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I am grateful for comments and suggestions from Simon Johnson, Ebrima Faal, Judith Gold, Samuel Itam, Masahiro Nozaki, Rodney Ramcharan, Selwyn Ryan, Arvind Subramanian, and Mary Zephirin, and participants at seminars held at the IMF and the Central Bank of Trinidad and Tobago. I am also grateful to Zhaogang Qiao for excellent research assistance, and Christy Gray, Verona Itam, and Maria Orihuela-Quintanilla for editorial assistance.
In this paper, institutional quality is measured by the indicators developed by Kaufmann, Kraay, and Mastruzzi (2005). The indicators, measuring the “institutions” of voice and accountability, political stability, government effectiveness, regulatory quality, the rule of law, and corruption, are derived by collating perceptions of these variables.
Antigua and Barbuda, Barbados, Dominica, Grenada, Jamaica, Montserrat, St Kitts-Nevis-Anguilla, St. Lucia, St Vincent, and Trinidad and Tobago.
Based on 2003 data, Barbados was ranked 30 out of a total of 177 countries in the UNDP’s measure of human development. Guyana’s ranking was 107.
The West India Company’s charter expired in 1791, 23 years prior to the British takeover in 1814 (Daly, 1975, p. 80).
Other earlier crops included cotton, cocoa, coffee, dyes, and tobacco.
Small indigenous populations were found by the British mainly in Guyana, Belize, and Dominica. By the time of British settlement, indigenous populations in the other islands had probably been exported to other colonies or died through war, work, or disease. See Williams (1984, pp. 95-110) for a summary of the use of indentured labor from Europe in the West Indies.
The island, however, was not disease free; in the last quarter of the seventeenth century it was affected by a number of epidemics, see Greene (1988, p. 155).
Williams (1984, p. 114). He notes that an indicator of Barbados’s early prosperity was the inflation of land values. Dunn (1969) estimates that Barbados’s exports to England in 1680 were likely higher in value than total exports from all the North American colonies to England.
Greenfield (1969, p. 54). Galenson (1985) estimates that through 1670 the rate of outmigration from Barbados was the same as that from some New England towns that have been models of stability in American history. However, the rate for Barbados rose after 1670, reflecting migration to the North American colonies, mainly the Carolinas.
Greene (1988, p. 155) notes that after 1710 whites in Barbados enjoyed more favorable health conditions than settlers in the rest of the West Indies, the southern mainland of North America, and even in cities such as Boston and Philadelphia.
Average rates of return on total investment fell from in excess of 10 percent during the late seventeenth century to 4-5 percent in the 1760s and 1770s.
Williams (1945, p. 361) expresses the view that the history of Guyana would have been different if it had become a British colony in the middle of the eighteenth century. The shortage of labor would have been resolved by the slave trade, and the colony’s fertile coast would have attracted large amounts of British capital, outstripping British investment in Barbados or Antigua.
These arrangements were generally retained by the British until 1928.
90 percent of Guyana’s population lives on the fertile but flood-prone Atlantic coast, which represents 4 percent of the country’s land area. The remainder of the country consists of forests and savannahs where the main activities are forestry, mining and livestock rearing. The coastal drainage system was introduced by the Dutch settlers.
Coastal rainfall averages about 80 inches a year. The latest in the series of damaging floods occurred in 2005.
Lewis (1968) notes that the ownership structure of the Guyana plantations was characterized by “intense corporate concentration”. Williams (1945, p. 363) estimates that establishing a plantation cost £30,000 to £50,000, making Guyana “a rich man’s country.”
Daly (1975, p. 249). Efforts to encourage German settlers also ceased because of their high mortality rates.
Malaria continues to be one of Guyana’s serious health problems, with 27,627 new reported cases in 2003 (24,000 in 2000). Most of these cases were concentrated in the western interior regions (UNDP, 2005).
The emphasis on settlement in Barbados was bolstered by the colony’s role as an important British military station, with a strategic position in the eastern Caribbean sea and a permanent force of troops beginning in 1785.
Sugar production costs rose sharply after emancipation. Shepherd (1929) refers to evidence before the 1848 Committee on Sugar Plantations indicating that in Barbados, costs per hundredweight (112 pounds) rose from 6 shillings to 15 ½ shillings.
Total compensation payments in the British Caribbean colonies amounted to almost £16 million, of which £4 million was paid in Guyana and £1.7 million in Barbados (Williams, 1984, p. 332).
By 1842, more than 1,000 families of former slaves had bought over 7,000 acres of coastal lands (Knight, 1990, p. 185).
Relative to the pre-emancipation period, 1824-33, annual sugar production in 1839-46 increased in Antigua, Barbados, and St. Kitts, and fell in Guyana and Jamaica. In Trinidad also, production declined after 1838. In Guyana and Trinidad, these declines were reversed after indentureship (Engerman, 1982, p. 196).
See Engerman and Sokoloff (2005) on the role of colonial land policies in contributing to persistent inequality.
Cumper (1960, p. 27). By 1911, indentured Indian workers in Guyana outnumbered freed slaves and constituted about 40 percent of the population.
By 1924, about a quarter of indentured workers who arrived in the British West Indian colonies had returned to India. (Williams, 1984, p. 352).
During 1886-89 there were about 100 labor disturbances involving indentured workers in Guyana (Daly, 1975).
The wage rate for indentured workers was about half that prevailing for free labor (Thomas, 1984, p. 21). Rodney (1981) makes the point that care should be taken in viewing the tensions among groups of workers as based only on race. Former slaves viewed with anxiety all new arrivals as potential competitors for limited work on the estates, and there were also disputes over labor and land among groups of former slaves. Jagan notes that indentured workers were used as strike breakers not only against freed slaves but also “freed” indentured workers who demanded higher wages.
There were 1,075 arrivals per year of Barbadian workers in Guyana during 1835-46 (Rodney, 1981, p. 48).
A strike in 1847 by freed slaves against planters’ efforts to lower wages failed because indentured laborers continued working (Daly, 1975).
The burden of import taxes fell heavily on freed slaves. In Guyana, public expenditure on immigration in 1842 was equivalent to 17 percent of total expenditure, the same ratio as that spent on health, public works, education, and welfare combined (Moohr, 1972, p. 353).
By 1880 unindentured Indian workers outnumbered indentured workers on the sugar estates. Indentureship ended following the intervention of the Indian government in response to complaints about the treatment of workers. By 1920 the last indenture contracts had been completed (Rodney, 1981, p. 34).
The number of sugar estates or plantations in Guyana fell from 308 in 1838 to 105 in 1884 and 46 in 1904 (Standing, 1979). By the late-1950s, one British company, Booker McConnell, controlled the sugar industry, owning 12 of the 17 plantations, with an average plantation size of 7,000 acres (Tomasek, 1959, p. 394).
Emigration continued through the early-1900s, boosted by demand for workers in the U.S. and the Panama Canal. Remittances to Barbados during 1906-1910 averaged over £65,000 a year, which helped finance the purchase of housing lots (U.K. Colonial Office, 1965, p. 116).
West India Royal Commission (1945). The Commission was set up to enquire into the reasons behind the labor unrest in the colonies in the 1930s.
The other colonies were administered as “Crown Colonies”, which implied almost full control of government arrangements by the governors.
The British government cited the risk of violence by the PPP as one of the reasons for sending in the army.
The labor legislation would have paved the way for the recognition of a PPP-backed union in the sugar industry. The umbrella trade union organization referred to the legislation as “a blue-print for the end of trade union freedom in British Guiana” (Daly, 1975, p. 305).
176 people were killed, 920 injured, 1,400 homes were destroyed by fire, and about 15,000 people (2 percent of the population) moved their homes to villages dominated by their own ethnic group (Daly, 1975, pp. 306-7).
See Cumper (1960, pp. 206-211). The Moyne Commission Report (p. 67) noted that in 1938 Guyana’s debt totaled £4,395,000—the highest in the British colonies, equivalent to £13 per head—and that debt service accounted for 21 percent of total expenditure. Equivalent figures for Barbados were £377,000, £2 per head, and 5 percent. Referencing data for 1944, Hammond (1946) estimates that Guyana’s expenditure on education as a percentage of tax revenue (2.2 percent) was significantly lower than that of Barbados, Jamaica, and Trinidad and Tobago (14.5, 16.5, and 7.1 percent, respectively).
Lewis (1968, p. 265) mentions a claim by the Booker Group that it controlled directly and indirectly the lives of about 80 percent of the population.
Tourist arrivals almost doubled to about 68,000 between 1960 and 1965, and generated earnings of BWI$26 million in 1965 (55 percent of merchandise exports).
Government of Barbados (1966).
Lewis (1968) observes that during the pre-independence period, Booker’s organized and administered much of the health and social services on the sugar estates with the result that government administrators and the public in rural areas developed little experience of the functioning of government.
Williams (1984, pp. 511-512) describes the economic strategy adopted in Trinidad and Tobago in 1969 as involving foreign investment and trade, increasing control over the commanding heights of the economy, promoting racial harmony and social equity, and developing a national and cultural identity.
Barbados’s capacity for consensus building in the face of crisis was demonstrated again during the 1991/92 balance of payments crisis. Much of the success of the response to that crisis (which included Fund financing) was due to wage protocols (tripartite agreements of the government, labor, and the private sector), which required an across-the-board commitment to overriding national goals, supported by strong institutions and capacity. The protocols also provided a mechanism for accommodating special interests such as labor unions, and providing voice to non-government groups. See Downes and Nurse (2004) for an assessment of the protocols.
This result is consistent with work by Rodrik and others, which shows that adjustment to shocks is worse in countries with conflict and poor institutions for conflict management.
During 1965-2000, 89 percent of the Guyana labor force educated at the tertiary level migrated to OECD countries. The ratio for Barbados was 63 percent and the average for the Caribbean region was 70 percent, see Mishra (2006).
For details of the ERP and its achievements, see Egoumé-Bossogo, Faal, Nallari, and Weisman (2003).
Data from Guyana’s Draft National Development Strategy (1997) and the ILO show that during 1985-94 the number of strikes averaged 393 per year, compared with 8 in Barbados and 19 in Trinidad and Tobago.
Three loans under the Fund’s Poverty Reduction and Growth Facility (PRGF) and a Stand-By arrangement were completed over the period 1990-2002, and a further PRGF loan was signed in 2002. In the 17-year period 1990-2006, the IMF disbursed loans in all but one year. Over that period, disbursements totaled SDR255 million, while repayments, charges, and interest totaled SDR364 million. http://www.imf.org/external/np/tre/tad/extrans1.cfm?
The election marked the return of the PPP to government after 28 years; its longstanding leader, Cheddi Jagan, became president. The PPP won 28 of the 53 directly elected seats, and the PNC, 23.
Central government expenditure fell from 89 percent of GDP in 1985-89 to about 40 percent in 1996-97.
Ryan (2003) notes that marches and demonstrations in July 2002 revealed that Guyana’s economic, political, judicial, and security systems were in a state of near collapse.
Grier (1999) finds that colonies that were held for longer periods tend to perform better, on average, after independence.
For reviews of Mauritius’s efforts to develop mechanisms and institutions to promote inclusion and ethnic harmony, which have contributed to the country’s favorable economic performance, see Brautigam (1999), Gulhati and Nallari (1990), Rodrik (2000) and Subramanian and Roy (2001).
Easterly, Ritzen and Woolcock (2006) find that where institutions are sufficiently well developed there is no adverse effect of ethnolinguistic diversity on growth.
As noted above, following the 1997 elections, a CARICOM team brokered an agreement between the two main political parties aimed at defusing tensions. Details of the agreement are available at http://http:/www.caricom.org/jsp/pressrelease/press06_98.htm