Patterns of Development
An extensive period of postwar growth transformed Jamaica into
an increasingly industrial society. This pattern was accelerated
with the export of bauxite beginning in the 1950s. The economic
structure shifted from a dependence on agriculture that in 1950
accounted for 30.8 percent of GDP to an agricultural contribution
of 12.9 percent in 1960 and 6.7 percent in 1970. During the same
period, the contribution to GDP of mining increased from less than
1 percent in 1950 to 9.3 percent in 1960 and 12.6 percent in 1970.
Manufacturing expanded from 11.3 percent in 1950 to 12.8 in 1960
and 15.7 in 1970.
Seven consecutive years of negative economic growth were
registered from 1973 to 1980 as several external and internal
factors changed postwar patterns of economic development. The most
important factor was the supply-side shock of quadrupled oil
prices. Jamaica was particularly vulnerable in that its economy was
relatively oil intensive for a developing country, primarily
because the bauxite industry's technology predated the energy
crisis. As a result of the crisis, Jamaica's oil import bill
increased 172 percent between 1973 and 1974. The economy was
simultaneously hurt by the plateau experienced in foreign
investment in the bauxite sector in the early 1970s, as the major
multinational companies were then operating on the island. Also,
both internal and external factors affected the tourist industry.
Internal politics, some violence, and the PNP's defiant Third World
stance scared away some tourists. PNP politicians, however, blamed
the fall in tourist arrivals primarily on biased press coverage in
North America and United States attempts at "destabilization."
PNP policies also contributed to negative growth. Unlike other
governments in the Caribbean, the PNP in Jamaica was proposing very
expansionary fiscal policies during a period of both serious
inflation and recession. Government expenditures on badly needed
social programs expanded much more rapidly than government
revenues, creating chronic budget deficits that increasingly were
financed by external loans. By 1980 external debt was as high as 82
percent of GDP and debt service was over 20 percent of exports.
Government budget deficits went from a level equal to 6 percent of
GDP in 1974 to a level of 18 percent of GDP in 1980. Chronic
deficits were coupled with restrictive import controls, unrealistic
exchange rates, and tight monetary policies; the result was a sharp
drop in investment and a decline of 18 percent in GDP from 1973 to
1980. The deteriorating economic situation and increasing political
violence generated serious capital flight and emigration of skilled
labor, thereby creating further long-run obstacles to future growth
Although growth did occur in the 1980s, it was sporadic and
unsustained. Real GDP growth was 4.0 percent in 1981, 0.0 in 1982,
1.8 in 1983, 0.4 in 1984, -4.5 in 1985, and was estimated at 2.0
percent in 1986. Despite some growth in the first half of the
decade, 1985 GDP was still below 1981 levels in real terms.
Furthermore, economic growth did not keep pace with population
growth; as a result, per capita GDP, in constant terms, declined
7.5 percent from 1981 to 1985. Observers estimated that real per
capita GDP in the mid 1980s was close to pre-independence levels.
Modest annual growth was expected in the late 1980s.
The economy went through a structural adjustment process with
the help of unprecedented funding from the World Bank (see Glossary), the International Monetary Fund (IMF--see Glossary), and
the United States Agency for International Development (AID). The
adjustment process integrated the local economy more fully with the
international economy by reducing tariffs, promoting nontraditional
exports, increasing the role of the private sector, and devaluing
the Jamaican dollar (J$). Nonetheless, recession in the world
economy and the depressed prices for traditional exports prevented
significant net increases in foreign investment or exports.
Although there was substantial growth in nontraditional exports,
such growth was unable to offset the large fall-out in traditional
exports and production. Unemployment, the greatest social problem,
remained stagnant at 25 percent in the mid-1980s.
Data as of November 1987