“Economic dependency is an unending situation in which countries, economies and economic agents depend on each other and a variety of different economic and non-economic factors for economic and non-economic reasons” (Collins Dictionary, 2012).
As we approach our 50th Independence Anniversary approximately one year from now, we are as far away from being an independent state as can possibly be, with strong dependency links across three clearly identifiable areas. Our bridle of economic dependence is presented in terms of little evidence of progress in economic development, sustainable gains or definitive steps towards true independence, as underscored by the below concepts:
- Dependency Theory
- Multi-level Economic Dependence
- Economic Mismanagement of Scarce Resources
- Internal Dependency I: Nassau
- Internal Dependency II: HLT
- External Dependency: USA
- The Consequences of an Antiquated Economic Development Model
Dependency Theory
The starting premise of dependency theory is that “existing national and international economic and political systems are the cause of their unjust situations”[2]. It is relevant because developing countries like us, do not exist in isolation so are understood best in the context of a wider integrated political and economic context and the asymmetry of power relationships with the developed world, as exemplified by the USA. The theory is underpinned by eight propositions, which may explain the unequal relationship between The Bahamas and USA:
- The crux of dependency is the asymmetrical relationship between any two sets of countries, with power and control flowing from the developed world (core) to the developing world (periphery), and nowhere is this imbalance more greatly exemplified than in the case of the USA and The Bahamas.
- Within the core, the intensive interaction amongst and within countries and between peoples spills over into the periphery, which itself has no such interaction amongst themselves. This results in ‘an isolated and weak periphery’ having an unequal power relationship with a united and strong core. This unequal power relationship is exemplified in the case of the USA and The Bahamas.
- For small countries and proximate large countries with close relationships, the ‘economic ties and relationships between core and periphery countries are particularly important’ but are advantageous for the core, with most benefits accruing to the core at the expense of the periphery.
- One potentially controversial point is that the underdevelopment described above is ‘not a natural state, but rather a condition that is caused’ by ‘developed nations actively under-developing Third World countries because of their trade interactions’.
- The flip side of this controversial argument is that the ‘underdevelopment of weak developing countries makes possible the continuing development of the powerful countries of the core’, with both the core and periphery being necessary parts of the global politico-economic system, neither able to exist without the other.
- The theory then argues that inequality and imbalance are a necessary and permanent part of the global economic system and will remain that way ‘so long as capitalism remains the dominant world economic system’, and that there is no reason for the situation to change.
- Proposition 7 directly implicates The Bahamas, positing that the global system of political and economic relationships ‘is duplicated within individual developing countries’, which have a core (usually the capitol city) which dominates and exploits the periphery of the country. The nation's economic, political, cultural and military power are found in the core, Nassau, so its power and wealth grow more rapidly than that of the periphery.
- Proposition 8 argues that ‘national leaders exploit the people in the periphery for their own personal benefit and power’ and as a result, these ‘national’ leaders could be seen as ‘agents of the international system’ because ‘it is they who act as links between the developing country and the world political and economic system’, directing the country's contacts with the world, and in a way that ‘the world core benefits more than their own country, although they themselves clearly benefit at a personal level’.
Whilst the label of knowledgeable agents may be far-fetched to pin on our politicians, the initial characterisation as exploiters of the people for personal benefit is not, as recent accusations of corruption demonstrate. Thus, the relevance of dependency theory is clear as it relates to the macroenvironmental context of The Bahamas vis-à-vis the USA. Barring a direct and provable link with propositions 4, 5, 6, and possibly 8, the remaining arguments seem to have been written with the USA and Bahamas in mind.
Multi-level Economic Dependence
As in business, no country or economy is or can be 100% economically self-reliant. For Small Island Developing States (SIDS), this is invariably the case, as physical size, small populations, limited internal markets, geography, geographical positioning/isolation, limited (or non-existent) natural resource bases and limited technical expertise often conspire to frustrate organic development. Dependence in our case, though necessitated by some of the reasons noted, is manifested in extreme ways because our reliance is singularly focused on three levels:
(i) Internally: on the capitol city;
(ii) Industrially: on the hospitality, leisure and tourism (HLT) industry; and
(iii) Externally: mainly on one country, the USA.
This multi-layered dependency places us in an odd dilemma. On one hand, whatever we plan is conditional upon the performance of the dominant North American economy, generally, and that of the USA, specifically. On the other hand, our focus is on one city, one main industry and not all its related sectors and segments, which limits our effectiveness to plan economically. Yet we entertain premature thoughts of being a republic.
Internal Dependency I: Nassau as ‘core’/Family Islands as ‘periphery’
Proposition 7 of dependency theory posits that the global system of unequal and unbalanced political and economic relationships is duplicated within individual developing countries, which is patently the case in The Bahamas. Nassau, the seat of Government, dominates our nation's political, economic, cultural and military planning and receives the lion’s share of financial resources, new foreign investment projects and national attention, at the expense of the Family Islands which grow weaker and less important in the national psyche, as power, wealth and influence aggregate to the core. This is a major dilemma for The Bahamas, where our key resource, people, flow to the core, Nassau, contributing to its wealth and power, while islands become increasingly marginalised. Indeed, in some islands, such as those most recently hit by major hurricanes (Inagua, Long Island, Ragged Island, Abaco and Grand Bahama), the devastation has accelerated the inequality as more people fled, primarily to Nassau. Successive governments have perpetuated the dependency links with Nassau, whilst doing very little to expand the economic pie or rebalance the dangerously centralised economy:
What if Hurricane Dorian had hit New Providence in 2019?
Two of our dependency crutches would have been taken away immediately and we would be left, depending on Uncle Sam! The unbalanced economy and the uneven development left in its wake, leaves many islands struggling to regain or maintain the economic output of just a few years ago. By focusing all attention on the capitol, leaders reinforce the imbalances and inequalities in the political and socio-economic systems of the country. When we experience instances of corruption, these could at least partly be explained by proposition 8 which posits that ‘national leaders exploit the periphery for their own personal benefit and power’, an unfortunate and most undesirable consequence.
Internal Dependency II: HLT Industry
Our second internal dependency is on the industry that dominates the economic landscape of The Bahamas: hospitality, leisure and tourism (HLT), a direct fallout from our existing model, where the main objective was to create a mass tourist industry.
Successive governments have perpetuated the dependency in the domestic economy by pursuing mega projects and making Nassau the focus for development resources and all new major projects. The past four most substantial luxury resort/residential developments have been in Nassau, capped off by Albany (owned by Tavistock Group, comprised of Tiger Woods et al); The Pointe (a Chinese-backed investment via China Construction America); Jimmy Buffet’s Margaritaville; and the US$3.5Bn BahaMar (another Chinese-backed project)[4].
All this whilst Freeport, the nation’s second city, has been neglected as it continues to suffer from under-investment and mismanagement, despite having the most advanced infrastructures in the country. In the words of a former local MP, Grand Bahama ‘is dying a slow death,’ as he urged his governing party to try a ‘little harder and faster’ to bring some economic relief to the island (The Tribune, 8th June 2018)[6].
Very little has been done to expand the economic pie away from the capitol and away from HLT. This over reliance makes it difficult for the country to thrive independently, so it struggles to maintain a momentum or experience growth that is independent of dominant proximate economies, particularly the USA. Lack of imagination and creativity are evident in virtually every initiative, with few bearing any resemblance to economic common sense. Meanwhile, we reinforce our HLT dependency, which caught the eye of international blogger, Rob Wile, who published his ‘Twenty-Five Economies Most Hooked On Tourism’1[7].
Of the 25 most heavily tourism-dependent economies in the world, The Bahamas comes in at 8th place, with receipts per capita of $6,288 and 17th in average tourist spend of $1,205 (sandwiched between Bermuda (7th) and Luxembourg (9th)). One might conclude that this showing is impressive and that such a listing could be cause for celebration because the top 10 ranking (at least on one score) of countries whose economies depend on a main industry, suggests we are good at it. A cause for celebration may derive from the many positive externalities that often are associated with HLT, including but not limited to:
- Foreign exchange earnings (proceeds from the export of goods/services and the returns from foreign investments, which add to national income)
- Public treasury contributions (that we would have to obtain from some other source)
- Employment generation (Tourism employs most people in the Bahamas, either directly or indirectly)
- Infrastructure investment (derivative effects in the form of construction and related jobs, as illustrated in our three mega-projects, although much of the work has gone to imported workers
- Local economic development (in most cases, absent the ill effects of 'enclave tourism' (see below), there is generally some development that spills over from tourism-related activities)
- Cross-culturalisation (visitors are introduced to local culture and vice-versa, though in The Bahamas, sadly this is decreasing as cruise companies take guests to isolated islands away the main population).
However rosy a picture the above data tell, they do not tell the whole story; from 2000 to 2015, the IMF claimed that ‘real per person GDP in the Bahamas had declined by an annual average of 0.4%’[9]. In the same publication, ‘The Bahamas was exposed as the only Caribbean nation to suffer a decline in per capita GDP this century, while also being the “notable exception” to major tourist arrivals growth’, which brought up an important issue that has yet to be taken seriously[10]. We are seeing growth of tourist arrivals, but the rise is no longer contributing to a commensurate growth in GDP per capita, which only rose by ‘an average of 1.2% over the same period’, the only country in the region to suffer this fate. At the same time, there are negative externalities associated with HLT:
- Financial leakage (monies leak away to tourists’ country of origin)
- Enclave tourism (tourism in developing countries is spatially concentrated, as in the above example with cruise ship companies)
- Economic dependence (leaves a developing country vulnerable)
- Infrastructure development costs (financial, social and environmental)
- Price inflation across the board (e.g., foods, drinks, cost of socialising, particularly, in tourist areas)
- Seasonal character of jobs (manifested in every resort in The Bahamas).
Economic dependence, the most detrimental of the lot, occurs when the ‘success of one aspect or thing depends on the success of another’. On a national level, North American economic success, pretty much determines the success of the Bahamian economy. As a tourism-dependent economy, we are dangerously reliant on the regular arrival of American tourists. However, when the rate or number of tourists that engage with the local communities falls, this has serious economic repercussions. Without doubt, we have benefitted immensely from HLT, but the industry has changed, and in such a way that simultaneously causes us to shoulder the most detrimental of the industry’s negative externalities. If we are to make a serious effort at achieving competitive advantage in HLT and maintaining advantage over our neighbours (many of whom have a higher quality product, more diverse and interesting landscapes, a superior price to value ratio and better accessibility from global markets), we really must radically re-think our strategy, destination branding, core value proposition and the market segments we want to pursue. Perhaps we might do more than just aspire (once again) to break our addiction to tourism.
A new Destination Branding is urgently needed
But even the HLT cash cow has not been treated well; we have allowed our product to deteriorate to a run-down state and routinely do not invest to keep our resorts and accommodation up-to-date and always to be attractive to our guests. Additionally, we have failed to update our once world-beating destination branding: “It’s Better in The Bahamas” which first appeared in the mid-1970’s, which has served us well but as our clientele changes, tastes and preferences change, so must we. A successful branding strategy is of high importance as it can lead to customer loyalty as asserted by several commentators and is successful when there is a high degree of congruence between visitors’ perception of the destination and the brand identity.
External Dependency: USA
The 1983 Caribbean Basin Initiative (CBI) has been the “cornerstone of U.S.-Caribbean economic engagement” for the United States’ engagement with the region, consisting of two trade programmes, the Caribbean Basin Economic Recovery Act (CBERA) and the U.S.–Caribbean Basin Trade Partnership Act (CBTPA)[12], of which The Bahamas is a beneficiary of the first. Historically, though traditionally tied to the UK, proximity to the US meant that practically, we would always be much closer to the USA. However, the obvious inequality would also mean the US would dominate the relationship. If anyone is in doubt as to the extent we rely on ‘America’, a quick stroll around Nassau or Freeport should quickly quell that doubt.
We drive American cars (though, oddly on the left side); we experience our biggest tourist arrivals and most air and sea traffic from the USA (by 2017, we had air service from the highest number of American cities, 18, in the region[13]); our dollar is pegged to the US$ which is used interchangeably with Bahamian currency across the country; we eat American foods (agricultural products, finished/processed foods and fast foods), with most of the American fast food chains represented and we immerse ourselves enthusiastically in American culture (art, dance, fashion, film, literature, music and sport). Many in society pay the ultimate compliment to America by adopting the ‘American accent’; underscored by our proximity, ~55 miles at the nearest point.
This near total dependency on a proximate dominant economy and culture comes at a huge cost, which far outweigh the obvious benefits of having so much at our ‘fingertips’, with access and convenience being amongst the first. Our creative talents are stifled along with suppression of any urge to be inventive or innovative. The mere fact that our clothes, food, technologies and entertainment are provided by someone else, does not motivate us to be more creative. There is no need to contemplate fashion design or music or food, we simply enjoy what’s available and what we can still afford to buy. If we know food will be available throughout the year, we do not need to think hard about how to produce our own. This is not to say the Bahamas should be producing things that we patently are not able to, but this dependency suggests our ability to allocate and utilise resources effectively is also severely retarded.
The Consequences of the Sir Stafford Sands Economic Model
Sir Stafford Sands’ main objective was to create a mass tourism and offshore finance industry, driven by a raft of services. This is well embedded today, as evidenced by our first choice of investment, continuing focus on Nassau and latterly, our pursuit of the cruise industry, with bigger and bigger ships all continue to serve this end. Despite all PMs taking on board the full responsibility of managing the nation’s finances, there has been a paucity of imaginative ideas, as the ‘tax/spend/borrow’ approach to prop up mega projects has played out time and time again. Consequently, our leaders have presided collectively over three major economic outcomes, which may not be apparent at first sight:
(i) Stagnation of the tourism industry, as the value it provides has been overridden by the money we charge and our tourist product degraded (‘…meanwhile tourism arrivals to the Caribbean had more than doubled between 1995 and 2014, the Bahamas was identified as the only country to miss out on such growth due to the “maturity” of its main industry and relative lack of new hotel rooms over that period’, IMF 2017)
(ii) Slow demise of the offshore financial services sector (despite our capitulation on issues such as ‘automatic exchange of information’); and
(iii) The dubious position in which The Bahamas finds itself, as the only Caribbean country to have suffered a decline in real GDP per capita, 2000 – 2015 (IMF, 2017).
These consequences may appear benign, but they have a lasting impact on a dependent and vulnerable economy. We have lost our competitive edge in HLT and the future of work looks very different from 50 years ago. As we approach our 50th Birthday, no doubt there will be festive celebrations to mark the occasion but will there be a serious and sustained reflection to examine just how independent we are, after a half century? Perhaps we need to concentrate our minds on the above issues, rather than stoke the fires of republicanism, a debate that should be left for those states that have made a real effort at independence? We need to grow up!
End
[1] http://www.esourceresearch.org/eSourceBook/SocialandBehavioralTheories/3TheoryandWhyItisImportant/tabid/727/Default.aspx 010918
[2] Taken from: https://udel.edu/~jdeiner/depend.html 190818
[3] https://sites.google.com/site/theoriesofdevelopment/stages-and-theories/dependancy-theories 270721
[4] https://www.forbes.com/sites/richardnalley/2013/03/16/baha-mar-the-biggest-thing-in-the-bahamas/#5ac1101854c7 010918
[5] http://www.bloomberg.com/news/articles/2016-01-04/the-ghosts-of-baha-mar-how-a-3-5-billion-paradise-went-bust 311017
[6] http://www.tribune242.com/news/2018/jun/08/mp-grand-bahama-dying-slow-death/ 010918
[7] http://uk.businessinsider.com/author/rob-wile?r=US&IR=T 150418
[8] https://datacommons.org/ranking/Amount_EconomicActivity_GrossDomesticProduction_Nominal_PerCapita/Country/northamerica?h=country%2FBHS&unit=%24 270721
[9]“Unleashing Growth and Strengthening Resilience in the Caribbean” (IMF)
[10] http://www.tribune242.com/news/2017/nov/15/bahamas-only-capita-gdp-faller-within-caribbean/ 010918
[11] Excerpts taken from a Speech to the House of Assembly by the Hon. Hubert A. Minnis on 26-Jul-2018
[12] https://www.csis.org/analysis/reimagining-us-strategy-caribbean 050122
[13] http://www.tribune242.com/news/2017/nov/15/bahamas-only-capita-gdp-faller-within-caribbean/ 010918
[15] On a shopping trip at a major food store in May 2018, I came upon an 11+lb cooked ham that was priced at $401.65
[16] http://www.airlinequality.com/airline-reviews/bahamasair/page/3/ 040918
Dear Editor,
