CHAPTER 2
THE ECONOMICS OF
SUSTAINABLE DEVELOPMENT IN SMALL ISLAND
ECONOMIES
Once upon a time, an
entrepreneur was cast away on a desert island. By good chance, the island lay
on a busy trade route, in a convenient time zone. The entrepreneur cut down all
the trees and exported them to Japan, sold off all the coral for jewellery, dug
up the island's gold and used the proceeds to set up schools, homes and
factories for a new Hong Kong, where everybody lived prosperously ever after on
the products of their brains, high technology and imported raw materials. Is
that sustainable development or not?" (Economist, Sept. 15,1989.)
There is an
understandable and unavoidable tension everywhere between the demands for
employment, improved wages and living conditions today and the environmental
sustainability of the economic policies implemented to achieve these demands.
This tension is particularly acute in many small island economies in the world,
and certainly in those of the Caribbean where there is widespread unemployment
and poverty.
It may even be
too generous to describe the relationship between the two as marked by tension.
In fact, it is perhaps more accurate to suggest that the issue of sustainable
development is not really on the agenda of the majority groups ‑including
the decision‑making and influences elites ‑ in Caribbean islands.
This is neither criticism nor condemnation. It is simply an interpretation of
the dominant reality.
It is not that at
least, a substantial minority, is unaware of, or unconcerned with environmental
degradation. Rather, the point is that even those who are sensitive to the
environmental issue (as opposed to a small, environmentally conscious minority)
have not yet found solutions, simultaneous or otherwise, to three problems.
The first problem
is economic survival ‑ whether in terms of profit‑making of firms
in depressed and liberalised economies; or of wage earners struggling to make
ends meet in the face of a continuous decline in the real value of their
income; or of the Herculean efforts to survive facing those without either a
job or a real business enterprise.
The
second problem which needs to be solved is the environmental impact of the
socio‑economic activities engaged in to address the three direct methods
of economic survival described above as part of the first problem of economic
survival.
The third problem
is that of anticipating and avoiding, or certainly mitigating, the impact of
the environment‑ via natural hazards or disasters‑ on economic
survival. This third concern is the perhaps the least appreciated in small
island economies, particularly in the Caribbean, although it, in fact, may be
the most significant.
The reality is
that, to date, economic theory and policy practice, have not found any easy, or
even complex, simultaneous solution to these three problems. In other words
there is no clear indication of the strategies and operational systems and
mechanisms, as Chapter 1 suggests, which would easily translate the aspiration
of sustainable economic development into practice.
This
situation is not unique to small islands. The fact that the overwhelming
majority of the world's environmental degradation originates in the rich,
industrial economies, tells us, in the most convincing manner, that
environmental concerns have not become a central part of their policy‑making
framework.
Island
economies may, however, offer the ,world a golden opportunity to test
alternative theories and strategies for achieving sustainable economic
development for several reasons.
First,
most island economies are almost completely dependent on their natural
environment* (including natural resources) for their economic survival. With
the exception of Hong Kong and Singapore, most populated small, island
economies live off of the earnings of raw material merchandise exports based on
their mineral or arable land, (and sometimes fishery resources), or off of
invisible service exports based predominantly on tourism which is, of course,
dependent on the natural environment.
Second,
island economies are marked by fragile ecological systems, easily affected by
socio‑economic activities. In fact, small islands can be considered, from
an environmental impact perspective, to be comprised solely of coastal zones.
In other words, there is an immediate, direct impact of terrestrial‑based
socio‑economic activities on the marine environment.
Third,
island economies are also highly susceptible to natural hazards particularly
cyclones and hurricanes. Many of the current scientific predictions suggest,
further, that global climate change, in particular global warming and related
mean sea level rise, will exacerbate the impact of natural hazards.
Fourth,
island economies represent a bewildering variety of socio‑political and
economic and ecological systems across the world's continents. Hein notes that
islands comprised 71 of the 94 countries, territories or areas, with
populations of less than one million as identified in the 1982 UN statistical
yearbook. (Hein,1990:35) Table 2(i) and Maps 1‑6 provides a summary
account of key characteristics of islands across the globe.
From a
methodological point of view, therefore, island economies provide a varied
enough universe from which to identify more generalisable strategies for
sustainable economic development.
If there is any
context in which sustainable development would appear to make sense, it would
therefore seem to be in small island economies because of the mutual
reinforcement of these four above mentioned reasons. What then does the
economic literature suggest in terms of small islands?
Literature Review
There is no
general body of economic literature on the very specific issue of the
sustainable development of small islands. There is, however, a more general
literature which does allude to, and sometimes directly address, the question
of sustainable island development. (The main non‑Caribbean literature
reviewed include Dommer. &Hein (eds.)1985; Benedict (ed.)1961; WORLD
DEVELOPMENT, 1980&1993; Crusol, Hein and Vellas (eds.) 1988; Blackman,
1988; Seawar,1990; Dolman,1986; UNCTAD,1988a&b, 1990; ECLAC, 1990; Beller,
d'Ayala and Hein,1990, as well as abstracts from UNESCO, 1992.) Four main themes have been identified
from a review of this literature. These are first, a definitional and
measurement concern; second, a focus on the problems and obstacles which small
islands face; third, the observation that economic theory and policy practice
in the small island context is generally insensitive to this very reality; and
finally, there is an even more general blindness of the economic literature to
the environmental base of island economies. The first two themes dominate the
literature. We now turn to a further elaboration of the literature on these
four themes.
Definitional and
Measurement Concerns
Two initial
observations can be made on this theme. First, there is no universally
acceptable definition of what constitutes a small island. As Dolman notes:
“The definition
of a small island is a matter of interpretation rather than fact. There are
more than 500,000 pieces of distinctly subcontinental land territory which can
be generically defined as islands. They range is size from sandbanks and
pinnacles of rock, virtually without a measurable surface, to extensive land
masses such as Madagascar.” (
Dolman 1985:40)
The second, initial observation is that, as
Dolman also notes, although international law is the normal arena for
settlement of definitional concerns, it was only in 1930 that a first
significant effort was initiated to define an "island."
In fact, two main types of definitional and
measurement approaches can be found in the literature on small islands‑
the socio‑economic and the climatic. (Several of the papers in Dommen and
Hein(eds.) 1985 provide exhaustive reviews of these alternative definitional
approaches). The first, and dominant
approach uses socio‑economic criteria to define smallness. The most
common indicator used is that of population. Differing studies use a cut‑off
point of 1, 10 or 15 million people or less to define small societies, with
islands merely being a sub‑set of the general categorization. Other
economic criteria used include land area (or arable land area) or size of Gross
National Product (GNP).
The second, less dominant, definitional
approach uses the climatic influence of islands to distinguish small from
continental types. Doumenge provides a helpful summary of this climatic
approach as outlined in Box 2a.
Box 2a
" Islands
must be distinguished from continents. The effect of continental mass is to
generate by its volume its own conditions of biological and natural environment
and of partitioning of space. When an
island has an emerged volume large enough to generate its own climatic effects,
it enters the continental category. In practice this threshold is reached when a mountainous mass of more than 1,000
metres of average attitude extends over more than 20 thousand sq.km. islands like Cuba, Hispaniola (Haiti and the
Dominican Republic), Iceland, Sri Lanka,
Taiwan, Tasmania, etc... not to mention vast entities belonging to arc
systems (Japan, Philippines, Indonesia, New Guinea, new Zealand) or included in
continental plates (Madagascar, British
Archipelago) are thus to be classified in a continentalized island category
... The true
small islands are those which are subject
to, and cannot modify, the influence of the oceanic hydroclimate because their volume is too small to have any effect
other than
to accentuate the contrast within one system. If there is no mountainous mass,
oceanic insularity will keep all its characteristics on emerged areas of up to
3,000 to 4,000 sq.km. If there are important
mountainous areas rising to above an average of 1,500 to 1,800 metres, oceanic
insularity is already modified when the
surface of the island exceeds 1,000
sq.km." (Doumenge,1985:70)
Other categorisations
of islands include by latitude (tropical, temperate or arctic), or by altitude,
underlying geology or island structure.
Against the
background of this definitional and measurement debate, Dolman defines a small island, for example, as:
" ..a territory
surrounded by a large body of water with a lend
area of less than 5,000 sq.miles (13,000 sq.km.) and a population of one million or less." (Dolman,
1985:40)
Streeten takes a more pragmatic approach:
" We all know that we
can define a country's size by its population,
or by its area, or by its national income. These criteria do not always
give the same results, but we know a small country when we see it. The best
simple measure is population." (Streeten,1993: 197)
In this particular publication we define all of
the Caribbean islands as small and also are sensitive to the coastal regions of
Central .and South America, particularly the Guyanas, which are isolated from
their hinterlands, and where the majority of the population live. Three main
reasons inform this approach. First, the fact that all of the english speaking
countries already share a common economic union ‑ the Caribbean economic
community.
Second,
all Caribbean countries share a common historical experience and therefore have
a shared experience and cultural similarities. Third, the Caribbean sea is the
common border of all Caribbean islands, and
neighbouring mainland states since maritime activities ‑ both positive
and negative ‑ impact on all of the abounding lands. It is therefore considered
invalid to exclude some Caribbean islands from the classification as `small
islands.'
Problems and
Obstacles faced by Small Islands
The dominant and overwhelming concern of much
of the literature on small islands, however defined, is with the delineation of
the specific problems and obstacles which lie in the way of small islands
achieving economic growth and development, far less sustainable economic
development. The evidence can be found in the titles of publications devoted to
small islands, for example, UNCTAD, 1990 ‑ " Problems of Island
Developing Countries and Proposals for Concrete Action"; Searwar,1990
‑ "Intrinsic Disabilities of Island Developing
Countries" ,Blackman,1988 ‑"Problems of Island
Developing Countries". ,Briguglio and Kaminarides, in the Introduction to
the recent, 1993 special issue o! the journal, WORLD DEVELOPMENT devoted to
" Islands and Small States: Issues and Policies" note, almost as a
matter of incontrovertible fact that:
As expected, the majority of authors emphasized the
disadvantages associated with small size."
We can distinguish between two categories of
problems or disadvantages listed in the literature": those inherent in the
condition of `islandness' and non‑island specific socio‑economic
problems.
Peculiar
`Islandness' Disadvantages
Three main disadvantages can
be found in the literature which relate to a particular and peculiar
'islandness' disadvantage. I These are physical remoteness from major continents
and/or markets; environmental fragility; and a particular vulnerability to
natural hazards or disasters.
The economic expression or
remoteness lies in the costs of movement of goods or people. Brookfield notes
that technical change has been reducing the economics of both ocean and air
transport to small islands:
BOX 2b
"... The
modern revolution in shipping and cargo‑handling, plus the growing size
of aircraft, have greatly worsened the locational disadvantage of islanders
over the past 20 years. The modern transport revolution has reached them mainly
through the displacement from island trade of socially‑useful smaller
wooden craft by second to fifth‑hand coastal ships in whole regions such
as the Caribbean and the pacific islands. As maintenance costs and replacement costs of such ships have
soared, services have deteriorated and the cost of moving goods and people have
risen." (Brookfield, 1990 :27)
Briguglio has
estimated transport and freight costs as a percentage of exports between 1987‑1989.
The average for 139 countries was some 20 %, for 117 developing countries is
was 23 $ and for 25 small island developing countries the average was some 40 %. (Briguglio,1993)
In terms of the second
disadvantage of ecological fragility,
island habitats are prone to a high degree of endemism relative to their
size. The Caribbean is reported, for example, to support over 130 restricted
range species and nearly every Caribbean island includes or forma an endemic
bird area.
The third `island‑specific'
disadvantage is perhaps the most telling. Briguglio has devised an index of
disaster damage between 1970‑1989 in 65 countries with disaster
incidence. While the overall ratio is
31%, thirteen small island states recorded the overwhelmingly highest
ratio of 61%. (Briguglio, 1993)
In the case of
the Caribbean, Collymore, McDonald and Brown. (1993), have estimated the impact
of natural disasters, reproduced in Table 2(ii). They estimate that hurricanes
between 1722‑1990 have caused 43,000 fatalities with the total damage between
19601990 estimated at US$3 billion. Volcanic eruptions concentrated in three
islands have cost 30,621 lives, 29,000 of which were lost in the famous 1902
volcanic eruption in Martinique. Collymore et al also estimate that earthquakes
have resulted in some 16,000 fatalities since 1691.
The prognosis for
the future also suggests that climate change will lead to a exacerbation of the
natural disaster impact. The UNEP background paper for the April, 1994 Small
Island Developing countries (SIDS) conference warns that:
The wider Caribbean region with its many island
based economies such as fishing and/or tourism is particularly vulnerable to
the physical changes associated with climate change and sea level rise." (UNEP, 1993:7)
Gomes also notes
in another background paper for the SIDS Conference that ten of the fifteen
most recent natural disasters which led to individual claims of over US$ 1
billion involved wind damage. (Gomes,1993:10)
In the light of
this empirical evidence it is a moot point to note whether, to date, it is the
environment which has had a greater negative impact on man in the Caribbean,
rather than the other way around, as is commonly felt.
Non‑island
specific socio‑economic Disadvantages
There are more
instances of this second category of disadvantage in the literature including
limited natural resource endowment; reliance on a few primary exports;
diseconomies of scale both in production for small domestic markets and in the
provision of social and physical infrastructure and public administration;