SUGAR SYMPOSIUM: THE SOCIAL ECONOMY OF SUGAR

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The economics of the sugar industry must be viewed merely as one aspect of the social economy. The sugar industry does cot exist as an autonomous entity in a social and economic vacuum. I want to look at the question in this way and to pose some of the things that should have legitimately concerned the government and the industry a long time ago. It is because we are concerned to get them to do these thing that these discussions have been initiated. M remarks will be concerned broadly with income, foreign exchange earnings, and employment, three important aspects of the efficiency or inefficiency of sugar in the social economy. Here I can give merely the outlines of the matter. My colleague Clive Thomas will deal with approaches to the question of land-use.

I must confess that everytime I contemplate the sugar industry the annoying question that recurs is: what is there so sacrosanct and preservable-at-all-cost in an industry which has 60,000 workers with their probably 240,000 dependents dangling precariously at the end of £3 per week.

Was this the best way to have used 60,000 men, 200,000 acres of land and £3om to £4om of investable funds? The problem is not simply a question of private returns per acre of land. It is a matter of the net returns to the country for all the resources put into the industry compared with the returns from alternative investments.

The net returns to the social economy (as distinct from the private) from the sugar industry is its gross private return less repatriated profits, less payments for imported materials and imported equipment, less the net diseconomies, less the effective subsidy. This figure has to be even further reduced by discounting for the risk clement. A brief word now about some of these deductions. The net diseconomics of the industry arc probably very high but difficult to quantify. They consist for example, of the results of the industrial relations turmoil it generates and the social and economic cost of its preservation, of which devaluation was a recent illustration. These arc standard methods in the literature of social project evaluation.

If the subsidy were a local subsidy it would at once, be apparent that we should subtract it from the private returns of the industry- a subsidy being merely a transfer from one section of the community to another. Since the subsidy is paid by Britain it may appear to be a net gain but only the most naive among us would think that ‘in effect’ it involves absolutely no quid pro quo. One of the more obvious offsets is the value of Jamaican preferences to the UK. Thus the subsidy, in essence, has very much the character of an internal subsidy and should be so treated in an ordinary social evaluation of the returns from a business activity.

The risk element is straightforward and so obvious that the industry itself argues this point (as it did before the Modecai Commission) when reference is made to the adequacy of the rate of returns on capital. For example, in 1961 the estates made £ 1m profit, in 1963 £3.7m; in 1965 a loss is alleged to have been made of some £390,000. Between 1954 and 1964 the rate of return on capital has varied from 21.3% to 2.5% One rationale for discounting for risk in a social project evaluation is that the degree of risk varies as between different activities. There is essentially a loss of comparability, so far as dynamic social valuation is concerned, in an exercise which simply contrasts the apparent returns from say livestock or construction with export sugar.