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What Should A Caribbean Think Tank Do?
Promoting Dynamism and Progress in the Caribbean
The most confounding feature of the Caribbean is its rapid decay into stagnation. For myriad reasons still not well-explored, the 20th century saw the emergence of intense intellectual talent within such a small place. Four Nobel Laureates (Lewis, Walcott, Naipaul, and Perse) came from the Caribbean—numerous globally famous public intellectuals, including C.L.R James, Fanon, Césaire, and Guillén. Much adored musical genres were created, ranging from Reggae to Salsa. Post-colonial economic growth was so material that Singapore’s Lee Kuan Yew considered Jamaica an early model of good governance for small states. Leadership on the world stage was ascendant. Caribbean politicians all commanded great attention at multilateral conferences, from Bilderberg Conf to Bandung Conf. The dynamism was nearly unyielding.
But all of this suddenly changed at the onset of the 21st century. The Caribbean went from a place where everything was happening to merely a place where things could have happened. Having grown up in the Caribbean, this puzzle acutely haunts me. What happened? And how do we course-correct? I believe these are the big questions that a think tank program focused on Caribbean issues should address. But none of the think tanks I know of wrestle with these ideas.
Academic institutions with "Caribbean Studies" programs primarily offer courses and research literary criticism and socialist sociology. While this could be valuable, there should be a more targeted focus on growth policy and macroprudential issues.
It's crucial to examine the Caribbean's 20th-century ascension and 21st-century fall for the region's benefit. This approach can also offer additional inputs for economic growth and development policy case studies.
An advantage of small size is that you can properly grasp variable adjustments and counterfactuals, which are often too complex to do well in large countries. Moreover, perhaps because of job market biases, academic institutions and researchers do not have sufficient incentive to explore these topics with nuance and care.
US government officials often ask me and think tank scholars for insights on enhancing the US' "Caribbean policy." Paradoxically, U.S foreign policy in the Caribbean lacks effectiveness due to a lack of receptive capacity in the Caribbean. In other words, the public and political institutions in the Caribbean are too weak to respond to US interests. Only after addressing these institutional and economic issues can US foreign policy be more effective. Some of these solutions may not be immediately obvious.
A think tank should be based on the premise of igniting and promoting dynamism and progress in the Caribbean. Here are some notes on agenda items that such an organization should prioritize and pursue. Hopefully it sparks some interest at established think tanks looking to form world-class Caribbean focused programs.
One way to organize agenda items is to borrow a concept typically associated with the Effective Altruism movement: structural prioritization mental models. What then are Caribbean priorities?
Full Dollarization, Everywhere in the Caribbean
Caribbean governments have uniformly aboragated their duties to design and implement credible macroprudential policy. I get that it is difficult to inculcate a great energy for these categories of reforms but these are the bedrock of anything else. Without a stable fiscal-monetary environment no other policy framework can be implemented.
In my opinion, the first priority for a Caribbean think tank or program should be to advocate for the implementation of dollarization, which involves the replacement of all existing Caribbean currencies with the United States Dollar (USD) as the sole currency. This idea is based on the numerous fiscal and monetary shortcomings exhibited by Caribbean governments. The benefit of this proposal is its widespread latent approval and straightforward nature, making it easier to garner support and understanding among the Caribbean people.
While this is a seemingly bold agenda, it is actually boring. Consider this: who should be the prime stakeholder of this think tank? That is, which stakeholders’ well-being should the think tank policy recommendations optimize for? In my view it should be squarely the people of the Caribbean.
The domestic money of Caribbean countries are only useful in the tiny land area of the earth where they are issued. For example, Barbados is 166 square miles and the Barbados Dollar (BBD) only has value in that small space. Why exactly should people be forced to exchange their labour for money that has such a limited use?
You might say that they can easily exchange the Barbados Dollar (BBD) for USD. But that is untrue. Barbados maintains strict capital controls because it cannot allow people to exchange too much BBD for USD as that would cause a crisis for the fixed exchange rate. This is a kafkaesque policy since virtually everything imported into and exported from Barbados is priced and invoiced in USD.
Moreover, the government abuses its position as the issuer of money. Primarily to finance its spendthrift operations by arbitrarily creating new money. This is the evident across the region. In Trinidad & Tobago, the government limited citizens to only a $250 USD allotment for international purchases on credit cards. This forced the black market rate to unprecedented levels, with everyone desperate to acquire USD. It came to a point where some services would give discounts if you pay in USD.
Basic point: Caribbean people are severely disadvantaged by being forced to use money that has no global acceptance. Caribbean governments will perpetually mismanage their domestic money to the detriment of citizens.
Responses to common objections to full dollarization:
It would be expensive to Dollarize
Take Barbados. The exchange rate is legally fixed by the Central Bank Act at $1.00 BBD = $0.50 USD. Since most money is within commercial bank databases then the banks just have to divide everything by 2 in a coordinated time to dollarize. Estimates suggests that cash bills in circulation in the country add to around $300 million USD. You would only need to import USD cash bills and have then ready for the switch. The Central Bank already holds reserves in the US, well in excess of $300 million. Simply exchange some of those reserves for cash bills at the Federal Reserve and ship them to Barbados.
It will be a loss of sovereignty for Caribbean countries
Caribbean imports and exports are already invoiced in USD. International service sector prices are already in USD. Intra-regional trade already runs on USD. The government of the respective Caribbean country made fiscal policy before and will continue to make fiscal policy after dollarization. Keep in mind that excess USD reserves are effectively loans to the US government. Why should a small country perpetually makes loans for the US for the sole purpose of currency stabilization? Since dollarization will prevent the perpetual balance-of-payments crises in the Caribbean it will actually give the country more sovereignty, as they will not have to genuflect to outrageous IMF requirements for support loans.
Monetary policy is an important toolkit of government management
This assumes that monetary policy solely means base money creation. Central banks can continue to have reserve requirements for commercial banks (these reserve requirements are still common in the Caribbean but not in the US or UK). The only difference is that the reserves would be denominated in USD. Small countries are structurally very open economies and its not worth arguing if this is a bug or feature. It is merely a fact. In this structure you never really have pure monetary policy. Having a domestic currency is only a dangerous pretense of monetary policy. By reviewing the history of Caribbean currencies we see that their existence and use only perverted good fiscal policy in favour of perpetual balance of payments crises.
There must be a lender of last resort
The “Central Bank” need not have money creation powers to offer an overdraft facility to the government in cases of temporary fiscal budget dislocations. In terms of lending to commercial banks, the macro-prudential regulations and active reserve requirements to which these banks are obliged, means that such LOLR facility is unnecessary. Remember that Caribbean banks are also subject to foreign exchange constraints.
The Caribbean should not be the first to make such a switch
Caribbean central banks only came to prominence in the 1970s. Before then, currencies were tied to sterling (via currency boards). This is in effect a return to orthodoxy rather than a radical reform. Also other countries have and remain dollarized: Panama, El Salvador, Ecuador, Cambodia.
Caribbean central banks were born in sin. The original intent was to provide alternative financing to the newly formed post-independence governments for “nation building”. Large regional commercial banks (which are foreign owned) refused to extend credit for what they considered unsustainable projects. This profligacy of Caribbean governments only continued over the decades. It is time for these central banks to be exorcised. Dollarization is a key agenda item because it promotes economic freedom for citizens while fostering fiscal prudence for governments.
Public Sector & Talent Internationalization
People make policy. People implement policy. People manage policy. Our public sector institutions need highly skilled, highly talented people. Since Caribbean countries are structurally small in size and population it is merely a fact that the pool of talent is not large. One undervalued feature of the British Empire was its talent acquisition and distribution program.
The British administration's influence on Hong Kong's public sector talent continues to be evident today. The Hong Kong Court of Final Appeal still maintains the presence of non-permanent judges from various Commonwealth countries. Similar trends can be observed in current overseas crown territories such as Bermuda in the Caribbean, where a significant proportion of senior public sector management comprises individuals from other Commonwealth nations.
The current population of Grenada is estimated to be 125,000 people. Why do we persist in the belief that a population of such small size has enough talent to effectively manage everything from foreign affairs to transportation in an objective, efficient manner?
A think tank focused on Caribbean issues would promote the need for public sector internationalization. The best talent should run public sector departments. Citizens should elect government officials and government officials should recruit the best talent in the world to run departments for the betterment of the citizens.
This is an essential element within the broader framework of public policy reform. The successful implementation of policy reforms necessitates the availability of qualified personnel.
As part of the wider public sector reform, starting from better talent acquisition, there needs to be a refactoring of the State Owned Enterprises throughout the region. In doing so there needs to be detailed audits of all state assets. In some countries the Auditor General reports have even commented that they cannot find account for several SOEs and government program.
A Caribbean think tank should promote these reform ideas not as standalone policies but interwoven with debt management and growth.
Here is why. Caribbean countries are small. Ideally they would be able to borrow capital from international private lenders via state bonds for most large spending projects they want to pursue. But international lenders often avoid buying government bonds because they have little evidence that the bonds will be repaid in a timely manner.
The need for financing from multilateral organizations or bilateral state lenders is prevalent in many Caribbean countries due to their inability to secure loans from open markets. However, complaints made by Caribbean borrowers at international events regarding the lack of concessionary lending from organizations such as the IMF and World Bank are misguided. To address this issue, Caribbean countries should aim to attain competitive international borrowing rates, similar to those achieved by territories such as Bermuda, rather than relying on concessionary lending.
Since the multilateral lenders are not as willing to lend to Caribbean countries on attractive terms nor can they borrow on the markets, the governments seek financing from state lenders like China. Since Chinese entities are more willing to lend on attractive terms, Caribbean governments are readily accepting of these deals.
U.S-based think tanks and state departments, for example, often conclude some kind of political reason as to why Caribbean governments are “pivoting” to China. But in my view this “pivot” is more a desperation, and an unnecessary desperation. With more talent in the public sector leading the reform implementation, the Caribbean will be able to attract more international private sector creditors.
Once this is accepted as a priority then the government should engage an American management consulting firm like McKinsey to assist.
CARICOM Foreign Policy
It is an incongruous reality that countries such as Dominica, with a limited population of 73,000, maintain a foreign policy infrastructure comparable to that of larger nations like Canada. For small nations, the effectiveness of foreign policy should be evaluated based on its practical usefulness.
In many cases, Caribbean nations establish small embassies and consulates around the world with a correspondingly small allocation of personnel and resources. For instance, several Caribbean embassies are staffed by less than five individuals, including the ambassador, and have limited funding for travel to attend only minimally significant events.
A Caribbean think tank should champion a better approach to foreign policy where most of the instrumental activities are done multilaterally through new joint CARICOM embassies.
CARICOM (Caribbean Community) is a political-economic grouping of 20 Caribbean Member States established by the Treaty of Chaguaramas in 1973. It acts more as a coordinating mechanism for institutions focused on trade, the regional university and so on with a formal Secretariat. In 2002 the regional governments revised the original treaty to establish a “single market” which aimed to have more coordinated economic policy. More can be done, but it must be argued for.
Over the decades the urge towards Caribbean unification waned. But it must remain an animating feature of policy formulation. The fundamental purpose of any foreign policy in small states should be to enhance the domestic economy. There are other legitimate purposes of foreign policy but those can carried through by larger states.
The concept of a shared embassy has a precedent in the Caribbean region. The Organization of Eastern Caribbean States (OECS), a sub-group of CARICOM, operates a joint embassy in Morocco, with a unified staff, single office, and a single ambassador. This model could be expanded to encompass the entire CARICOM community.
Real Industrial Policy
Industrial policy refers to the state's deliberate actions to drive economic transformation. The Caribbean economy is primarily centered around service sectors, with tourism serving as the dominant industry within this sector. In the case of Barbados, a substantial portion of the foreign exchange inflows, approximately two-thirds, is generated by the tourism industry. Nevertheless, the promotion of this key industry is not given the appropriate level of consideration.
There is a general sense that we have reached Peak Tourism. I have read dozens of opinion pieces saying that there needs to be more “diversification” away from tourism as the main foreign exchange earner - saying also that it is too fragile.
This argument is weak. In the case of Barbados, the limited growth in tourism revenue over the last several decades is not a result of diminished international demand, but rather due to domestic supply constraints. Despite significant interest from international investors to establish hotels and related services, such growth has been hindered by government inefficiency in the public sector. Despite some improvements in quality, the number of hotel rooms in Barbados has remained stagnant since 1980. To address this issue, it is crucial to not simply await a higher movement upwards the demand curve for a higher equilibrium , but also to push out the supply curve itself.
There is ongoing debate regarding the expansion of the Caribbean tourism industry into new markets, such as China. However, the limitation lies in the domestic supply rather than the demand from these new markets. In order to spur growth within the tourism industry, a comprehensive industrial policy is needed which creates a favorable investment climate. This would entail the growth of infrastructure, such as hotels and globally recognized brands, as well as the development of cultural events and festivals. However, the implementation of such initiatives is impeded by suboptimal government decision-making.
Furthermore, there is an emerging opposition to tourism within international policy circles. Certain U.S.-based think tanks and multilateral organizations, such as the IMF, characterize tourism as a fragile industry. Despite this characterization, they maintain that the Caribbean must rely on tourism due to its lack of natural resources. This perspective is incorrect.
Tourism is a natural resource from the bounties of superior geography. While some regions may possess oil as a valuable natural resource, the Caribbean's geography are a unique and long-lasting asset that will persist even after those oil resources have been depleted. This highlights the importance of recognizing and valuing tourism as a crucial component of a region's natural resources.
A Caribbean think tank agenda must promote a more realistic thinking on the natural resource of tourism and advocate for more rigorous industrial policy to develop it.
It is imperative that Caribbean nations prioritize reducing their dependence on oil imports for energy production, not simply to address environmental concerns, but to optimize foreign exchange re-allocation. As previously noted, small countries heavily rely on foreign exchange, and the cost of importing oil represents a significant drain on these resources. By generating energy domestically, these nations can conserve valuable foreign exchange and redirect these funds towards other important developmental initiatives.
If the money spent on importing oil were saved, it could equal the amount of foreign exchange earned from tourism. Because the countries are so small this energy transition can already be accomplished with current technology and commercially available products.
Some estimates suggests that with a sustained, calibrated, transparent transition program it be done in as little as 15 years. Some Caribbean governments have said that want to do this kind of energy transition. But they have provided no credible plans on doing so.
A Caribbean think tank should advocate for the implementation of a transition management program towards energy independence, and provide support in developing and executing a comprehensive plan in collaboration with relevant governmental agencies.
Counter Democratic Backsliding
In recent years, think tanks in the US and EU have paid increasing attention to the state of democracy in the Caribbean. Discussions often center on the perceived threat posed by the growing interests of China and Russia in the region. However, this focus on external factors neglects the underlying causes of democratic backsliding within the Caribbean itself.
In Barbados, the Prime Minister and her political party controls all of the parliamentary from approximately 33% of eligible voters participating in the last election. This issue is exacerbated by the concentration of power in the Prime Minister's office as stipulated by Caribbean constitutions; a legacy of post-independence decolonization efforts. The ruling Prime Minister wields immense power, with the ability to appoint and dismiss judges, senators, ministers and public sector leaders at will. With control over the legislative process and the ability to declare a state of emergency, the PM alone and her party holds sway over every fate of the nation. The current PM and her Party has transitioned Barbados to a Republic and is in the process of rewriting the constitution with virtually no meaningful parliamentary process.
This leaves Barbados in a precarious position. There is neither distribution nor separation of meaningful power. The fact that this is unknown outside of the Caribbean is a testament to the lack of information and content on these matters. Granted, the government was “fairly” elected. And if by democracy we solely mean fair elections by the electorate then everything is fine. But that has not been the working definition of democracy for some time.
In Dominica, the Prime Minister (who has been in power since 2004) vigorously labours to minimize opposition to his rule. In December last year he called a snap general election that were not even attended by the Opposition parties. Yet this is called a democratic country. Superficial democracy without credible institutions is no democracy at all.
In St. Vincent, the Prime Minister's grip on power has lasted for two decades. With a reputation for declaring ‘all roads lead to me,’ he has systematically hindered the emergence of a viable opposition in the country while refusing to push reforms for growth.
A Caribbean think tank should not shy away from calling out such remarkable examples of governance failure and advocate on the need for course-correction. It is not China causing problems of democracy.
The prevalent economic ideologies in the Caribbean have a strong socialist influence, akin to that of Central America. This is a result of the post-independence modernization plan that prioritized government-led growth.
Therefore the starting point of policy discussions in the Caribbean is always what the government should do. There needs to be more championing of classical liberal ideas and ideals with Caribbean characteristics. How can our poetry and music be so libertarian (in my view all real decolonial struggle art is Libertarian) but our politics be so socialist-leaning?
Beyond the moral reasoning for more libertarian leaning ideals, there are structural benefits. It is fairly standard globally that ports of entry, though owned by a state body, are leased-operated by a private company. This is not standard in the Caribbean. Governments believe that this should be done by the state - leading to subpar services. Moreover, since it is the state that needs to finance port development and upkeep projects this adds further debt burden. If these were operated by international private companies they could acquire financing from their own network, thereby decreasing the debt burden on the state.
More libertarian thinking would inculcate better reasoning on matters like taxation. Caribbean governments have high taxes on most imports without a good reason for doing so. A typical reply is that they want to make domestic production competitive relative to international production. This is a bad argument on two fronts. First, if international products where cheaper you should not harm consumers by making them pay more because domestic suppliers are uncompetitive. Second, there are no domestic substitutes for 99% of products that are imported. Therefore, import taxes are only there so the government can collect more revenue to transfer to other public services. But in most cases these public services should be provided by private companies in the first place.
A Caribbean think tank should advocate for the consumers and show why they shouldn't continuously be drained of their money due to government excess. This issue is notably absent from the views of most Caribbean policy experts and think tanks, including those in the US and EU that work on Caribbean issues.
A more in-depth discussion is necessary to further refine the considerations outlined above and additional issues can be explored. I believe that these notes represent the central and overarching priorities that a Caribbean think tank should focus on. This is just a sketch.
I want to emphasize yet again the structural smallness of Caribbean countries. This brings notable problems but also has its benefits. One major benefit being that information transmission can be swift and potent. Once you have a sustained message and you broadcast it in the correct tone then it is relatively easy to capture mindspace.
Any think tank focused on promoting dynamism and progress in the Caribbean should have its research staff read and digest everything written in these 10 books:
The Economic History of the Caribbean since the Napoleonic Wars by Victor Bulmer-Thomas (Economic Historian)
From Slavery to Services: The Struggle for Economic Independence in the Caribbean by Victor Bulmer-Thomas
The Undiscovered Country by Andre Bagoo (Poet)
Development and Stabilization in Small Open Economies Theories and Evidence from Caribbean Experience By DeLisle Worrell (Economist)
Empire: The Rise and Demise of the British World Order and the Lessons for Global Power by Niall Ferguson (Historian)
A Writer's People: Ways of Looking and Feeling by V.S. Naipaul (Novelist)
An Intellectual History of the Caribbean by S. Torres-Saillant (Literary Scholar)
Caliban's Reason Introducing Afro-Caribbean Philosophy By Paget Henry (Sociologist)
Dub In Babylon: Understanding the Evolution and Significance of Dub Reggae in Jamaica and Britain from King Tubby to Post-punk by Christopher Partridge (Religious Scholar)
Caribbean Art by Veerle Poupeye (Art Curator)
If you have any comments or questions about anything written above, I’d be happy to respond below in the comments section.