“The factors influencing and the rationale behind the establishment of Public Enterprises within Caribbean states”

THE INFLUENCING FACTORS

Reasons for setting up public enterprises were wide and varied. (C. Holder 1990). The countries of the English speaking Caribbean have traveled and endured a far distance; from freedom to couples of imperialistic societies achieved through colonialism; followed by wars and riots which lead to neocolonialism and finally to independence (Dominquez, Pastor and Worrel 1993). The post colonial era was the most active in relation to political thought and transformation as the social and economic issues of the “riot times” were examined. The minimal participation of the government in the laisser- faire ideological infrastructure that governed that period was the major purpose for change and as the full political responsibility for government was localized and the drive to industrialization spearheaded the drive for economic development trough the passage of Public Enterprises in Caribbean states.

Caribbean governments wanted full participation in the commercial markets; what Mr. Norman Manly avidly describes as “commanding the heights of economy”. This thirst was quenched as some countries took steps toward the socialist perspective of controlling economies; this step caught the attention of other Caribbean governments and evoked further participation in the commercial and industrial development undertaken by governments. Social welfare is not to be forgotten. Vivid memories of harsh treatment, prejudice, hard labour only to suffice the needs of metropolitan powers is an important element in the adaptation of public enterprises.
“Man needs material security, because he has physical needs, access to homes, jobs and education…” (Manley 1990).
It can be clearly seen that the creation of the relevant Public enterprises achieved these factors as governments sought to efficiently enhance their social role. The private market operates solely to maximize profits and minimize costs as it supplies goods and services- according to individual demands – through a price mechanism which characterizes excludability of individuals and rivalry in consumption (Howard 2001). The public market does not operate on these characteristics- a good is provided based on collective individual demands which means that no one is excluded and the good or service cannot be rivaled for. This makes it practically impossible for private markets to provide the good efficiently (Howard 2001) resulting in unwillingness to undertake the provision of these kind of goods and services; addressing equity consideration such as the redistribution of income and job creation. It can be deduced from the above that pragmatic reasons contributed to establishment of public enterprises.

RATIONALE FOR SETTING PUBLIC ENTERPRISES

Jamaica and Guyana
In the case of Jamaica, as early as its 1945 and 1949 election campaigns, the people’s national party (PNP) under the leadership of Norman Manley had brought about the traditional socialist notion occupation of the commanding heights of the economy for practical reasons however this issue was put on hold during its 1955-1965 periods in office. Michael Manley, the son of Norman Manley in 1974 restated the Nations Party (PNP) philosophy of democratic socialism. The PNP declared that social accountability required that government must supervise the running of the economy through a combination of direct ownership, control by participation, and regulatory machinery. Some of the areas requiring public sector involvement included, basic nutrition, infrastructure and public utilities, mineral resources, salvage operations (and) trail blazing. This decision was heavily influenced by the New World Group as it was readily visible in Mr. Manley’s book The Politics of Change. Soon after, the Jamaican government got a hold of major shares in the sugar industry in Jamaica the sugar industry, in alumina/bauxite, manufacturing, utilities and transport, tourism, agriculture, financial services, and communications, and also established a number of regulatory, promotional, and community service organizations. This was done in aim to eradicate the free market system, to subsidize these basic needs for the people of the country and provide employment. . The number of state owned companies and statutory corporations in Jamaica By 1980 were greater than 200, public enterprises accounted for a half this amount. Not all public enterprises were established by the PNP for ideological reasons. Its choice to get a hold of the majority of hotels in the country came about due to pragmatic considerations. For instance, in the 1970s government had offered investors a package of incentives (some included government guaranteed loans) for the construction and extension of hotels. With the collapse of the tourism industry in the late 1970s, government was forced to honor its guarantees and assume ownership of several hotels. Others were taken over by government to avoid closure and a consequent rise in unemployment. By January 1978, the Jamaican government owned or held majority holdings in 17 hotels, comprising half of the national hotel accommodation. It can be seen that the government’s attempts were to enhance the country and improved the standard of living of the people by providing employment and basic essentials.
In 1953, Dr. Cheddi Jargan leader of the Marxist Peoples Progressive Party (MPPP) put forward the social Underpinnings of the public enterprise. Unfortunately, the Jargan government did not get the opportunity to carry out a socialist program. However, in the early days of the peoples’ national congress, under the leadership of Mr. Forbes Burnham, the Guyanese strategy for development was even more conservative than in any of the commonwealth Caribbean states. Guyana, in the 1966-70 development plans stressed that: “the objective of the government is neither to obtain control of private industry nor to gain direct participation in their profits though substantial equity holdings”. The aim however was to remove obstacles that hindered rapid industrial development by providing pre-investments and other promotional services and, when necessary, to participate financially to ensure that desirable industries can be started (Caricad studies). Until 1970, public enterprises in Guyana consisted merely of the utilities and Guyana Development Corporation. In 1970, Guyana was declared a Cooperative Socialist Republic and embarked on a program of nationalization, which by 1976 led to the acquisition of both the bauxite and sugar industries. Thereafter they established the Guyana National Cooperative bank and declared a policy of miniaturizing the foreign commercial banks. They nationalized distribution holdings of bookers and by 1980 government controlled about 80% of the formal economy. According to Carl Greenidge, “By 1976 it was the private sector that needed to justify its existence.” In the context of this cooperative socialism, pragmatic considerations were reflected least of all, and went far beyond the “occupation of the commanding heights” of the economy and the repatriation of “ownership and control” over domestic enterprise. It involved virtually the total state control of the economy, and “totalitarian” would not be too extreme a term to apply to the Guyanese regime if the late 70s and 80s (Caricad Studies). Some might have seen economy suited to fit the dominance model, as the government saw it fit to take control of all major operations for the betterment of the country, but the belief in this case that their intervention would do more harm than good

Barbados
The rationale of state-ownership in Barbados has been predominantly pragmatic. The democratic socialism of Barbados’ two leading parties, the Barbados labor Party and the Democratic Labor Party, has manifested itself primarily in the most comprehensive welfare programmes in the region. However, successive administrations since the 1950s have reiterated their commitment to a capitalist type economy, and have unabashedly pursued the strategy of “industrialization by invitation”, a term, opprobrium to socialist parties in Guyana and Jamaica and to the nationalist PNM in Trinidad and Tobago.
According to John Mayers, of the University of the West Indies, government involvement in the Barbadian economy “was aimed at diversifying the economy, increasing employment, and achieving greater self-sufficiency for the country”. However government saw itself at playing a catalytic, rather than a dominant role in the economy. There was no evidence, even in the rhetoric, of any attempt to “occupy the commanding heights of the economy”. The Barbados Marketing Corporation (1961) was established to stimulate output of non-traditional agriculture. The Barbados development Bank was set up to finance new investments in tourism and industry, while the establishment of the Barbados Port Authority reflected the need to rationalize and improve port operations. The Barbados Hilton Hotel was set up in the 1960s to further seed the development of a fledgling tourism industry. Heywood’s Resort Hotel was built with the blessing and support of the World Bank during the brief period when that institution supported public investment in the tourism sector.
Some other state enterprises were established to meet some political objective. E.g. the transport Board began with the acquisition of some private sector bus operations in the mid-1950s, after the refusal on government to allow a rise in bus fares. Other bus companies were later acquired as a rationalization measure. The agricultural Development Corporation was initially in 1965, to ensure that small farmers in the Scotland district would be able to get their sugar cane to market, and serves both a commercial and development role. The Arwak Cement Company, completed in the early 1980s, was the boldest Barbadian venture into state-ownership. It was undertaken jointly with the government of Trinidad and Tobago in response to a chronic shortage of a product critical to the development process and which the private sector seemed unwilling to supply. The Natural Gas Corporation is the only public utility, other than the Barbados Water Authority which is wholly owned by government. Governments’ minority holdings in the Telephone and Light and Power utilities reflect the accidental acquisition of shares in return for foreign loan guarantees. However, the prospects of monopoly profits moved government to take part in ownership in Cable and Wireless, which was renamed Barbados Telecommunications Limited, and in the merged domestic telephone and telecommunications corporation. Generally, government has preferred to control the operations of public utilities through the mechanism of a Public Utilities Board and had allowed the two hotels built by government to be managed by foreign operators.

Trinidad and Tobago
The government of Trinidad and Tobago proceeded by stages towards extensive participation in public enterprise. However unlike that of Guyana and Jamaica, in this case, there was never any declared commitment to Marxist or Socialist doctrine. However the doctrines of the New World School must have influenced politicians and bureaucrats alike, but the basic motivation appears to have been strong nationalistic sentiments and the availability of huge windfall revenues after the first and second oil shocks of 1974 and 1978 respectively. This provided the means for government to follow through on its determination to develop “a truly national economy”.

Its First Five Year Development Plan followed the Lewis strategy and in Prime Minister Eric Williams’ words: ‘What government has to do is create a framework which is favourable to investment, and to try to persuade as many persons as possible, here or overseas, to create new employment opportunities”. The purchase of the Telephone Company from private shareholders and of shares in BWIA in 1960, the creation of public transport system in 1965 out of two heavily subsidized private concerns, reflected government’s concern to create a climate conductive to industrialization. Which can be seen as governments way of stepping in to avoid the consequences of failed provide business ventures i.e. unemployment.

The Second Five Year Development Plan covering 1964-8 again stressed that the economy was “based on private enterprise”. At the same time government committed itself to the improvement of the infrastructure – education, electricity, transport and communications, health, water and drainage, in an effort to facilitate private capital investment in the production of goods for local consumption and for export. Accordingly, electricity, water and sewage, harbour and port facilities, previously shared between municipal authorities and central government, were rationalized and centralized within central government.
The Trinidad and Tobago strategy did not reflect any socialist ideology. Nationalism, especially after the attempted coup of the early 1970s, must have been the critical moving force.

Eastern Caribbean States
The basic rationale of state ownership in the Eastern Caribbean States, such as Anguilla, Antigua & Barbuda, Dominica, Grenada, St. Lucia, St. Kitts & Nevis etc, has been the support of economic development. Development banks and marketing corporations have been established in most of these territories. Utilities such as electricity and land line phones are also provided by Government in some territories where the diseconomies of small scale have traditionally deterred private investors. In these countries, the public sector was viewed as an essential counter force to external control, to stimulate the weak private sector, to transfer technology to strategic sub-sectors, to gain access to concession financing from which small, local entrepreneurs with limited assets were barred.

SUMMARY
Public enterprise was for a long time an important part of the public sector in most developed or developing countries (Farazmand, 1996), Governments have established public enterprises for a variety of reasons. These can include: inadequate private supply of goods and services; rescuing private firms if their closure is against the public interest; improving competition; reducing social costs such as environmental externalities; even to protect national sovereignty in some way.

REFERENCES
CARICAD STUDIES 1992. Report on Management of Public Enterprises in the Caribbean.

Farmazand Ali, 1996. Public Enterprise Management: International Case Studies. Westport, CT: Greenwood Press.

Howard, Michael 2001. Public Sector Economics for Developing Countries. The University of the West Indies Press.

Manley, Michael. 1990. The Politics of Change. Andre Deutsch Limited.
Steiner, George & Steiner, John. A. 2003 Business, Government and Sciety 11e. McGraw –Hill/Irwin.