AND DEVELOPMENT
between
horizontal and vertical transfer.
established technology from one operational environment to
another;
for instance, from one company to another.
technologies
from the generation during research and development activities
in
science and technology organizations; for instance, to
application in the
industrial and agricultural sectors.
6

developing countries gain
access to technologies that are new to them.
ast
Asian newly
industrialized countries, coupled with domestic ‘technological
learning’ – efforts to
accumulate the capability to change technologies – have been
key factors in their
rapid technological and economic development.
ity of developing countries to use
technology transfers to
develop their domestic capabilities, allowing such countries to
reap the social and
economic benefits of existing technologies, have been mixed.
and between
sectors within
individual countries.
7
– and within – developing countries
in

benefiting from technology transfer suggest that the relationship
between technology transfer and the accumulation of domestic
technological capability is far from straightforward.
lead to more technological and economic development.
owledge
transfers are: Technology Needs Assessment (TNA), number of
people involved in joint R & D projects, and inter-academia
collaboration.
8
-2018 Technology
Needs Assessment, the
Caribbean region concurred on five priority sectors for
mitigation:

concern by 86% of the
countries. In second place was the transport sector (a priority
for 32% of the
countries), followed by land use change and forestry (23%),
waste management (18%),
and agriculture (15%).
9
-achievement is a major barrier to
economic
development.
influence
on output growth will enable us to understand not only the long-
run
determinants of sustained growth, but also the short-run costs of
industrialization during the process of creative destruction.

Technologies
(ICTs) represent a way for developing world nations to foster
economic development, improve levels of education and
training, as
well as address gender issues within society.
10
through
telecommunications. It is similar to Information Technology
(IT), but focuses primarily
on communication technologies. This includes the Internet,
wireless networks, cell
phones, and other communication mediums.
technologies have provided
society with a vast array of new communication capabilities.
For example, people can
communicate in real-time with others in different countries
using technologies such as
instant messaging, voice over IP (VoIP), and video-
conferencing. Social networking

websites like Facebook, Whatsapp and Instagram allow users
from all over the world
to remain in contact and communicate on a regular basis.
Learning Management
Platforms like Schoology, google classroom Zoom have rescued
the proliferation of
online learning.
d a "global village," in which people
can communicate with
others across the world as if they were living next door.
11
the
world.
Bank in 2011 indicates that small
businesses
create a disproportionate share of new jobs. They generate new
ideas,
new business models, and new ways of selling goods and
services.

also vital
for entrepreneurship and small business development.
were
birthed from entrepreneurial ventures. 12
DRIVING FORCES OF INNOVATION AND
TECHNOLOGICAL
ADOPTION
Panagiotis & Tatum, C. (2000) the
four forces that drive innovation are:
technology in the industry.
13

TECHNOLOGY & DEVELOPMENT
gain access to capital and market information.
infrastructure or much support in the way of financial
resources.
14
highly
concentrated in few industrial countries.
amounts of
Research & Development (R&D).
technical
progress eventually relies upon the ability to adopt any
appropriate
innovations produced by advanced countries.

nal technology spill-overs
becomes a
crucial issue in explaining economic development.
15
TECHNOLOGY & DEVELOPMENT
level of
investment in research and development (R&D) in an economy,
the
higher will be the rate of growth.
Government intervention, lies behind an almost across-the-
board
commitment of governments in the industrialized world (and
indeed, in
emerging and even developing economies) to support
businesses’ R&D
ventures as well as the commercialization of publicly funded
research
results carried out in the higher education or public research
sectors.
16

not all, government strategies on innovation
and
business growth are predicated on an assumption that
“technological
development drives growth”.
-classical (Solow 1956) growth theory assumes that the
level of
output is determined by the amount of available labour and
fixed
capital interacting within the framework of a given technology
available
to all and determined ‘outside of the economic system’.
growth
path determined by the growth of the labour force and
‘technical
progress’.
17

18
-
classical growth model leads to the convergence (or
catching-up) hypothesis: that there should be a systematic
tendency for poorer countries or regions to grow faster
than richer ones, since the capital-labour ratios of the
former (poorer countries) are below the long-run optimum.
that can drive economic growth.
countries or regions, there is no evidence of across the
board ‘catching-up’.
adjustment’ over time
better than others, this suggests that other factors (such as
imperfect
competition, incomplete appropriability of returns from
investment,
international trade interdependence) are important determinants
of how
much an economy will invest in technology.
theory, does not

take the rate of technological progress as a given but rather
assumes that
private investment in R&D is the central source of technical
progress
leading to increasing return to scale.
faster pace of
innovation and extra investment in human capital. 19
good nature, or in others words there are technology
spill-overs between firms in the R&D process.
raise growth rates particularly if they lead to a higher
level of competition in markets and a higher rate of
innovation.
has not entirely confirmed these predictions suggesting

that there are other factors influencing growth. 20
ovation plays a critical
role in fostering
and increasing economic development potential.
types of
benefits that can accrue from both public and private sector
investment into
technology.
spill overs,
human capital formation, productivity growth, reduced
environmental
damage or resource depletion, etc.
-satisfaction and life-
satisfaction in ways that
cannot be easily measured in economic terms (e.g. improving
work
standards, removing 'drudgery', reducing accident rates, etc).
21

CHANNEL OF ECONOMIC BENEFIT FROM RESEARCH
1. Increasing the stock of useful knowledge
2. Training skilled graduates
3. Creating new scientific instrumentation and
methodologies
4. Forming networks and stimulating social interaction
5. Increasing the capacity for scientific and technological
problem solving
6. Creating new firms
22
PRECONDITIONS FOR TECHNOLOGICAL TRANSFER AND
DIFFUSION
of technology, acquire
the required technology, adapt it to local needs and develop the
local technological
base.
sfer

-private partnerships
ures to improve host-country absorptive and
technological capacity
23
DIFFUSION
-
transfer-related
activities such as the purchasing of equipment and/or licensing
of a
particular technology by developing country, firms and
institutions, and
training of operators and maintenance personnel.
to suit the

local conditions and standards, and the preparation of feasibility
studies,
missions and project planning meetings. 24
DIFFUSION
(FDIs)
that may encourage suppliers to
innovate. They may provide direct training to suppliers and
retailers of their products and services. In
addition, the movement of manpower between different firms
could transfer management and
marketing techniques. These could induce higher efficiency in
the utilization of resources (e.g. human
and financial) that will entail further adaptation of competitors
to survive in the new environment.
er of countries encourage their firms to invest in
developing countries through provision of
incentives. Although many of these incentives aim at promoting
internationalization of their firms, in

some cases, home-country governments require their firms to
show evidence of technology transfer
to developing country in order to receive the incentives, while
in other cases there is no such
requirement. Some of the requirements such as training of local
personnel, transfer of machinery and
equipment, linkages with the local firms and local supplier
networks are considered important in
facilitating technology transfer through FDI.
25
DIFFUSION
to identify the most suitable technology from out of
several alternative technologies and multiple sources of
technologies. This is important especially in those areas
where the technologies are changing rapidly. Matching those
who possess the necessary technologies with those
that need them may be difficult and costly for developing
countries with limited sources of information.
-Private Partnerships

-private partnerships present a unique opportunity for
combining the entrepreneurial, innovative and
efficiency of private firms and the flexibility of public
institutions to deliver services especially in neglected areas.
These partnerships so far have been in limited areas.
examples of facilitating access to technologies and their
transfer. Developed country governments have provided funding
to research and development (R&D) institutions
and the private sector to develop and produce drugs, vaccines
and diagnostic kits. Public support is largely in
terms of financing research, conducting trials and mechanisms
for delivery of services to the end users. Some of
the clinical trial sites are located in developing countries,
passing on information and skills needed to manage
trials.
26
DIFFUSION

litating technology
development and transfer through
provision of support for product development and
commercialization. Venture capitalists also provide
management support, business and marketing strategies, and
match making services, among others,
that improve the success of commercializing technologies and
expansion of businesses.
environment in recent decades has been the
formation of networks involving partners in different countries,
each providing complementary
support services and technologies. These networks are designed
to reduce the risks and share the
costs associated with the development of new products. Such
arrangements are particularly important
in areas with limited access to financing and technology. Some
of these alliances may involve developed
and developing country institutions that may share key
technologies.
27

DIFFUSION
-Country Absorptive and
Technological
Capacity
development in developing
countries by providing scholarships for higher education in their
home countries.
They also provide research and equipment support to academic,
research and
professional institutions in developing countries. Technical
assistance is also provided
to industrial associations and government advisory bodies.
28
HUMAN CAPITAL
capital, according to Organization for Economic Co-
operation and
Development (OECD), refers to “the knowledge, skills,
competencies and other
attributes embodied in individuals or groups of individuals
acquired during their

life and used to produce goods, services or ideas in market
circumstances”.
set.
measure where all
labour is thought to be equal.
man capital recognizes that not all labour is
equal and that the
quality of employees can be improved by investing in them. The
education,
experience and abilities of an employee have an economic value
for employers
and for the economy as a whole.
29
HUMAN CAPITAL
investments in many
countries.

morbidity (or the relative
incidence of disease).
but may result in lower
quality of life or functionality and productivity.
bidity rates (individuals of poor health
or limited
functionality), even though it may take years of increased
physiological stress to
produce fully lethal heart problems or strokes.
30
HUMAN CAPITAL
–nourishment and other diseases (e.g.,
malaria) produces anaemia.
less able
to learn (poor oxygen flow throughout their systems, but
particularly
to their brains).

bat the anaemia are a
low–
cost form of investment to raise the productive ability of the
children.
31
EDUCATION AND HUMAN CAPITAL
growth but economists are still working on
empirical hypotheses to be tested. In a report from Applied
Systems (2008), there is strong evidence of
positive, statistically significant effects of education on a
country’s economic development;
sufficient) precondition for long-term
economic growth.
the skills of the person receiving the
education.
–order effect, education raises the person’s
productivity in the market place.

but also in the home. Parents with more
education, are more likely to seek and use information.
households with more education, even controlling
for household income.
32
Education and Human Capital
33
that increases a
person's economic productivity- that is, enables him or her to
earn a higher
income.
capital by devoting
money and time to education and training (to accumulate
knowledge and
skills).
human
capital require

sacrifices. People agree to make these sacrifices if they expect
to be
rewarded with additional income in the future.
believe that a better-
educated population will contribute to faster development.
- when a person is educated they
receive a private benefit but
society also benefits. You can educate others and help for
instance to reduce the crime
rate.
oyers pay for employee training because they expect to
cover their costs and gain
additional profits from increased productivity and individuals
are often prepared to
spend time and money to get education and training, since in
most countries people
with better education and skills earn more.
output or output that is
more valuable in the market place, and their employers tend to
recognize that fact with
higher wages.
34

35
same.
Returns to education may be lower if:
acquired at school do not match
market demand. In this case investments in human capital were
not efficient enough, resulting in
less human capital and lower returns to individuals and society.
slow economic growth. In this case
workers' human capital may be underused and under-rewarded.
deliberately paid similar wages to
preserve a relative equality of earnings- as used to happen in
countries with centrally planned
economies. These distortions in relative wages are being
eliminated as part of these countries'
transition to market economies.

Human Capital Investment
36
are critical to a
country's level and rate of economic development, primarily
because
human capital is the most important determinant of a country's
ability to
produce and adopt technological innovations.
important, is not
sufficient for rapid economic growth.
development strategy.
CONSTRAINTS
sustaining
previous investments in education and in making new ones.
urther development and improvement
of basic

education can proceed without taking into consideration
increasing
public debt.
37
CONSTRAINTS
integration of ICT on either systemic or individual levels.
systems is
adequate to support individual teachers and students integrating
technology on an ad hoc basis.
38
TECHNOLOGY AND THE CARIBBEAN
statements and to the

goals proposed by CARICOM and other regional organizations.
students adequate
access to technology and to courses.
typically fail to develop a
strong base of technological skill and use among students.
expected and at the
same time, limits use of potentially valuable technology
resources to support
student learning in other subjects
39
provide adequate access to
computers and the Internet, and have developed capacity to
design, implement, and manage
educational technology projects.
Anguilla now ensures that
all primary students have ICT skills.

and comprehensive technology projects
for their secondary schools.
—hasn’t adopted an ICT-in-education policy, and
has yet to pass 90 percent gross
secondary enrolment—has provided Internet-enabled computer
labs in over 50 percent of both
primary and secondary schools.
Trust/National Training Agency (HEART
Trust/NTA) has established ICT support, including e-learning,
for its 80,000 TVET students. 40
operations and classrooms, Ministries of Education (MOEs) are
seeing
returns on these and other investments.
-wide performance on the hands-on portion of the
Caribbean
Secondary Education Certificate (CSEC) IT exam increased by
32

percent between 2004 and 2005
41
MIGRATION AND ITS IMPACT ON THE CARIBBEAN
has quite often begun within the region. This
has become evident through the fact that the absolute number of
foreign-born nationals originating in the
Caribbean present in another country in the sub-region has
steadily increased over the last two decades.
unemployment particularly for younger people and little
hope for improvements in the foreseeable future constitute the
main push factors for those desperate to
leave.
migrants might compete with nationals for the same
jobs, and would even accept work under less favorable
conditions with the implication of decreasing wage
and benefit levels for all in the long term.
Caribbean have undertaken various efforts to

provide access to basic social services, such as reproductive
health and education services to migrants in
their countries. However in spite of the efforts undertaken to
improve, apart from living and working
conditions for migrants, a particular challenge faced is the
supply of basic social and health services to
undocumented migrants who in fear of being expelled quite
often hide in inaccessible squatters and illegal
settlements.
42
skilled professionals are on the move worldwide.
Caribbean countries like Jamaica, Cuba and Trinidad and
Tobago are strong exporters of qualified labor,
particularly teachers, nurses and other health professionals.
Family ties, geographic proximity and the use of
the same language make the United States and Canada and, to a
lesser extent, the United Kingdom a
preferred destination for migrants from the Caribbean.
Increasing job opportunities in certain sectors of

the labor market along with the hope of a prosperous life make
moving north an attractive option for many
Caribbean nationals.
in exchange for desired remittances to boost
their economies, many countries suffer tremendous constraints
in their capacities to provide equal,
qualitative and affordable social services to their populations.
Worse, the continued depletion of
professionals deprives the region of its desperately needed
qualified staff whose education and training
were often a considerable expense to its taxpayers. Since
qualified professionals play a critical role in
sustainable development, this continuous loss threatens to
paralyze progress underway in the economic and
social sectors in the region. 43
e more needs to be done to alleviate the impact of
the brain drain and to provide
for attractive options at home for those who would otherwise
seek greener pastures
abroad.

workers an improvement in pay
and working conditions could act as an incentive to stay.
opportunities and recognition of the
profession are also known to be important (WHO, 2002).
ces of the brain drain becoming
more severe, the understanding
in the developed world that the negative impact of a severe
shortage of professionals in the
developing world has begun to hamper local, regional and
global development efforts.
44
ECON3501
CARIBBEAN ECONOMIC
DEVELOPMENT
UNIT 5 – ECONOMIC DEVELOPMENT
RESOURCE MATERIALS

Randle Publishers
Beckford; George (2000) Persistent Poverty;
(2004). In Defence of Globalization,
Bank-World
Development Report
2
THE CONCEPT OF ECONOMIC DEVELOPMENT
Development can be conceptualized in two ways:

– desirable things that society should strive towards
hunger and poverty,
universal access to education and healthcare, representative
government, social
stability and many others, including those listed in the United
Nation's (UN)
charter on human rights.
been
the Millennium Development Goals (MDGs). These were agreed
by the
United Nations at the Millennium Summit in September 2000
and aimed to be
met by 2015; and subsequently the Sustainable Development
Goals (SDGs)
to achieve by 2030.
3
THE CONCEPT OF ECONOMIC DEVELOPMENT
– mutually recognized frameworks for
understanding and achieving such goals.

development goals are reached. They might involve
specific policies and strategies adopted by governments and
other
development agencies, or they may relate to wider forces of
change
outside the control of governments or individual organizations.
agree on
broadly defined aims, it is often much harder to prioritize
between
them or reach agreement on how to achieve them.
4
ECONOMIC VS HUMAN DEVELOPMENT
material living
standards and therefore to improvements in income,
consumption,
employment, savings and investment.
different people

and the processes that influence this distribution. Ensuring that
economic
improvements benefit the majority rather than just the few is an
important
goal in development.
-based development is important for both ethical
and
economic reasons, as large inequalities can be an obstacle to
further
economic development (Ravallion 2005).
5
ECONOMIC VS HUMAN DEVELOPMENT
in technology
and institutional change as well as changes in the structure of
the economy
as a country typically diversifies away from agriculture and
expands its
industrial and service sectors.
such as
security, health, education, social stability, equality,

empowerment, dignity,
and so on.
wider
conceptualization of 'development as freedom' (Sen 2001 p.
382), as these
goals and means are necessary components of freedom - to live,
to
participate in society, to choose, to consume, etc.
6
ECONOMIC DEVELOPMENT VERSUS ECONOMIC
GROWTH
Michael Todaro, is “an
increase in living standards, improvement in self-esteem needs
and freedom from
oppression as well as a greater choice.”
a
normative one.
morality (right and
wrong, good and bad). It is subjective in nature.

output that an economy
produces over a period of time given all its productive resources
are used
efficiently.
resources and improvements in
technology or in another way an increase in the value of goods
and services produced
by every sector of the economy (GDP).
7
OBJECTIVES OF DEVELOPMENT
which
society has (through some combination of social, economic, and
institutional processes), secured the means for obtai ning a better
life.
basic life-
sustaining goods (food, shelter, and protection)

education,
greater attention to culture and human values)
(freeing them from
servitude and dependence not only in relation to other people
and
nation-states but also to the forces of ignorance and human
misery)
8
THE RELATIONSHIP BETWEEN GROWTH AND
DEVELOPMENT
development goals?
major international
organizations, and the economists that advise them, is that a big
part of the answer lies in
economic growth.
domestic product (GDP) or
related indicators, such as gross national product (GNP) or
gross national

income (GNI) which are derived from the GDP calculation.
o high levels of GDP necessarily correspond with high
levels of development? Not
necessarily.
Countries like China
and India have much higher levels of GDP than, say, Singapore,
New Zealand or
Belgium, but few would suggest that the latter are economically
less developed than
the former.
9
THE RELATIONSHIP BETWEEN GROWTH AND
DEVELOPMENT
are those with
the highest GDP per capita.
It says nothing about
how incomes are distributed or spent. Growth in GDP per capita
could result

from growth in the incomes of richer groups in society, with
incomes of poorer
groups remaining largely unchanged. It coincides with spending
patterns that are
skewed towards the rich and which exclude the needs of the
poor.
will lead to a
reduction in poverty or to broader social and economic
development. Indeed,
there are those who argue, rightly or wrongly, that in many
countries economic
growth is associated with increasing levels of poverty, rather
than the reverse.
10
MEASUREMENT OF ECONOMIC DEVELOPMENT
social situation.
and education for

countries with similar levels of GDP per head.
-marketed output may never get measured.
less about growth
but more about inclusive well-being, and building capacities
and resilience
in a fast-changing and unpredictable world.
11
THE HUMAN DEVELOPMENT INDEX (HDI)
human
development as a process of enlarging people’s choice.
a long and health life, to be
educated and
enjoy a decent standard of living.
measure and rank
countries' levels of social and economic development .
sure of living
standards that

attempts to measure and rank countries' levels of social and
economic
development on a scale 0 to1 based on three goals or end
products;
longevity, knowledge, and standard of living as measured by
real per capita
income.
12
years of
schooling
dard of living: GNI per capita (PPP US$)
development
levels over time and to compare development levels in different
countries 13

lculated, an index is created for
each of
these dimensions.
—the life expectancy, education
and GDP
indices—minimum and maximum values (goalposts) are chosen
for each
underlying indicator.
’s reported maximum and
minimum
values for life expectancy were 85 and 25 years, respectively.
Expected
years of schooling and mean years of schooling were 18 and 0
and 15
and 0 respectively. Standard of living was $75,000 and $100
respectively.
14

dimension indices:
1/3 (GDP index)
y is
believed to be.
15
-human-development-
index-
ranking
16
LIMITATIONS OF THE HDI INDEX
income.
international development targets demonstrate that a

set of other factors are equally important.
r the continuing omissions e.g.
access to clean water and the elements which it is
unable to measure e.g. political freedom.
components and the difficulty in measuring quality as
opposed to quantity.
on social progress. The Gender-related
Development Index was established.
distribution and can be disaggregated for individual
groups of regions. In these ways it improves on GDP, gives a
simple comparison and reflects important
elements of development. Other measures such as the HPI and
MEW may be alternatives.
17
OTHER INDEXES
human development
indicators,

many of which are composites of other weighted indexes. Other
than
the HDI other indexes include:
PI)
18
HDI AND IHDI
19
• The IHDI takes into
account not only the
average achievements of
a country in health,
education, and income,
but also how those
achievements are
distributed among its

population by “discounting”
each dimension’s average
value according to its level
of inequality.
THE GENDER INEQUALITY INDEX (GII)
20
• The GII It measures gender inequalities in three important
aspects of human development—reproductive health,
measured by maternal mortality ratio and adolescent birth rates;
empowerment, measured by proportion of
parliamentary seats occupied by females and proportion of adult
females and males aged 25 years and older with at
least some secondary education; and economic status, expressed
as labour market participation and measured by
labour force participation rate of female and male populations
aged 15 years and older.
• The GII is built on the same framework as the IHDI—to better
expose differences in the distribution of
achievements between women and men. It measures the human
development costs of gender inequality. Thus the
higher the GII value the more disparities between females and

males and the more loss to human development.
THE MULTIDIMENSIONAL POVERTY INDEX (MPI)
21
• The Multidimensional Poverty Index (MPI) is published by the
UNDP’s Human Development
Report Office and tracks deprivation across three dimensions
and 10 indicators: health (child
mortality, nutrition), education (years of schooling, enrollment),
and living standards (water,
sanitation, electricity, cooking fuel, floor, assets).
• The MPI provides a comprehensive and in-depth picture of
global poverty and its intensity– in
all its dimensions – and monitors progress towards SDG#1 – to
end poverty in all its forms.
PHYSICAL QUALITY OF LIFE INDEX (PQLI)
of Life
Index (PQLI). He found that most of the indicators were inputs
to
development process rather than result of the development

process.
performance in
meeting the basic needs of the people. Indicators include:
eracy Indicator (BLI) 22
PHYSICAL QUALITY OF LIFE INDEX (PQLI)
Physical
Quantity of life Index (PQLI).
23
SUSTAINABLE DEVELOPMENT
today, it is not possible to discuss
development without involving
the concept of sustainability and sustainable development.

needs of the present,
without compromising the ability of future generations to meet
their own needs.
many different ways,
balance different, and often
competing, needs against an awareness of the environmental,
social and economic
limitations we face as a society.
purely in terms of
consumption. Thus, sustainable development is said to occur
when increases in
consumption are capable of being sustained indefinitely.
Environmental sustainability is
only important insofar as it facilitates this.
24
-f crisis
stability, whether in relation to the economy,

environment, or social relations. The late 2000s and early 2010s
has been marked by considerable
instability. In economic terms that instability has manifested
itself in sharp movements in the prices
of food, fuel and financial assets. Together these shocks have
come to be known as the triple-f
crisis. Some see sharp rises in food and fuel prices as marking
the start of new era of growing
scarcity, both of food and fossil fuels. The scarcity is linked to
both supply and demand factors with
rapid economic growth in emerging economies, especially China
and India, helping drive up the
demand for both food and energy in the face of supply
constraints.
increases. So, too, does their
demand for grain as meat and dairy products (which require
large amounts of grain to produce)
begin to feature more prominently in people's diets due to rising
incomes. The increased demand
for grain also drives up demand for energy as agricultural
production becomes ever more
dependent upon fossil fuels, especially in the production of
fertilisers.

25
problem. At a global level
consumption of natural resources is growing at an unsustainable
rate. It is also
highly skewed, with rich countries consuming a
disproportionate amount of the earth's
resources. In the pursuit of sustainable development there is
clearly a case to be made for
curbing the consumption of the rich whilst increasing the
consumption of the poor. In the
world's rich and/or rapidly growing countries excessive
consumption poses the most
serious threat to sustainable development; whilst in poor
countries it is the lack of
consumption that is the main problem.
the most basic of necessities.
This represents a failure of development, but can have damaging

environmental
consequences too, as poverty often forces people to degrade
their environment just to
survive.
26
The focus of sustainable development is far broader than just
the
environment.
just society.
existing and
future communities, promoting personal wellbeing, social
cohesion and
inclusion, and creating equal opportunity.
27
UN MILLENNIUM DEVELOPMENT GOALS (MDGS)
nited Nations Millennium Development Goals are eight
goals

that all 191 UN member states have agreed to try to achieve by
the
year 2015.
September
2000 commits world leaders to combat poverty, hunger, disease,
illiteracy, environmental degradation, and discrimination
against
women.
specific
targets and indicators. 28
- Eradicate Extreme Poverty and Hunger
Target 1a: Reduce by half the proportion of people living on
less than a dollar a
day
Target 1b: Achieve full and productive employment and decent
work for all,
including women and young people

Target 1c: Reduce by half the proportion of people who suffer
from hunger
- Achieve Universal Primary Education
Target 2a: Ensure that all boys and girls complete a full course
of primary
schooling
- Promote Gender Equality and Empower Women
Target 3a: Eliminate gender disparity in primary and secondary
education
preferably by 2005, and at all levels by 2015
29
- Reduce Child Mortality
Target 4a: Reduce by two thirds the mortality rate among
children under five
- Improve Maternal Health
Target 5a: Reduce by three quarters the maternal mortality ratio
Target 5b: Achieve, by 2015, universal access to reproductive
health

- Combat HIV/AIDS, Malaria and Other Diseases
Target 6a: Halt and begin to reverse the spread of HIV/AIDS
Target 6b: Achieve, by 2010, universal access to treatment for
HIV/AIDS for all
those who need it
Target 6c: Halt and begin to reverse the incidence of malaria
and other major
diseases
30
- Ensure Environmental Sustainability
Target 7a: Integrate the principles of sustainable development
into country policies and programmes; reverse loss of
environmental resources
Target 7b: Reduce biodiversity loss, achieving, by 2010, a
significant reduction in the rate of loss
Target 7c: Reduce by half the proportion of people without
sustainable access to safe drinking water
Target 7d: Achieve significant improvement in the lives of at
least 100 million slum dwellers, by 2020
MDG#8 - Develop a Global Partnership for Development
Target 8a: Develop further an open, rule-based, predictable,
non-discriminatory trading and financial system. Includes a
commitment to good governance, development, and poverty
reduction - both nationally and internationally
Target 8b: Address the special needs of the least developed

countries. Includes tariff and quota free access for least
developed countries' exports; enhanced programme of debt
relief for HIPCs and cancellation of official bilateral debt;
and more generous ODA for countries committed to poverty
reduction.
Target 8c: Address the special needs of landlocked countries
and small island developing States
Target 8d: Deal comprehensively with the debt problems of
developing countries through national and international
measures in order to make debt sustainable in the long term
Target 8e: In co-operation with pharmaceutical companies,
provide access to affordable essential drugs in developing
countries
Target 8f: In co-operation with the private sector, make
available the benefits of new technologies, especially
information
and communications
31
targets.
e G8 finance ministers agreed in
June 2005 to provide enough
funds to the World Bank, the International Monetary Fund
(IMF) and the African
Development Bank (AFDB) to cancel $40 to $55 billion in debt
owed by members of the

heavily indebted poor countries (HIPC) to allow them to
redirect resources to programs
for improving health and education and for alleviating poverty.
justification behind the chosen
objectives, and the difficulty or lack of measurements for some
goals and uneven progress,
among others.
rose during the challenge
period, more than half went for debt relief and much of the
remainder going towards
natural disaster relief and military aid, rather than further
development.
32
UN MILLENNIUM DEVELOPMENT GAP TASK FORCE
REPORT
2015
been made in a number of targets.
assistance (ODA) which reflect
the international commitment to

provide financial resources to support the development efforts
of developing countries, have
increased from about $81 billion in 2000 to $134 billion in 2014
in constant dollars, accounting for
about 0.3 per cent of the gross national income (GNI) of
developed countries.
Kingdom of Great Britain and Northern
Ireland has met the established United Nations target of
providing 0.7 per cent of GNI as ODA in
2014.
access to developed-country
markets, including increased duty-free admission, although
progress towards this target has been
very limited since 2010.
initiatives to reschedule or write down the external
debt of developing countries have
reduced debt burdens, in particular, for low and middle-income
countries.
33
UN MILLENNIUM DEVELOPMENT GAP TASK FORCE

REPORT
2015
educing vulnerabilities for many
developing
countries, including least developed countries (LDCs), small
island
developing States (SIDS) and other low-income countries.
highly
problematic, with many households squeezed out of the market
due to high
prices and limited availability.
technologies
(ICTs) has allowed several billion people in developing
countries to join the
information society, a major digital divide is still in place, with
more people
offline than online and particularly poor access in sub-Saharan
Africa.
34
UN SUSTAINABLE DEVELOPMENT GOALS

includes
a set of sustainable development goals (SDGs) to be achieved
by 2030
agreement on
climate change.
-
in-a-
generation opportunity to advance prosperity, secure the
planet’s
sustainability for future generations, and unlock resources for
investments in education, health, equitable growth and
sustainable
production and consumption. 35
STRATEGIES FOR ACHIEVING ECONOMIC
DEVELOPMENT
three broad objectives which
(following Dorward 2009) we refer to as 'hanging in', 'stepping
up', and 'stepping out'.

with the objective of clinging onto the
assets they currently possess or control. It refers to their effort
not to lose assets as a result of
unfavourable trends and shocks. Examples include smallholders
trying to maintain the fertility of
their soils, trying to keep hold of their land in the face of
competing claims on it, trying to avoid
stress-induced sales of livestock and other assets.
their existing assets and activities
through investments in new assets, such as new equipment,
better skills and technology, or more
land. Examples include smallholders investing in new seeds and
improved irrigation technology to
enhance the productivity of their land.
n people's livelihoods shift to
new, more productive, activities, and
is associated with the accumulation of a new set of assets.
Examples include smallholders investing
in off-farm enterprises or investing in education and skills in
order to qualify for urban jobs.
36

DEVELOPMENT
37
-wide Transformation
DEVELOPMENT
point
for examining how success or failure in achieving development
goals
manifests itself.
diagram
above explicitly recognizes the importance of structural changes
in
people's livelihood activities as development progresses. It
highlights
the need to understand interactions between (a) livelihood
strategies and transformations at the household level and (b)
development at higher levels of social organization. 38

DEVELOPMENT
ng high crime rates in some countries
-traditional markets –more
trade and partnership alliances with Brazil and China
39
STRATEGIES FOR ACHIEVING ECONOMIC GROWTH
Economic growth strategies could include:
that will add enough
local input to transform an economy (Business Process Out-
sourcing-BPO;
Logistics hub development)
p programme as is done by Grenada, Antigua
& Barbuda,
Dominica, St Kitts-Nevis; St Lucia;

-
risking risks it faces
from hostile and big developed countries)
rojects (e.g. road infrastructure
development-toll
roads)
40
ECON3501
CARIBBEAN ECONOMIC
DEVELOPMENT
UNIT 8 – REGIONAL ECONOMIC INTEGRATION
RESOURCE MATERIALS
ter, Michael (1996). The Critical Tradition
Randle Publishers

mic
Bank-World
Development Report
2
GLOSSARY
– African Caribbean and Pacific
– Association of Caribbean States
– Caribbean and Canadian Association
– Caribbean Single Market and Economy

– Organization of Eastern Caribbean States
3
ECONOMIC INTEGRATION
trade that
prevent or hinder the flow of goods and services into or out of a
nation or society.
other punitive
customs practices,
regulatory
treatment to encourage cross-border investments.
4
- taxes imposed on imports to a country
- a limit to the amount of a product that can be

imported
- complete ban on the importation of a good) and
border restrictions
formed the North
American Free Trade Agreement (NAFTA) now, United States
Mexico and Canada
Agreement (USMCA), which reduces trade barriers between the
three countries.
trade barriers on goods from
other countries. 5
that describe the areas
of cooperation in detail, as well as some coordinating bodies
representing the
countries involved.
-operation usually begins with economic integration
and as it continues,
comes to include political integration.

ale, with zero (0)
representing no integration at
all between two or more countries.
or more countries.
a new country — in
other words, total integration.
6
7
between political and
economic integration.
-operating
states become so
integrated that all barriers to the movements of labour, goods
and capital are
removed.
- as the economies of the co-operating
countries become

completely integrated into a single market, there appears a need
for common policies
in social policy (education, health care, unemployment benefits
and pensions) and
common political institutions.
omic
integration:
1. Trade in goods and services
2. Movement of capital and integration of financial markets.
3. Human migration (Labor)
9
STAGES OF ECONOMIC INTEGRATION
omic integration.
perhaps not
eliminations, to a set of partner countries in some product
categories or

sectors.
-discriminatory tariffs, would
remain in all
remaining product categories or sectors. 10
FREE TRADE AREA
Free Trade Area
barriers between
themselves, but maintain their own barriers against non-member
countries.
tariffs or quota restrictions.
USMCA is an example of a
FTA.
because they are a move
towards a free market for a wide range of goods and servi ces.
traded to one of the
other member countries of the regional economic free trade

area.
11
FREE TRADE AREA
Examples of Free Trade Agreements:
ions (ASEAN)
Free Trade Area (1992)
- Non- EU
countries in Southeast Europe
Area- (2011)
(2000)
- Canada, US
and Mexico (1994)
93)
-1973)
12

CUSTOMS UNION
Customs Union
barriers to trade
among themselves and erect common barriers against non-
member
countries.
mon external tariff is charged to non-member
countries.
CARICOM also
represents a customs union.
coordination.
13
CUSTOMS UNION
Examples of Custom Unions:
- Andean Community (1969/1996) Bolivia, Colombia,
Ecuador, and Peru
- Eurasian Customs Union (2010)
- East African Community (1967- 1977) (2000)

- European Union Customs Union (1958)
- Mercado Común del Sur- Southern Common
Market-(1991) U (1994
- Southern African Customs Union (1910) Up. (1970)
14
COMMON MARKET
and capital freely across
borders.
ies within a geographical area to
promote duty free trade and
free movement of labor and capital among its members.
imports from non-
member countries.
tion that benefits from
the forming of a common
market. In recent times, greater effort has been allowed in
CARICOM toward becoming an
actual common market.

borders to seek
employment.
passports, as well as CARICOM
members. They can also work in different parts of the region
without restrictions.
15
COMMON MARKET
Examples of Common Market:
- European Economic Area (1994)
- European Free Trade Association (1960) Iceland,
Liechtenstein, Norway and Switzerland
- Common Economic Space (2003) replaced by the
Eurasian
Customs Union 2012 and the Eurasian Economic Union (2015)
– CARICOM Single Market and Economy (2006)
16
ECONOMIC UNION

goods and services,
set common external tariffs among members, allow the free
mobility of capital
and labor, and will also relegate some fiscal spending
responsibilities to a
supra-national agency.
-ordination
of economic
policies.
continuum.
major
macroeconomic variables
such as inflation, interest rates and exchange rates.
17
ECONOMIC UNION
Examples of Economic Unions:
- European Union's (EU) Internal Market (1993)
- Eurasian Economic Union (2014)

18
MONETARY UNION
with the inclusion of a
Currency Union (i.e. Common Currency)
which will determine
monetary policy for the entire group. A well-known example is
the European
Union (EU).
Caribbean is the
Organization of Eastern Caribbean States (OECS), which
comprises the Lesser
Developed Countries (LDCs) of the CARICOM group, such as
Antigua and
Barbuda, Dominica, Grenada etc.
Caribbean Dollar and a
common Central Bank (Caribbean Development Bank).
19

POLITICAL UNION
e
development of a political union.
the
development of common external barriers plus the free
movement
of factors of production, the harmonization of economic
policies, and
common political institutions and governance procedures.
20
REGIONAL ECONOMIC INTEGRATION
countries in a
geographic region to reduce and ultimately remove, tariff and
non tariff
barriers to the free flow of goods or services and factors of
production
among each others, countries agree to coordinate their trade,

fiscal, and/or
monetary policies.
nation-states
agree to co-operate and work closely together to achieve peace,
stability
and wealth.
effectively,
Caribbean countries as well as other developing countries must
improve
their own competitiveness.
21
BENEFITS OF REGIONAL INTEGRATION
Caribbean
economies.
or pausing
points at which countries may decide either to stop the
integration

process or pause prior to integrating further.
in the
interest of trade.
22
23
BENEFITS OF INTEGRATION
consumption
shifts from a high cost
producer to a low cost producer. Economic integration increases
specialization by
removing trade barriers and by encouraging specialization, it
enables a shift in
production from high cost to low cost countries.
available to
consumers in member states. Removal of trade barriers enables
consumers
to have a variety of commodities from which to choose. Local
consumers are no

longer restricted to consuming local products. Increased variety
and consumer
choice improve people’s standard of living.
24
there are
conflicts between countries.
d in economic efforts, it becomes
necessary to maintain
friendly relations.
considered as
international trade is immediately converted to domestic trade.
cy that was previously
involved in
international trade and results in trading being more efficient
and hence,
more profitable. 25

integration enables
member countries to expand the scale of production and enjoy
economies of scale
because of the expanded market.
attracted by large
markets. Small and fragmented national markets are usually not
sufficient to attract
huge investments. Economic integration makes the region a
huge market which
foreign investors find attractive.
countries
acting together improves their bargaining power in trade
agreements with other
countries and trade blocs. A common policy and common stand
enables the group
of countries to integrate to achieve more than they would if the
individual countries
bargained individually.
26

integration Reduces problems of exchange rates:
Economic integration enables member countries to use the same
currency
throughout the region. This eliminates the need for converting
currencies
for cross border trade.
ization: The knowledge that a
country
will be able to freely export surplus output to its trading
partners
encourages specialization which greatly improves the efficiency
and quality
of output produced.
duction: The
free
movement of factors of production in an integrated region
enables
unemployed factors of production to find employment in other
countries.
27

integrate, they are
able to undertake very costly projects that they would not have
afforded individually.
This enables them to undertake costly research, develop better
and modern
infrastructures and services.
from the member
countries competing
for the market without restrictions, firms are forced to improve
on quality and sell
at lower prices. Firms must devise the most efficient methods of
production so as to
favorably compete. Integration therefore promotes efficiency.
security within the
region. A country will find it difficult to wage war against a
fellow member state.
There are also many structures aimed at resolving conflicts
amicably without
resorting to war.

28
Benefit of Economic Integration to the Caribbean Region
of goods and services
PITFALLS OF INTEGRATION
against
non-member countries.
ade barriers, trade is diverted from
a non-
member country to a member country despite the inefficiency in
cost.

manufacture in a non-member country and trade with a
manufacturer
in a member country which has a higher cost. 30
PITFALLS OF INTEGRATION
some
degree of control over key policies like trade, monetary and
fiscal
policies.
, the greater the degree of
controls that needs to be given up particularly in the case of a
political union economic integration which requires nations to
give
up a high degree of sovereignty.
31
EVOLUTION OF CARIBBEAN INTEGRATION
ies Federation was a political union in the
making established in1958 by

the British Caribbean Federation Act of 1956 and comprised of
ten territories: Antigua and
Barbuda, Barbados, Dominica, Grenada, Jamaica, Montserrat,
the then St Kitts-Nevis-
Anguilla, Saint Lucia, St Vincent and Trinidad and Tobago.
Federation were direct
taxation by the Federal Government, Central planning for
development, Establishment of a
Regional Customs Union and Reform of the Federal
Constitution.
structures imposed by the
British; policy disagreements an unwillingness to give up power
to the Federal Government
were faced.
, was led by the withdrawal of Jamaica –
the largest member and
Trinidad and Tobago’s subsequent withdrawal shortly after.
32

founded by Antigua and Barbuda,
Barbados, Guyana, and Trinidad and Tobago in1965, with the
signing of the Dickenson Bay Agreement
(the Agreement establishing the Caribbean Free Trade
Association).
-
Nevis-Anguilla, Saint Lucia, St Vincent and
the Grenadines, Montserrat and Jamaica.; and in 1971 by Belize.
joint presence on the international
scene by encouraging a balanced development through:
– buying and selling more goods among the
Member States
– expanding the variety of goods and
services available for trade
– removing tariffs and quotas on goods
produced and traded within the area
petition – setting up rules for all members
to follow to protect the smaller
enterprises.
33

In addition to providing for free trade, the Agreement sought to:
y
distributed
Oils and Fats Agreement)
which was significant in many of the LDCs
facilitate the marketing of selected
agricultural products of particular interest to the LDCs (through
the Agricultural Marketing
Protocol)
products which were more
important for the revenue of the LDCs 34
(CARIFTA) was that it
only facilitated the trading of merchandise goods.

harmonize the industrial
and foreign policies throughout the region (“Guyana Chronicle:
The History of
CARICOM”).
that accommodated
the free movement of commercial services, people and capital
within the Caribbean
known as the Caribbean Community (CARICOM) in 1973.
35
1973-
1989, replaced CARIFTA in 1973 with the signing of the Treaty
of Chaguaramas.
‘pillars’ of economic
integration (a common market in goods), functional cooperation
(education, health
and several other areas), and foreign policy coordination.
twenty countries; fifteen of which
are Members and five

Associate Members. They work together to coordinate economic
policies, engage in
development planning, launching of special projects targeted at
less-developed
countries and handling trade disputes within the region.
the 1980s intraregional
trade deteriorated. 36
- In 1989
CARICOM Heads
of Government (HoG) declared their intention to create a Single
Market and
Economy (CSME).
Treaty of Chaguaramas in
2001.
Court of Justice was
created.
2006 and the Single

Economy is scheduled for completion in 2015.
37
mplement provisions for the removal of
trade and
professional restrictions.
businesses,
to provide regional services, the free movement of capital and
the
coordination of economic policies.
auspices of
multilateral lending institutions, implemented structural
adjustment programmes having at their core, programmes of
economic,
financial and trade liberalization that far exceeded their
commitments as
expressed in the Treaty of Chaguaramas.
38

The fundamental aspects of CSME are as following:
rrangements for Free Movement of Persons
CSME OBSTACLES
in terms of GDP per
capita as well as population. Furthermore, the economies are
very open, but tend to
focus on very few export goods.
region has a long history

through CARIFTA, CARICOM and now CSME.
regional economic integration
among developing countries have been concerned with the issue
of equity in the
distribution of benefits.
ies are much more
developed than others, the
gains from being integrated are very likely to be distributed
unequally.
40
CSME OBSTACLES
than the less
advanced.
ce is a wider gap between the
members:
the more rural
area is condemned to a lower level of development.
not stimulate strong

migration flows.
labour within
CARICOM.
41
CSME OBSTACLES
market, citizens of
CARICOM willing to move will probably prefer to go to the US
or other higher
developed countries outside CARICOM.
categories like graduates,
musicians artists etc. Artisans and unskilled persons still have
to get work permits.
to ensure that all facets of the
agreement were in place
by 2015.
-2019 in tandem with the Community Strategic
Plan 2015–2019
-plan-

for-the-csme-2017-
2019/
42
https://today.caricom.or g/2018/10/26/implementation-plan-for-
the-csme-2017-2019/
CSME OBSTACLES
is adequate infrastructure.
Economic gains prompted from regional integration are highly
dependent upon the
ability of the system to move resources, people, capital, and
information seamlessly from
the sourcing areas to production hubs and finally to di stribute
its products efficiently.

CHALLENGES TO INTEGRATION
https://www.everycrsreport.com/reports/RL34308.html#_Toc20
2746444
44
https://www.everycrsreport.com/reports/RL34308.html#_Toc20
2746444
GLOBALIZATION AND CARICOM
developing economies such as
those in the Caribbean, which are already dealing with a number
of issues in their
pursuit of sustainable development.
has been reflected in
increased liberalization and market-opening policies, especially
during the latter
part of the 1980s and the 1990s.
nd the increasing openness of
these economies
have not led to a significant increase in intraregional trade or

helped them to
obtain a growing share of the extra- regional export markets. As
a result, these
countries’ growth potential has been limited.
45
Economy (CSME).
integration than had
been possible under the existing treaty and, through the
development of
economies of scale, to increase the competitiveness of these
countries in
the global economy.
enhance the bargaining
position of CARICOM countries in international negotiations
such as those
at the level of the World Trade Organization (WTO) and the
future Free
Trade Area of the Americas (FTAA). 46

specific sectors but
has not provided the means to overcome the weaknesses and
stumbling blocks
that have marked the development of some of the more
traditional sectors.
sectoral output and, in so
doing, has made the existing disparities among CARICOM
countries more visible
and transparent.
composition of output
has reflected a loss of competitiveness resulting from high
production costs,
external shocks and a heavy dependence on trade preferences
granted by the
European Union. 47

expansion of
human settlements and development policies aimed at
addressing poverty
and income inequality, which are among the most serious
sustainable
development issues confronted by the Caribbean countries.
opportunities presented by the global environment is the
transformation
from a labour intensive to a highly trained knowledge-based
workforce
48

ECON3501CARIBBEAN ECONOMIC DEVELOPMENTUNIT 4 – ECO

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