This raises an important question of method. From the outset, Demas makes the conventional professional disclaimer and exempts himself from “dealing very extensively with the more fundamental, social, political and institutional parameters underlying the process of growth and structural change” (p.4). This, he describes, as requiring an “interdisciplinary approach”.
But as Arthur Lewis has long since reminded us, the theory of economic growth, by shifting attention from proximate to ultimate causes, at once queries the conventional boundaries of discipline. The “interdisciplinary approach” then implies a revision of the fundamental assumptions, a task which falls within the discipline. Lewis, however, was interested in the difference in human behaviour which influences economic growth. Demas is principally concerned to show the effects of size.
But while the latter’s lectures are a valuable reaffirmation of the influence on economic growth of size by itself, and suggest many possible connections between size and other variables, they remind us, above all, that the bulk of the potential for explaining economic growth, even in small countries, has still to come from more systematic examination of the instruments that control rather than of the ‘natural’ variables themselves.
In view of his concern with size, it is a matter of some surprise to find that Demas defines the region politically to mean the British Commonwealth Caribbean. His definition is not in terms of his claim that economies with population under five million and land space of five to ten thousand square miles constitute a special class with restricted development choices and limited potential. Instead, it is in terms of some presumed community of shared (British?) institutions, policies and behaviour patterns. It is equally surprising that Demas did not acknowledge (let alone explore), the possibility of incorporating within the class, not only the British Antilles and British Guiana, but perhaps all of the Antilles and the Guyanas, Venezuela, the Brazilian North-East, parts of Columbia and Ecuador, sections of Central America and even a sizeable fragment of the American ‘South’.
Such a grouping has been suggested before, notably by Wagley, on the grounds that, whatever their particular political associations, these areas have exhibited strikingly kindred forms of economic and social organisation and very similar patterns of culture and economic performance. In all cases, their character seemed to have been formed by a dominant institution, the plantation, producing for export, and the institutions which it created in its own defence. More important for the economist, is that they seem to have in common, a tendencv to dissipate any development potential created for them bv booming exports and have only a limited capacity for industrialization, transformation of their internal structures and for successful adjustment to adverse forces emanating from outside. These similarities exist, apparently, irrespective of differences in the size of the territories.
Conceivably. there was a chance here to investigate, within the boundaries of this wider class, the interplay between ‘natural’ factors such as size, and others such as economic organization. Demas, however, declined the opportunity, perhaps for the very good reason that he did not have the necessary information. But even within the more limited framework of the British Caribbean, he does not test his theory in any systematic way. He does attempt a rough distinction between the ‘larger’ territories and the ‘smaller’. But while he asserts that the future of the Leeward and Windward Islands is much more closely bound up with exports of traditional primary products, the growth in productivity of the domestic food-producing sector and the development of the tourist industry rather than with the development of manufacturing industry, he does not show precisely how scale is decisive here.
What Demas in fact does is to conduct his analysis of the characteristics of the Caribbean economy by placing institutional factors in the foreground; in particular, the long-standing connection between the region and the North Atlantic, and what presumably he sees as necessary concomitants of it, the modelling of patterns of culture and economic behavior, and of forms of governmental, political and labour organisation on their counterparts in that metropolitan area.
Hence, he regards the economies as having to operate within two “fundamental institutional constraints” (p. 99). For one thing, there is “the existence of a strong independent and forceful trade-union movement sharing the philosophy of North American, and British Trade Unionism” (p. 98). For another, there is also “the existence of political democracy on classic Westminister lines” (p. 98). These institutions “can impose severe constraints on the growth process” but they remain “intrinsically valuable” (p. 115).
How do these institutions restrict growth? First, the trade unions create an aristocracy of organised labour and this increases the inequality of income and distorts the pattern of demand so making the substitution of locally produced goods for foreign imported goods more difficult. Secondly they raise the supply price of labour and so create unemployment.
Yet they cannot be easily controlled in a “full blown” democracy. “In a totalitarian one-party state, the interests of associations such as Trades Unions are made to coincide with those of the state and the society” (p. 99). But here, the political system makes matters worse. Governments arc placed under pressure to expand and improve welfare services at the expense of development, all the more because the Caribbean… “has been overcome by the revolution of rising expectations. There is a widespread desire for many of the more expcnsive durable consumer goods associated with North American civilization. …” (p. 98).
In other words, Demas quite properly appreciates that the Caribbean economies are at present importing a mixture of goals, institutions and behaviour patterns which, in the context of their own resources, defeat any attempt at a matching of ends and means. Heis aware that the technology in use cannot employ all the resources available, raw products and capital, skill and labour. He stresses the rigidity of resources in the agricultural sector and the dualism in the economy as a whole. He outlines the difficulties in the way of resource mobilization posed by the existence of financial and commercial systems designed to service an open economy.
The consequences of this complex of characteristics are clear enough. The economy is high cost and is able to sustain sales in international markets only when specially favourable conditions obtain; unemployment on a large scale emerges as a chronic feature, especially when there are no migration outlets available; dependence on foreign investment funds becomes a constant, even in times when income is expanding rapidly.