Political Reality, Economic Issues and the CARICOM Single Market &
Economy
By Dr. Ken Blawatt, UWI Cave Hill Campus, Barbados, W.I.
ABSTRACT
There are two issues that challenge those nations considering a market union. On
the one hand there is the desire to consummate a mutually compatible agreement that
removes all barriers and provides free and open commercial intercourse. On the other
hand there is an equal, if not more urgent need in the case of Caribbean countries, to
stimulate economic activity once agreement is reached. It is not sufficient to negotiate an
impeccable trade and market-legal infrastructure if there is not a capability to mutually
exploit the opportunities the agreement provides for, and to realize solid, individual
national gain. Otherwise what is the purpose of the agreement?
The paper offers commentary and evidence to both issues. It presents the flow of
negotiations between Canada and the United States in arriving at the North American
Free Trade Agreement, with particular attention to the variations, if not oversights that
might serve as object lessons for Caribbean negotiators. In discussing sovereignty and
size, the paper points to a need to avoid a subservient position by either party in
negotiating terms and references. Canada’s disposition to bend to American interests has
weakened the nation’s sovereignty on a number of fronts including market and legal
sovereignty. The paper assumes that CARICOM members will avoid those and will
develop a mutual and equitable agreement.
Yet that is not the principal thrust of the discussion. For once agreement is in hand
and provides the roadmap to improved economies all round, the CSME faces the
daunting task of readying its members to profit from the union. The economies of
developed and developing nations have two components, an older and in part, dying
sector, and a dynamic, innovative, entrepreneurial sector. It is incumbent on CARICOM
members to prepare their economies for the promise, and the competitive challenge of an
open market system in both. Individual nations need to prepare their older and established
(or beta economy) enterprises to meet the competition that will flood into an open
market, and to expand their operations into the greater market.
Commensurately and more importantly, nations in the CARICOM must change
their commercial cultures to accommodate and stimulate entrepreneurial activity. The
engine of an economy is the entrepreneur. He/she creates the nation’s alpha economy.
These entrepreneurs by innovation, new technologies and/or the creation of market
opportunities are the genesis of job creation and prosperity.
1
Author
Dr. Ken Blawatt is a visiting senior lecturer at the University of the West Indies,
Cave Hill campus, in the Department of Management Studies, Faculty of Social Science.
He has been an instructor for thirty years at Simon Fraser University where he continues
to instruct part time in the MBA program, as Associate Professor at Bishop’s University
and at Brock University, all in Canada. From 1976 to 1982 he was guest professor in
marketing and technical entrepreneurship at the University of Waterloo where he coauthored the text “The Technical Entrepreneur.” During the same period he was a sitting
member of the Canadian federal government’s Task Force on the Automotive Industry,
consultant and advisor to the Ontario Centre for Automotive Parts Technology, and a
consultant and federal lobbyist for the Canadian Federation of Independent Business. He
was also a director and consultant to an industry sponsored organization, The Committee
for Fair Trade from 1987 – 1989 that sought to make improvements to the CUFTA. Dr.
Blawatt was a member and director of the Canadian Council for Small Business and
Entrepreneurship from 1994 to 2001 and has written numerous articles on the subject
including a text on Entrepreneurship published by Prentice Hall Canada.
2
Political Reality, Economic Issues and the CARICOM Single
Market & Economy
Dr. Ken Blawatt, Visiting Senior Lecturer, Department of Management Studies, University of the
West Indies, Cave Hill.
The new CARICOM Single Market and Economy promises opportunities and
improved economic prospects for the fourteen million people affected by the proposed
agreement. The evidence from transnational agreements, including the North American
Free Trade Agreement (NAFTA), supports the view of a ‘win – win’ situation that should
encourage all participants to work toward a mutually enabling political and economic
agreement.
INTRODUCTION
The creation of a new common market in the Caribbean may profit from the
history of others as well as new thinking in regard to economic opportunities in the new
constituency. The Canadians were drawn into a free trade agreement with the United
States that was in fact a political agreement rather than one with complete economic
parity. It was the conclusion of what was already a mutually successful auto trade
agreement that accounted for the majority of trade between the two nations.
Arising from this background are a number of issues that CARICOM participants may
wish to review.
Firstly, in working with other countries to expand market opportunities and
establish guidelines to direct multilateral trade, at stake are the political and economic
sovereignties of participant states. The creation of a single market will expose the
markets of CARICOM’s fourteen members to the intrusion of the strongest and most
able. A free, open and democratic marketplace is completely essential for economic
growth and improved standard of living but even so, certain safeguards are important to
ensure the sovereignty of nations.
On the other hand, the agreement itself may contain language and structure that
restricts national interests. Care must be taken to provide equity, yet at the same time
avoid oversights such as covenants that preclude the ability of governments to address
domestic problems. Under NAFTA, for example, Canada is constrained from dealing
with dwindling resources and environmental change in its energy programs by a
superceding requirement in the agreement. If companies want to preserve the country’s
resources for future generations by curbing US exports they cannot do so unless they also
reduce supply to Canadians. In effect the US, by implication, has equal access to
Canada’s resources. But in extending NAFTA to Mexico, the Mexicans would have none
of that and held on to their energy sovereignty.i
The consequences of any agreement will have an effect on the economy of a
nation. Once a single market is created, and the political language equitably enables the
flow of commerce, it is important that all members equally profit from the arrangement.
An examination of the individual CARICOM economies suggests there is something less
than equal opportunity for all, particularly the smaller and less developed states. Thus, the
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major and difficult role for negotiators will be to level the playing field so that all may
profit equally
The second consideration is the ability to prosper under the agreement and to
appreciate economic expansion. In most economies there are two wealth producing
sectors. The first is comprised of older, perhaps larger enterprises that provide much of
the employment and national wealth. Within the CARICOM, many countries are resource
based and depend on mining, fishing, sugar and fruit production in addition to tourism.
History tells us that these industries will eventually decline, (if some are not already on
that slope), and disappear. In developed economies the successful, older companies are
able to renew their operations with technology and incremental product innovation. But
even so, in time these will die, pushed aside by higher technology firms and radical
innovation. The second sector is that part of the economy given to innovation within
existing firms and the creation of new industry by innovative, entrepreneurial people. As
older firms decline they are replaced by new companies created by individuals who start
new ventures in response to opportunities in the marketplace, (As in those that might be
presented under a CARICOM, CSME). Global studies confirm the existence of this dual
economy and the utter importance of its creative contribution to national wealth. This will
be the single most important challenge to the CSME. Even as the CSME is formed,
governments must take large strides towards encouraging the growth of the
entrepreneurial component in their economies. The challenge is whether governments
will be able to overcome an inherited business culture that has remained in place, almost
unaffected, for the last five hundred years.
SOVEREIGNTY: POLITICAL REALITY AND THE CANADIAN EXPERIENCE
The late Canadian Prime Minister, the Hon. Pierre Trudeau, declared Canada’s
relationship with the United States was as “a mouse in bed with an elephant, ever fearful
of the latter were it to roll over.” During more than forty years of intermittent
negotiations leading up to the NAFTA, Canada has assumed the lesser position in
response to the bulk of its partner. That is not to say the elephant has been unduly
aggressive nor intimidating, but in the minds of Canadian officials and bureaucratic
mandarins there has been a consistent need to give obeisance to the elephant.
In contriving the precursor to the Canada – US Free Trade Agreement of 1989,
(CUFTA), Canada’s representatives effectively relinquished all economic sovereignty
over the automotive market in their final draft of the Canada-US Automotive Products
Trade Agreement (APTA) in 1964. Their naively produced accord would have cost
Canada its entire auto industry and tens of thousands of jobs. The objective of the
agreement was to create broader markets “within which the full benefits of specialization
and large scale production’ would be achieved. At that time and to the present, the
industry was almost entirely composed of American subsidiaries operating in Canada.
When the draft for approval was presented to the Hon. Lester Pearson he was quickly
apprised of the fact the agreement, as written, would more than live up to its purpose, for
it permitted the full-scale production and rationalization of the industry south of the
Canadian border! The draft provided full and total access to the Canadian market with no
quid pro quo or restriction whatsoever that would assure that supply would come from
Canadian based firms.
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In a uniquely entrepreneurial move the Prime Minister penned in a two-sentence
attachment to the draft agreement that required a Canadian value-added of at least sixty
percent in those automobiles sold into Canada.ii Needless to say American business was
appalled when President Lyndon Johnson signed on to the agreement.
Sovereignty and Size
The APTA was the basis for the Canada-US Free Trade Agreement of 1989. This
accord was prompted by fears that Canada would be excluded from access to US
markets. Again the nation’s bureaucrats and politicians were influenced by the elephant
to seek an arrangement assuring a continued access to the US automotive market. At that
time a number of US politicians, including Richard Gephardt a recent Democratic
presidential candidate, were clamoring for protection for American jobs and proposing
increased tariffs and quotas. Canada once again rushed to the table and signed the
Canada-US Free Trade Agreement where, again it was found, the negotiators had yielded
yet more national sovereignty.
In 1998 Canadian medical scientists found that a manganese compound, MMT,
used in gasoline replacing lead, as an antiknock constituent was detrimental to health.
Accordingly, the federal government banned the product. In short order the country was
sued by the Ethyl Corporation of Virginia for abrogation of Article 110 of NAFTA. This
article permits recourse for corporations affected by national policy. Rather than fight for
its domestic national rights the government yielded, paid the Ethyl Corporation almost
$20 million CAD, and lifted the ban on MMT calling to mind the words of Dr. Yandell
Henderson of Yale University who declared that “Men in industry take it as a matter of
course that a little thing like industrial poisoning should not be allowed to stand in the
way of great industrial advance.”iii
The focus for Caribbean negotiators, then, is on the provision of equality among
parties and an acceptance that size has little to do with any less need for sovereign rights,
whether to market, economic or legal jurisdictions. A market is a national sovereign
issue. It is not to be yielded simply on the basis of implied threats from a larger partner.
Equality Within The Terms of Agreement
The genesis for NAFTA was almost an agreement that ceded market sovereignty
to the Americans. The APTA was reworked and rushed into the CUFTA, 1989, by the
Hon. Brian Mulroney who reacted to American expressions, but not actions of
protectionism. In his desire to please US interests, Mulroney demanded the individual
provinces in the country be signatories to the agreement thereby endowing the CUFTA
with the status of a treaty.
On the other hand the US federal government did not make the same demands on
its individual states, assuming any would have been signed on in any case, thereby
excluding their commercial sovereignty from the agreement. Canadian businesspeople
have been confounded when they realized they could not do business in certain states
without the approval of one commission or another. In good part the softwood lumber
dispute, the grain embargo against Canadian wheat and penalties against the steel
industry are manifestations of individual states’ pressures to have retained certain
jurisdictions. NAFTA is exclusive of certain key issues and will continue to defy
5
Canadian national interests until such time as amendments are made or the agreement is
reworked.
Here again Caribbean legislators are reminded of the need to work on an equitable
application of agreement across all jurisdictions.
Vested Interests and Agendas
A nation is responsible for its marketplace, the crucible in which businesses and
entrepreneurs create economic wealth and employment. This is vitally important if a
nation is to stimulate its entrepreneurial economy. Unrestricted, free access to a local
market by external, large-scale enterprises interferes with the ability of local producers to
start up and/or become competitive. On the other hand, with new and larger markets
made available to smaller economies within a free trade agreement there is opportunity to
expand operations, improve productivity and reduce costs for commodity type goods.
Commensurately, for differentiated goods, those that have intrinsic value and worth
beyond pure price consideration, there is a need to increase investment in marketing and
distribution. In either case domestic enterprise is to be nurtured and encouraged to grow.
It cannot be left to larger interests to apply the concepts of laissez-faire when it suits
them. Nations must be assured they have equal access to a continuing, growing yet
sustainable economy.
In setting the scale where some industries were protected for five to ten years into
the agreement, Canadians accepted a potpourri that was seen to suit the agenda of one
vested interest or another. Some of those granted a long-term adjustment period were
perceived to be politically associated with the government of the day, while others who
were smaller and less contributory were excluded. Canada, despite being a woodproducing nation permitted its furniture industry to wither. A few years into the
agreement it witnessed a 39% drop in the furniture industryiv that had been given
marginal assistance at best to respond to competitive pressure from the south. The wine
industry was given no opportunity, and was further vexed by having to apply to
individual states for licenses to distribute wine. But the breweries were granted a ten-year
hiatus. The transportation and services industries had little or no time to adjust to the new
competitive environment. Canada’s toy industry, essentially a small scale operation along
with 7,500 other small and medium sized businesses closed down at the expense of
425,000 jobs.v Most of these were either privately owned Canadian operations or smaller
US subsidiaries.
It is clear that the granting of adjustment periods should match the importance of
the industry to a domestic economy and not the political whims or vested interest of
competitive enterprises. Manufacturing and production are bedrock aspects of a national
economy and could represent as much as five jobs for each one lost in manufacturing.
The Role of Multinational Corporations
The NAFTA and its predecessors were designed to accommodate the automotive
industry that accounted for 70 percent of Canada’s trade with the United States. Most of
these corporations are foreign subsidiaries of multinational firms. Thus while NAFTA is
credited with improving the economies of all parties to the agreement, the fact is that the
bulk of trade growth was among and between US multinationals.
6
Table 1 Growth in US-Mexican-Canadian Tradevi
Millions of $ CAD
1990
1998
Canada-Mexico
Canada-USA
2,405
199,432
9,008
474,822
The figures are impressive and the nation has enjoyed evident monetary success.
But that is not necessarily a statement of wealth, for the real wealth of a nation is the
ability to create and sustain employment. There are fewer jobs in a million dollars worth
of resource products and many more in a million dollars worth of finished goods. So,
while the dollar values are impressive, they accrued at the expense of hundreds of small
firms that were closed under the agreement and multinationals grew even larger and
stronger.
Prior to NAFTA, a US corporation that was hurt by the actions of a foreign
government had to defend itself in a state court or prevail on its federal government to
take the issue through GATT. Under Article 110 of NAFTA it is now the case that
corporations may sue the Canadian government directly, as with Ethyl Corp. “The only
‘citizens’ whose rights in Canada were extended by continental governance are
corporations based in the United States or Mexico, against governments whose
regulations might reduce their earnings.”vii
Multinationals are large entities that are often directed by their own needs rather
than those of host nations in which they operate. Paraphrasing J. K. Galbraith, it is
wondered that standing astride international boundaries they are not an assault on
political sovereignty or are, perhaps making obsolete the national state.viii It is clear they
serve a purpose and can be effective in creating employment in a region. But one must
wonder about Galbraith’s thoughts, and the fact that for every job created in a region, the
multinational corporation also creates two at home.ix The result is abundantly evident in
the automotive industry, where despite the billions of dollars in trade by Ford, General
Motors and others, there are virtually no jobs in corporate purchasing, engineering,
marketing and finance nor other senior functions located in Canada. They are all in the
United States.
A national policy, perhaps a CARICOM policy, should require contractual
arrangements with multinational companies for access to markets, but only to the extent
there is an allocation of jobs that includes senior as well as menial activities.
Foreign Domination
In developing national policies at the time that Australia was debating leaving the
Commonwealth and becoming a republic, politicians and consultants constantly reminded
each other they did not want Canadianization to occur in their country. They were
referring, of course, to the fact that foreign corporations control a large portion of
Canada’s economy where almost all the automotive products and energy industries are
foreign held, as are more than 40 percent of manufacturing, mining and food services.
Mostly held by American multinationals.
7
Foreign domination has three aspects that impact on national economies,
notwithstanding the issue of a loss of sovereignty and economic control. These are
transfer pricing, corporate payments for technology and management services, and skilled
employment. Taken together these remove capital from the system. A further aspect is
that these cost allocations decrease profits on the books of subsidiaries and foreign
corporations pay a less than equitable portion of the tax burden. Noted Canadian
economist Eric Kierans observed that if foreign corporations in Canada were taxed the
same as they were in the United States it would be the equivalent of increasing the wages
of every Canadian by ten percent.x
Highly specialized employment located at head offices also precludes the
development of innovation and invention in a host country. Thus a nation’s intellectual
property is diminished and future expansion within the nation is curtailed, being held in
control by foreign interest. There is also the effect of decision-making in regard to social
and environmental factors that will no doubt be influenced by home office governments.
ECONOMIC ISSUES: ENTREPRENEURSHIP IN THE CARIBBEAN
The major challenge to CARICOM will be in the ability of individual nations to
realize their potential within the CSME. The creation of structure and terms of reference
for the agreement will not be all that onerous. CARICOM has made substantial progress
in contriving a concord respecting the fourteen member nations. There is a common will
to come together. Moreover there is a considerable body of legal material in other
transnational agreements including NAFTA, that can be studied to extract the language,
meaning and form that will where appropriate, apply to the CSME agreement. But what
will prove to be the principal challenge, if not stumbling block to its success, will be the
ability of businesses and individuals to exploit the opportunities that will be made
manifest from the agreement.
Classical economics states that national wealth is derived from factors inclusive
of land, capital and labour; that a capitalist assembles from these factors the ingredients
to develop enterprise and wealth. In recent decades that model has changed dramatically,
impelled to do so by the dynamics of the information age: new technologies, a rapidly
changing environment and fragmenting markets. What has materialized is the role of the
entrepreneur as the powerhouse of an economy. Audretsch and Thurik have successfully
argued that “Entrepreneurship has emerged as the engine of economic and social
development throughout the world.”xi
Duality in the Economy
Entrepreneurship is the mechanism that creates a national economy. While
econometric models hitherto have generally ignored the role of the individual as a prime
mover, the dominant force of new and applied knowledge in the formation and operation
of enterprise necessitates the role of an entrepreneur as the ‘mover and shaker’ in an
economy. Entrepreneurship has long played a role in business development and is
prominent in the Austrian school of economics. It is now a serious, if not major
component of a national economy, so much so that it comprises a significant, and in some
instances, a major part of the national economy. In Canada and the United States it
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accounts for half of the employment and innovation and almost all new inventions.
Entrepreneurship, if not the fountainhead of an economy, is a vital component to
its success. Walstead and Kourilsky in reporting the results of a national survey note:
“Entrepreneurship is destined to have an accelerating effect on the economic future of our
nation and on our economy’s ability to generate new jobs.” xii
In its first annual report on the contribution of entrepreneurship in ten leading
countries, the prestigious Global Entrepreneurship Monitor concludes that
entrepreneurship is now foremost in the public policy initiatives of most countries. xiii In
the newly emerging economy of Estonia, a decade removed from the lugubrious structure
of an authoritarian government, researchers find the empowering force of
entrepreneurship at work.xiv Referring to the function of the entrepreneur Kurik et al
observe, “In today’s increasingly global, increasingly knowledge-based economy,
innovation – the capacity to apply new knowledge in order to improve productivity and
create new products and services – is more significant than ever.” An earlier study in that
country found that almost as soon as the Soviet hegemony collapsed, entrepreneurs
emerged by the tens of thousands to fill the market voids left by that corrupt system.xv
What is important about the Estonian study is that it took place in a new economy,
one that was created virtually from scratch. But Kurik et al go on to make a further point
that has import to the CARICOM condition. In commenting on the role of the
entrepreneur they further observe that: “This capacity relies not only on scientific
inventiveness and entrepreneurial flair but, critically, on the conditions which permit,
encourage and sustain the innovative creativity, or restrict it.” In other words there must
be a receptive and encouraging society in which entrepreneurship can flourish.
Some years ago Jeffry Timmonsxvi signaled the importance when he observed that
an entrepreneurial wave was sweeping America with entrepreneurship the fuel, engine,
and the throttle of the nation’s economic machinery. From 1980 to 1987 he found that
larger firms, notably the Fortune 500, downsized their operations and cast off more than 3
million jobs. Remarkably, these were more than offset by the creation of 17 million jobs
in high technology industries.
But while the creation of jobs is important, entrepreneurs are the source for
knowledge and innovation too. Baumol observes that “...the small firm, home of the
independent entrepreneur and the independent inventor, has been the primary source of
the technical ideas and innovations that serve as the foundation for the unprecedented
growth performance of the world’s industrial economies.” xvii
The fourth annual publication of the Global Entrepreneurship Monitor,xviii now
expanded to a thirty seven-nation study, including Mexico, Israel, South Africa and
Hungary, develops the argument for a dual nature to an economy comprised of large
enterprises and smaller, growing entrepreneurial enterprises. Researchers find there are a
number of significant variables that define the construct of entrepreneurship in those
countries, including innovation, new business startups, intellectual property and so on.
As with Baumol and Audretsch and Thurik they support the concept of a ‘managed
economy,’ that is to say one comprised of larger and/or older companies managed by
executives and to a separate, dynamic entrepreneurial economy.
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The Market Based Model
Kirznerxix argues that market forces, and not supply side assumptions direct an
economy. Demand is a function of needs and wants of a population, including
manufacturing entities that direct the flow of goods and services. Thus demand is a
derivative of one of four decision criteria: the utility of a product or service, the cost, the
benefit and the intrinsic value, (Figure 1.). New products and innovations have a value
that place them in a quadrant of benefit and value. In time, as they become more
intensively commercialized, they are driven to the more competitive cost-utility quadrant
where, barring improvements or other innovative application, they become less in
demand and eventually are dropped, or the firm and the product disappear from the
market.
Applying market forces to the examination, a model of a dual economy is
developedxx wherein the entrepreneurial economy, or the alpha economy, is a summation
of entrepreneurial activities that constantly disrupt stability in the marketplace, as noted
much earlier by Schumpeter. This activity can be described as the economic velocity of
the economy and is contained in the generalized expression: ∆Ve =ƒ(∆Di*∆Pi), ∆T, ∆E)
and the total effect on an economy is recorded by the term = GNP [1 +/- Ve]xxi. In the
model T = technology and E = entrepreneurial activity.
As the alpha type enterprise reaches maturity and experiences the effect of
competition it becomes a part of the managed economy, a beta enterprise. It begins to cut
costs and employment through economies of scale and productivity and seeks ways of
maintaining growth usually by exporting to other nations. In time it becomes less
competitive, less in demand and it passes from the scene.
Figure 1. Market Forces Model
Benefit
α Economy
Value
Cost
β Economy
Decline
Utility
The Caribbean: Alpha or Beta?
The evidence supports the thesis that the Caribbean for the most part tends toward
a beta type economy. Excepting one or two nations the balances in trade are in deficit,
10
growth is tied to the tourism industry, which is an external and uncontrollable source of
wealth, and there are limited natural resources on which to build enterprise.
A successful economy requires the entrepreneurial activity of individuals to start
new ventures and to expand existing businesses. Nor is it appropriate to believe that
entrepreneurial activity is assured in those enterprises that now exist. The evidence very
much establishes that older and larger firms are in fact declining, if not part of the
‘working dead.’xxii The dual model (Endnote xx) establishes that many of the firms in the
beta, or managed economy, are in a state of decline. In the Caribbean these may include
resource industries such as sugar, fruit, certain tourism operations, manufacturing and
retailing. Thus within CARICOM there are enterprises that are susceptible to decline
even as the promise of a CSME is considered.
Smaller countries in the Caribbean suffer a shortage of fuel for their
economies.xxiii During the agricultural era, prior to 1950, the islands subsisted on export
of raw material, sugar, fruit, fish and a bit later, on resources such as bauxite. In the years
that followed the developing industrial era they continued to provide raw goods,
augmented by tourism and travel. However, these aspects no longer provide sufficient
fuel to power the economies and in many cases the trend is not positive.
Consumers in the smaller nations continue to demand imported goods even
though there is less national income to counter the cost in terms of value added export
opportunities. Commensurate with this trend is the fact that aggregate incomes may also
decline, because of job elimination in moribund industries, as in the export of sugar and
fruit crops, plus the effect of employment inequity in traded goods. Thus the economic
velocity of the economy is retarded and decline continues.
Nor does the heavy reliance on external sources of income from tourism or
international banking improve economies, except perhaps in the short-term. Typically
these activities are characterized by lower income opportunities for these nations with
less commensurate revenue from taxation and no opportunity for technological growth.
What smaller nations require is an access to entrepreneurial opportunity.
Technology trends do promise certain prospects for growth, as would access to expanded
markets and demographic shifts. Unfortunately smaller economies usually lack a skilled
technical and entrepreneurial class to exploit the trends. Until the CSME is fully
operational smaller economies will not have the larger market mass to support a critical
production base and the innovative opportunities that can be exploited by an
entrepreneurial class.
Where might entrepreneurs begin? One of the areas, given the creation of a larger
market is the opportunity to consider import replacement programs. Early studies into the
economic viability of smaller businesses concluded that viable, competitive firms could
exist in a population as small as one million people and produce up to 70 percent of all
consumer goods required for that market.xxiv Macro-enterprises may be stimulated to
satisfy basic demands in food goods, craft ware and apparel. Within smaller markets
these are not sufficient to improve a hard-pressed economy but with access to larger
markets these smaller-scale enterprises have opportunity to expand and grow.
A further consideration is that economies of scale no longer pose a major
drawback, as once may have been the case. Technology now permits smaller scale
operations and equivalent, if not superior output.
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Entrepreneurship is an Attitude
Creativity in the arts or in business is a spiritual thing. The outcomes are very
related. What one person brings to a canvas or musical score, another brings to an
enterprise. Regis McKenna is looked on as the leading authority in marketing in the
Information Age. He believes that entrepreneurs are successful because of their attitude
toward what they do.xxv Indeed he attributes the success of the Silicon Valley
phenomenon to the attitude of the men and women who achieved great things and
continue to do so in creating new products and services for the new era. Needless to say,
the Silicon Valley model has been replicated around the world where governments have
set up the seed structure to encourage and enable creativity in high technology operations
in their own countries.
But an entrepreneurial attitude also requires an environment that nurtures and
succours the entrepreneurial act. Under the heavy tutelage of the former Soviet Empire
there was virtually no creative entrepreneurship, and the failure of the system is as much
attributable to that factor as it is to inadequacies of the concept. Entrepreneurship requires
a democratic, free spirited, supportive business culture and organic environment to thrive.
The Caribbean is democratic and free spirited. However there is some question
about its business culture and no little suspicion the region still retains vestiges of a
eighteenth century bureaucracy. A recent study of middle managers in 47 countries
focused on the sources of guidance or values that managers referenced in making
decisions.xxvi A variety of criteria were tested but the important consideration was
whether managers felt confident in their own abilities as to be venturesome and creative.
Did they rely on their own experience or were they constrained to follow the rules. The
study found that Caribbean states, including Jamaica and Barbados relied on the
guideline of rule in making decisions. In other words, there is little empathy for
entrepreneurial activity on the part of managers in the beta economy.
Fortunately attitudes can change, given opportunity to do so. The experience of
emerging nations from the former Soviet Union, newly developing countries in Southeast
Asia, and China itself, give assurance that a nation economy can thrive in its
entrepreneurial class if so disposed.
Developing an Entrepreneurial Economy
CARICOM and its individual states have much work to do if they are to thrive in
the newly formed free market and economy. A laissez-faire attitude will do little to
encourage growth except the expansion of larger enterprise, including multinationals. It
will also encourage the inclusion of flow-through operations, whereby highly competitive
goods from multinationals will dominate the economy and reduce national wealth. Thus
rather than stimulate internal growth it will facilitate contraction, replaced by these
external sources. In any event neither of these reflect an alpha economy, but rather a
managed, declining economy.
The lesson from developing and developed nations is the need to have within the
population some or all the following:
1. The existence of opportunity seeking individuals
2. The existence of companies with opportunity seeking managers
3. The existence of latent entrepreneurs in the population
4. Access to opportunities in technology
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5. Access to opportunity through markets
6. A supportive government
7. A supportive commercial system
Experience and history confirms that people have the latent entrepreneurial
capability. In defining the entrepreneur a number of studiesxxvii have found that
individuals can be trained and conditioned to become entrepreneurial. Thus the issue
becomes one of setting forth an effort that would accomplish that goal.
Creating an Alpha Economy
CARICOM has a unique and exceptional opportunity to create and sustain
entrepreneurship in the Caribbean. The United States, and to a lesser extent Canada,
developed their entrepreneurial economies in the last century. Even so Canada lagged the
US for some years, held back by the vestiges of an inherited bureaucratic system. Only
latterly has the country begun to improve its alpha economy.
In preparation for the single market, Caribbean nations must initiate campaigns
that will inform business communities and latent entrepreneurs of the intention to
encourage and grow its entrepreneurial class. Table 2. presents an overview of the
programs that could be considered to assist businesses in the transition and encourage
new venture formation.
Table 2.
Creating an Entrepreneurial Economy; Phase One
SECTOR
•
Existing
Businesses
•
•
•
Latent & Budding
New Ventures
•
•
OBJECTIVES &
OUTCOMES
Heightened Awareness
of Competition
Improved Internal
Operations
Market Opportunity
Identification
New Venture Creation
– Market Niches
New Venture Creation
– Technologies
Inventory of New &
Appropriate
Technologies
•
•
•
•
•
•
•
•
PROGRAMS &
DELIVERY
New Technologies &
Productivity Methods
Market Identification &
Analysis
Marketing Strategies
Technology transfer
Concept – Invention
Development
Prototype Development
New Venture
Commercialization
Small Business
Development Centres &
Incubators
It is critically important that domestic businesses are encouraged to avail
themselves of the opportunities that a single market will provide. It is here that
governments must take a position and become involved. During the period when
Japanese industry threatened to outflank Ontario’s automotive products sector with new
13
technologies and productivities, the provincial government created an agency to work
with the hundreds of firms in the industry, assisting and encouraging them to become
competitive and productive in the face of new competition.
But industry assistance by itself will not be sufficient. The Caribbean needs to
examine its culture in respect to commerce and industry, certainly in regard to free
enterprise and entrepreneurship. The former republics of the old Soviet Empire required a
decade, and in some cases a generation, to overcome the negativity that had been
associated with entrepreneurship. The term “mafia” was used in those days to signify
someone who made profit at another person’s expense: being an entrepreneur. People
were jailed for trying to make a profit. Thus, it behooves Caribbean governments to take
the message to the people and to begin the long process of creating a full, free enterprise
system. Table 3. sets out an overview of programs that might initiate the process.
Table 3.
SECTOR
The Public
Creating an Entrepreneurial Society; Phase Two
OBJECTIVES &
OUTCOMES
•
•
Education
• High
Schools
• Colleges
• Universities
• Institutions
•
•
•
Acceptance of free
enterprise as
important to a strong
economy
Alert the public to the
option of self
employment
Change in Public
Attitude
Creation of Enterprise
Culture
Stimulate Concept of
Self Employment
PROGRAMS &
DELIVERY
• Media publicity to
educate the public of the
importance and necessity
of entrepreneurship
•
•
•
•
•
Governments at all
Levels
•
Appreciation for the
Importance and Worth
of Business and
Entrepreneurship
•
•
•
Introductory Courses on
Entrepreneurship
Entrepreneurial
Economics
New Venture Creation
Projects
Business Plans and
Funding
Certificates, Degrees in
Entrepreneurship
Seminars
Courses in Business
Courses in
Entrepreneurship
Conclusion
The CARICOM Single Market and Economy promises a great opportunity for
Caribbean nations, small and large, to boldly enter the twenty first century. It can provide
the economy that will vastly improve the standard of living for all countries. Then too it
14
may just provide the vehicle that unites the entire Caribbean basin and thirty to forty
million people. There is much to concern members and most of the challenge is yet to
come. There are pitfalls, oversights that need be examined and markets safeguarded in
coming to an agreement, but these can be managed. Nevertheless CARICOM, in the final
analysis, will rise to its full capability to the degree it can build and sustain an
entrepreneurial economy. Older businesses, like so many ancient structures, need
rebuilding through innovation and entrepreneurial action or the will die. New enterprises
await the new Caribbean entrepreneur. But he/she will need the environment and the
encouragement of an enterprise society to make that happen.
Endnotes
i
Text of the US-Canada Automotive Products Trade Agreement.
With Nafta Canada Gave Up Its Energy Sovereignty, by Eric Reguly, Toronto Globe and Mail, June 16,
2003
iii
Cited in The Canadian Environmental Law Association Intervenor, Vol. 23, No. 3 July-September 1998,
pp 6 – 8.
iv
NAFTA AT SEVEN, Briefing Paper, Economic Policy Institute, Washington DC, 2001
v
Labour Market Effects Under CUFTA/NAFTA. Bruce Campbell, Andrew Jackson, Mehrene Larudee and
Teresa Haces, International Labor Organization, 1999
vi
NAFTA and Transportation: A Canadian Scorecard, Mary R. Brooks, Centre for International Business
Studies, Dalhousie University N.S. August, 2000
vii
Canada’s Secret Constitution: NAFTA, WTO and the End of Sovereignty? Stephen Clarkson, Canadian
Centre for Policy Alternatives, October 2002, ISBN: 0-88627-281-5
viii
Economics and the Public Purpose, John Kenneth Galbraith, Hamondsworth Penguin, 1973
ix
“How Foreign Investment Creates Jobs at Home.” Harvard Business Review, September, 1972
x
Discussions with Eric Kierans, former Liberal Cabinet Minister, Professor Emeritus in Economics,
McGill University, Montreal, Toronto and District Liberal Policy Conference, October, 1980
xi
The Model of the Entrepreneurial Economy, David Audretsch and Doug Thurik, Institute for
Development Strategies, Indiana University and the Centre for Advanced Small Business Economics at
Erasmus University, Rotterdam, September, 2003.
xii
William B. Walstead and Marilyn Kourilsky, “The Findings From a National Survey of
Entrepreneurship and Small Business,” Journal of Private Enterprise. Vol. XI, No. 2 (Spring 1996) pp 2132
xiii
Global Entrepreneurship Monitor, 1999, Executive Report, Paul D. Reynolds, Michael Hay, S. Michael
Camp, Babson College, Kauffman Center for Entrepreneurial Entrepreneurship, London School of
Business.
xiv
Innovation in Estonian Enterprises 1998-2000, Silja Kurik, Runno Lumiste, Erik Terk, Aavo Heino,
Estonian Technology Agency (ESTAG), Talinn, 2002
xv
Blawatt, Ken R. "Entrepreneurship in Estonia: Profiles of Entrepreneurs", Journal of Small Business
Management, Vol. 33, No. 2, April 1995, 74 - 79.
ii
xvi
Timmons, Jeffry A. America’s Entrepreneurial Revolution: The Demise of Brontosaurus Capitalism.
Babson College, F.W. Olin Graduate School of Business, 1998, P. 11
xvii
William J. Baumol, Entrepreneurship, Innovation and Growth: The David-Goliath Symbiosis, a Talk
based on The Free-Market Innovation Machine: Analyzing the Growth Miracle of Capitalism, Princeton,
Princeton Press, 2002
xviii
Global Entrepreneurship Monitor, 2002, Executive Report, Paul D. Reynolds, Erkko Autio, William D.
Bygrave, Larry W. Cox, Michael Hay, Babson College, Kauffman Center for Entrepreneurial
Entrepreneurship, London School of Business.
15
xix
Kirzner, Israel, Entrepreneurial Discovery and the Competitive Market Process: An Austrian Approach'
,
Journal of Economic Literature, March 1997
xx
Blawatt, Ken R. “Defining the Alpha Economy; The Role of Entrepreneurship in Creating National
Wealth, Working Paper, Department of Management Studies, University of the West Indies, Cave Hill,
March 2004.
xxi
There is an implied relationship between the function of the term and the Kondratieff long cycle. As
technological and entrepreneurial activities become greater, so too does the growth of economic activity
increase. As the acceleration decreases, so too does economic activity decline. It is in this cycle the model
may explain and have some relativity to the Kondratieff long cycle.
xxii
Professor Rein Petersen, director of York University’s Centre for Entreprenurship in Toronto, Canada
refers to small businesses in three classifications, gazelles who are leaping ahead, the deceased or ventures
that are on the way out and the working dead, those who do not have enough sense to shut the doors and
walk away.
xxiii
Blawatt, Ken R. Defining Economies & An Enterprise Society, Presentation to the St. Vincent
Conference, May 22nd, 2003 University of the West Indies School of Continuing Studies, Country
Conference Series
xxiv
Barry A. Stein, Competitive Scale in Manufacturing: The Case for Consumer Goods, Cambridge MA,
The Center for Economic Development, 1976.
xxv
Regis McKenna, Silicon Valley Isn'
t a Place as Much as It Is an Attitude Forbes ASAP, 12.03.01
xxvi
Cultural Values, Sources of Guidance and Their Relevance to Managerial Behaviour: A 47 Naiton
Study, Peter B. Smith, Mark F. Peterson and Shalom H Schwarts, et al, Journal of Cross Cultural
Psychology, 33, 188 – 208, September 2002
xxvii
Entrepreneurial Studies cited by Blawatt, Ken R. include: Entrepreneurship: Process and
Management, Prentice Hall Canada, 1998; "Defining the Entrepreneur: A Conceptual Model Based
on Performance" Paper presented to the Canadian Council of Small Business and Entrepreneurship
1995 CCSBE Conference, October, 1995 in Thunder Bay; "Entrepreneurship in Low Technology
Nations: Evaluation of Entrepreneurship in Estonian Business Students Employing the Rokeach
Value System," proceedings of the 11th Annual Canadian Conference on Small Business and
Entrepreneurship, Winnipeg, October 27th, 1994.
16