The role of the mandarin
February 16, 2007
In his book `The economics of development in small countries with special reference to the Caribbean' William G. Demas reproduced the substance of four lectures delivered by him at the Mc Gill University in Canada in 1964 when he was the Research Fellow at the Centre for Developing Area Studies there.
Mr Demas discusses, in terms intelligible to the layman, the real issues of development in small economies like those in the Caribbean. He argues that "development really means a structural transformation of the economy so that:
1. the degree of dualism between the productivity of different sectors, and at a later stage, different regions, is reduced;
2. surplus labour is eliminated and drawn into high-productivity employment;
3. subsistence production is eliminated and a national market is established for goods and services;
4. the share of manufacturing and services in Gross Domestic Product is increased in response to the changing composition of demand;
5. the volume of interindustry transactions increases, mainly as a result of the growth of the manufacturing sector;
6. the ratio of imports to G.D.P. falls in the long run - although the volume of imports increases absolutely - and the composition of imports shifts away from consumer to intermediate and capital goods; and
7. the economy becomes not only more diversified but more flexible and adaptable, as a result of underlying political social, and institutional changes."
Later, he offers a brief summary of his argument in the form of the following propositions:
"1. The criterion of development or underdevelopment of a country is the extent to which it has achieved structural transformation. Indices of transformation would include shares of agriculture, manufacturing and services in the G.D.P. and in employment, the degree of structural interdependence in the economy, the difference in productivity per man between various sectors and regions within the economy, and the extent to which disguised and open employment have been eliminated.
2. Structural transformation is usually associated with an increase in real output and real income per head.
3. A country can have a high per capita income without having undergone structural transformation, if it is an enclave economy or a small economy relying on exports of valuable natural-resource products.
4. In this case continued increases in income per head over the indefinite future depends either on the resource lasting and commanding a good price in world markets or on the economy undergoing structural transformation.
5. A transformed economy is one that is flexible and adaptable and ready to apply technological and institutional innovations.
6. A very small country can achieve transformation only with a high ratio of foreign trade to GDP.
7. Only large continental economies with varied resources and very large populations can achieve fully self-sustaining growth.
8. Small countries, even if their economies have undergone transformation, are placed in various degrees of dependence in that their momentum of growth is not fully determined by decisions of domestic producers, consumers, and the local government.
9. To some extent even in transformed small economies the national economy may not in many important respects be the really important unit of economic activity, and economic regionalism may be an important means of such economies achieving a more self-sustaining pattern of growth."
This is, of course, the kind of clear and insightful analysis that one would wish to have informed the public debate on economic development in this country. That debate tended to be overshadowed by ideological issues which have either been irrelevant or too vague to be operationally useful. Though some of what Mr Demas says on the subject of structural transformation may have been part of the conventional wisdom it has rarely been addressed with such clarity and with such particular relevance to small countries like ours.
William Demas, an educated and enlightened public servant, also played a key role in the creation of Caricom. When the Treaty of Chaguaramas was signed on the 4th July, 1973, Dr Eric Williams called on the assembled leaders (including Michael Manley, Forbes Burnham and Errol Barrow) and guests to give him a standing ovation for the important role he had played. He later served as the first Secretary General in Georgetown for one year and was succeeded by Alister McIntyre who had also been involved in the project of regional integration. The essential role played by civil servants of the highest quality like Demas, McIntyre and in Guyana Lloyd Searwar was that they provided an intellectual analysis of the issues and alternatives facing the nation, or the region, thus enabling the government in power to be better informed.