September 25, 2007

THE SPONSORS OF STRUCTURAL ADJUSTMENT like to hold up the success of the "Newly Industrialized Countries" of South Korea, Taiwan, Singapore and Hong Kong as models for the Caribbean. But to comply with World Bank advice to "follow the NICs," Caribbean nations would have to break nearly every policy prescription the Bank, the IMF and AID have tried to impose. In Taiwan and South Korea, the most successful Asian NICs, five factors were essential ingredients in the growth of industry: I) food self-sufficiency; 2) relatively equitable distribution of land; 3) close linkages between farming and manufacturing; 4) strong state intervention; and 5) largescale U.S. assistance. None of these are contemplated in the strict external market-driven development strategy advocated for the Caribbean by the multilateral lenders and official U.S. agencies. Strengthening agriculture was a government priority under Japanese colonialism during the first half of this century, and later in the years following World War II, in both Taiwan and South Korea. Largely in order to serve Japan's needs for food, fiber and manufactured goods, the Japanese promoted increased fann productivity and a modernized infrastructure. In the Caribbean, agriculture, especially on small farms, has been neglected for most of the twentieth century. The distribution of rural land and income during the period of industrializatidn in Taiwan and South Korea was relatively broad and equitable. No plantation system, like those in the Caribbean or the Philippines, was introduced. The majority of farmers in both countries, although not wealthy, were comparatively secure. This was largely the result of extensive land reform carried out in the early l900s and again in 1949-1951 in Taiwan, and in the 1940s and 1950s in Korea. These programs were much more farreaching and viable than those being recommended by the World Bank for the Caribbean, which could hardly be called land reform. The proposals for the Caribbean would have the effect of evicting many peasants and leaving those who receive land without the infrastructure, credit or marketing support needed to make it as private farmers. Post-war South Korea has not abandoned agriculture geared to local consumption, as structural adjustment plans would have Caribbean countries do. During the process of industrialization, South Korea increased its food production for local use. Although Korea does import corn and wheat today, it is largely self-sufficient in its major staple food, rice, and has become more so as industrialization has progressed. According to World Bank figures, food constituted 15% of South Korea's imports in 1965 and only 6% in 1986. Caribbean resources, in contrast, have been drained to finance a weighty food import bill. Because they had access to land and government help in increasing productivity and income, the small-scale farmers of Taiwan and South Korea constituted a large domestic market which helped industrialization get off the ground. Rural savings also helped finance industrial development. Most impoverished rural families in the Caribbean could not afford to buy the goods produced in their countries' export manufacturing enclaves, even if those products were sold locally. In addition, the governments of both Taiwan and South Korea have played an active role in promoting farming and agro-industry as a basis for, and a complement to, manufacturing. Government enterprises and state-sponsored investments in agricultural research and extension, transportation, communications, and hydroelectric power helped to integrate agriculture and industry. Farmers produce fibers and other raw materials for use in export industries; factories produce fertilizer and other inputs for agriculture. As a result, proceeds from agriculture and manufacturing have not been cancelled out by the high cost of imported industrial parts and materials and farm inputs, as has happened in much of the Caribbean. In Taiwan, post-war industrialization was subsidized by a huge influx of U.S. assistance, averaging some $100 million yearly for three decades. The United States financed an estimated 26% of the value of Taiwan's capital formation in the post-war years, in addition to substantially reducing the country's trade deficif No comparable level of sustained support for locally owned industry or agriculture has been offered by any foreign donor to independent nations in the Caribbean. Furthermore, during the early decades of industrialization, Taiwanese and Korean manufacturers were aided and protected by government subsidies, controls over the use of foreign exchange, and restrictions on the import of goods which might compete with those produced locally. The citystates of Hong Kong and Singapore, which have experienced similar success in export-oriented industrialization, have also relied heavily on government planning, protection and subsidies. These import substitution policies are the converse of the open-market, "free-trade" development strategy endorsed by those who today tell Caribbean nations to follow the NICs. Finally, rapid industrialization and export competitiveness have been accompanied in most NICs by labor repression, environmental degradation, spreading urban blight and homelessness, and political turmoil. This is hardly what the Caribbean people would choose for their development. As the chief of Dominica's economic planning division remarked, "The United States is asking us to carry Out policies under a democracy that really require a dictatorship. Capitalism and democracy it's a terrible mix."

Tags: Caribbean, foreign aid, structural adjustment, NICS

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