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Caribbean Islands ECONOMY
Jamaica is a middle-income, oil-importing country that
attempted diverse economic development strategies during the 1970s
and 1980s. Jamaica had the second largest GDP of the Commonwealth
Caribbean, behind only Trinidad and Tobago, an oil-exporter. The
island's GDP for 1985 was US$1.7 billion, or US$940 per capita. The
major sectors of the economy were bauxite (see Glossary) and
alumina (see Glossary), tourism, manufacturing, and agriculture.
Bauxite and alumina, in particular, set the pace of Jamaica's
postwar economic growth through new investment and foreign exchange
earnings. Bauxite production declined rapidly in Jamaica in the
1980s, however, because of the prolonged recession in the world
aluminum industry, global oversupply, and the departure of
multinational producers. Tourism declined in the 1970s, but
recovered between 1980 and 1986, thus becoming the second most
important sector of the economy. Manufacturing, a quite diversified
sector, underwent structural changes in the 1980s when production
was refocused on exports rather than on the domestic market.
Agriculture, the heart of the Jamaican economy for centuries, has
been in relative decline since World War II.
Jamaica enjoyed rapid growth rates during the 1950s and 1960s
as the bauxite industry boomed. Real GDP growth averaged about 4.5
percent during these two decades. Economic growth was sporadic and
weak from 1972 to 1986, however. Indeed, the Jamaican economy did
not register two consecutive years of significant growth during
that period. Between 1973 and 1980, the island experienced seven
consecutive years of negative growth. The economic downturn in the
1970s demonstrated the highly mobile nature of both labor and
capital in Jamaica, as skilled labor and investment capital left
the island. The democratic socialist government of Michael Manley
from 1972 to 1980 was popularly blamed for the poor performance
during the 1970s (see Political Dynamics, this ch.). Nevertheless,
Manley's successor and conservative political opponent, Edward
Seaga, was also unable to turn the economy around during his first
six years in office. The economy experienced sporadic and
unsustained growth in the early 1980s. GDP declined by 4.5 percent
in 1985 but rose again in 1986 by more than 2 percent. In the mid1980s , the Jamaican economy was about where it was in 1980 in terms
of real GDP. Negative growth in the 1980s was generally attributed
to the acute decline in the world bauxite market.
Most Jamaicans enjoyed a relatively high quality of life when
compared with their neighbors. For example, in the early 1980s,
Jamaica's physical-quality-of-life index computed by the Overseas
Development Council was higher than that of Mexico and Venezuela
and equal to that of Trinidad and Tobago. Nevertheless, Jamaica
still suffered from severe social problems resulting from the
skewed distribution of the country's wealth, often said to be the
legacy of colonialism and slavery. For example, in 1960 the top 20
percent of society received 61 percent of the national income, and
after independence income distribution continued to worsen. Land
tenure was also highly inequitable. In 1961, the year before
independence, 10 percent of the population owned 64 percent of the
land; this pattern continued in the 1970s, despite the
implementation of a land reform program. Less than 1 percent of the
country's farms covered about 43 percent of the land in 1978.
Jamaicans in urban areas had much more access to piped water,
sanitary plumbing facilities, and high quality health care than
their rural counterparts. These disparities in income and service
were believed to have widened even more as a result of the austere
economic policies of the 1980s.
Jamaica was hardly immune from the structural economic problems
affecting other developing countries in the era. Beginning in the
mid-1970s, inflation was generally double-digit, caused primarily
by the increase in world oil prices, expansionary fiscal policies,
and entrenched labor unions. Chronic unemployment and recession
coexisted with high inflation during the 1970s, causing
stagflation. Unemployment averaged roughly 25 percent during the
1975-85 period, affecting women and urban youth the hardest. The
country also faced rapid urbanization as economic opportunities in
rural areas deteriorated. In 1960, about 34 percent of the island's
population was considered urban, but by 1982 that figure had risen
to about 48 percent as opportunities in rural areas declined. Like
other countries in the Western hemisphere, Jamaica quickly compiled
a large external debt in the 1970s and 1980s; by the end of 1986,
it amounted to US$3.5 billion, one of the highest per capita debts
in the world.
In the 1980s, Jamaica's economy was generally defined as free
enterprise, although major sectors were government controlled. The
PNP governments in the 1970s were the most active in increasing
state ownership. Although some private companies were purchased,
the more usual pattern was to create joint public-private
enterprises or to increase government regulation of the private
sector, especially of foreign multinationals. In the 1970s the
state ownership was largely financed by a levy on bauxite
production, introduced in 1974, and by deficit spending.
In 1980 Seaga was elected on a platform of denationalization
and deregulation of the economy. In his first six years in office,
however, Seaga achieved mixed results. Denationalization did occur
in tourism and agriculture, but the role of government actually
increased in oil refining and bauxite production after several
large firms unexpectedly left the island. As of early 1987, the
structural adjustment (see Glossary) of the economy was nearly
completed and increased government divestments were forecast.
Jamaica's economy was rather open. Trade as a ratio of GDP was
estimated to be over 50 percent in the 1970s, a percentage believed
to be increasing in the 1980s. As part of structural adjustment
policies to further open up the economy, the Jamaican dollar was
devalued several times in the early 1980s. Although imports fell as
a result, the country's overall trade deficit actually increased as
prices collapsed for its major primary product exports, bauxite and
sugar. The country's trade deficit rose to over US$500 million
during 1985. The island's direction of trade changed, with a
greater share going to the United States and less to the Caribbean
Community and Common Market (Caricom--see Appendix C), particularly
to Jamaica's major trading partner in the community, Trinidad and
Tobago.
Data as of November 1987
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