foun 1301 economy

• Economics


  An academic subject with the primary objective of examining the problems and decisions of economic agents from a social perspective
• Knowledge of economics is necessary because we all live and need to function in an economy. Also, most political problems have an economic characteristic, whether it deals with the budget, the tax structure or even environmental issues and concerns. Individuals who have some knowledge of economics are better able to think critically about policy proposals that emerge from governments and that are debated in the mass media
• Branches of Economics


  • Microeconomics
  • Macroeconomics
• Microeconomics


  The study of decision-making by individual economic agents, such as the consumer or the producer. It seeks to understand how consumers meet their material needs and achieve maximum satisfaction, and how firms go about satisfying these consumer needs, while simultaneously serving their own self-interest by profit maximization
• Major goals of microeconomic policy-making

  • Efficiency
  • Equity
  • Freedom of Choice
• Macroeconomics


  Focuses on the whole, or aggregate view, of the economy and is concerned with aggregates such as, consumption, investment, government expenditure, savings, taxation, imports and exports. Thus, macroeconomics is concerned with the functioning of the economy as a whole
• Economic Functions of Governments

  • Issuing a national currency and having Monetary Policy
  • Providing internal security, external defense and some basic forms of social security and public infrastructure, and raising revenue through taxation and having Fiscal Policy
  • Putting in place mechanisms for some orderly arrangements for trade in goods, services, and movement of money between countries, and having Exchange Rate and Trade Policy
• Common goals of macroeconomic policy

  • High employment
  • Price-level stability
  • Economic growth
• George Beckford (1972), Lloyd Best (1968), and Best and Levitt (1975) represent the major articulation of dependency and underdevelopment thesis of the Plantation Economy school of thought. Norman Girvan (1975, 1991) emphasizes the reproduction of races and class structures leading to a flawed notion of independence
• Beckford's view on the plantation economy

  The institutional setting, the mode of production and social relations of the plantation were the most important variables. Underdevelopment derives from the institutional environment - the nature of economic, social and political organization. The institutional features help to explain the relative stagnation and structural constraints derive from the plantation legacy
• Best and Levitt's view on the plantation economy

  The plantation is defined by the domination of a "hinterland" by transnational corporations of the countries at the center of world capitalism. They differentiate between three types of analytical "hinterland": Hinterland of Conquest, Hinterland of Settlement, and Hinterland of Exploitation. The key to understanding the inner workings of the plantation economy lies in a proper appreciation of its origins in the mercantilist epoch and the four rules of the game: the Muscovado Bias, Navigation Provision, Metropolitan Exchange Standard, and Imperial Preference
• The post war (1945) experience of Jamaica, Guyana and Suriname (bauxite) and Trinidad and Tobago (petroleum) provide the concrete examples of the reinforcing of traditional economic and social structures of dependency and the ratooning of the old plantation relationships, both external and internal
• Possible outcomes when old metropolitan ties are cut

  • Old metropolitan ties are cut, but the traditional export sector is maintained intact
  • Old metropolitan ties are cut, and the traditional export sector disintegrates
  • Metropolitan ties are maintained or restored and a quasi-staple is developed
  • Metropolitan ties are maintained and reinforced by the entry of a new staple
• Positives of contemporary Caribbean politics


  • Freedom
  • Democracy
  • Some CARICOM members have high Human Development rankings (Barbados, the Bahamas, Antigua and Barbuda, St. Kitts and Nevis, Trinidad and Tobago)
• Negatives of contemporary Caribbean politics

  • Issues in the democratic system: crime
  • Unemployment and underemployment rates remain high
  • Electoral turnouts have been declining over time
• Globalization


  A process in which geographic, economic, and cultural boundaries are of decreasing significance, first and foremost the movement of capital
• Globalization is a dynamic process, whereas a system is static
• Boundaries of decreasing significance in globalization

  • Movement of capital
  • Movement of goods, people, services, ideas, values, diseases
  • Character of environment (e.g. global warming)
  • Dynamics of politics
• Globalization could be argued to have started when trade began, because people have been moving across geographic distances and connecting with one another for many centuries
• Three aspects of globalization from the 1990s that make it fundamentally new

  • Revolutionary technologies
  • New political influences
  • New policies
• Revolutionary technologies


  • Technological advances in transport and communication (e.g. jet aircraft, telephone, fax, cellular, cable TV)
  • Reduced international distance and increased movement between countries
• Revolutionary technologies


  Facilitate greater ease of transmission of materialist consumer values dominant in late-twentieth-century American society
• New political influences


  • International governmental organizations (IGOs) like World Bank, IMF, WTO
  • International non-governmental organizations (NGOs) like World Council of Churches, Amnesty International
  • Transnational corporations that stretch production, marketing, distribution across many countries
• Liberalization/neo-liberalism


  Policies that require states to remove barriers to movement of capital, goods and services, and reduce government role in market forces
• Globalization of the minimalist state was the result of pressure from IGOs like IMF, World Bank, WTO
• Foreign direct investment


  Investment projects where foreign investor retains active interest, e.g. establishing subsidiary or joint venture
• Advantages of relying on foreign direct investment

  • Greater availability of capital
  • Efficiency gains and innovation transfer
  • Employment possibilities
• Greater availability of capital


  Foreign direct investment helps bolster domestic capital formation and promote economic growth
• Efficiency gains and innovation

  Multinational corporations can transfer technology and expertise to enhance domestic efficiency, e.g. in telecommunications
• Employment possibilities


  Foreign direct investment promotes employment growth as multinationals recruit local workers at various levels
• Behaviour and marketing


  • Has prompted financial success in the Caribbean for certain multinational corporations
• Multinational corporations


  • Introduce infrastructural improvements in their areas of operation
  • This is derived from the multinational corporation's access to technical know-how
• Foreign direct investment


  Promotes employment growth
• Recruitment by multinational corporations in the Caribbean

  1. Recruit local employees at most, if not all, levels

  2. In early years relied on expatriates for senior positions, later changed to have Caribbean nationals in senior positions

  3. Foreign personnel may be relied on only if no suitable national is available
• Foreign direct investment


  • Generates benefits for consumers in the Caribbean
  • Helps increase market size in particular communities which serve the multinational operations
  • Increase in market size often leads to competition and improved quality among domestic suppliers
  • Foreign investors may introduce new items of technology that benefit local consumers
• Foreign direct investor operating in the Caribbean

  • Normally required to pay corporate taxes
  • Contributes significantly to the domestic economy
  • Some foreign investors contribute to local scholarship programmes and establish foundations for social welfare projects
• Multinational corporations


  • Some are large, powerful organizations with annual revenues in excess of the national income of the typical Caribbean country
  • Some are not averse to using their power to secure their main objectives, even if this may involve undermining law and policies in the host country
• Foreign direct investors


  May borrow heavily from the locally based banking sector, driving up interest rates and blocking free availability of loans to domestic enterprises
• Foreign enterprises


  • May use superior technology and financial resources to "crowd out" local competition
  • May deter new competitors from entering the market
• Foreign direct investment


  • May lead to reduced demand for labour, especially in agriculture, as foreign investors prefer mechanization over traditional forms of organization
  • Multinational corporations do not necessarily consider themselves obliged to employ nationals for senior positions