December 19, 2013 5:03 pm

Paradise lost

The Caribbean is suffering from crippling government debt, endemic crime and a middle-class brain drain that have contributed to an economic meltdown of alarming proportions
Pebbles Beach, Carlisle Bay, Barbados©Andrea de Silva

Pebbles Beach, Carlisle Bay, Barbados

Norman Blake, the owner of a funeral home in Kingston, Jamaica, used to bury about seven people a week. But such is the depth of the country’s ­economic troubles that even undertakers are feeling the pinch. Each week, his services are required by fewer and fewer clients, and relatives now often choose the cheapest package on offer. For J$260 (£1.50), burial clothes have to be provided by the family but at least they will have a rudimentary – if shallow – grave to which they can bring flowers. Yet even this is more than many can afford.

“Every day more people die but some people don’t have money to bury their dead. So they’re burned as paupers,” Blake says casually, leaning against the wood-panelled wall of his business on Orange Street.

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Bob Marley once lived on this road, which slopes down from the foothills of upper Kingston towards the city’s palm-dotted waterfront. The strip of asphalt – often known as Beat Street – was the birthplace of ska and reggae legends such as Prince Buster and Dennis Brown. But no one dances along Orange Street any more. Its demise is a vivid example of Jamaica’s economic woes and the struggles of its shrinking middle class.

There is still a smattering of vinyl record stores but most buildings that line the road are dilapidated, their paint fading, covered with scraps of old posters and graffiti. Some are derelict. A few years ago Winston Riley, a famous reggae artist and producer, planned to invest millions of Jamaican dollars in a new record store, reggae museum and recording studio. But he was shot in the head and died in 2012, another victim of Jamaica’s endemic crime problem. Blake says several undertakers on Orange Street have been robbed at gunpoint recently, an all-too-common risk for businessmen in Jamaica. “If you can’t control crime, how can the ­country move forward?” he asks.

Jamaica’s economy has long been stagnant and crime has always been a problem. But the financial crisis triggered a deep and stubborn recession, and ballooning government debts have led to a tough austerity programme under the aegis of the International Monetary Fund. The hardship is now so severe that the squeeze extends deep into the middle class. And after several years of decline following a brutal security crackdown, the murder rate is climbing once more.

FT Series

Paradise lost? Caribbean in crisis

Paradise Lost

The FT examines the economic plight of the region. To read more of the series, go to Caribbean in Crisis. The reporting from the Caribbean was supported by a grant from the Pulitzer Center on Crisis Reporting, a non-profit organisation that supports independent international journalism.

Yet Jamaica is not the only struggling country in the English-speaking Caribbean. Setting aside countries such as the large and Spanish-speaking Cuba and the Dominican Republic, impoverished Haiti and a smattering of former Dutch and French ­colonies, the roughly five million people living on the 12 ­anglophone islands – of which Jamaica is the largest and Montserrat the ­smallest – have for the most part enjoyed good living standards. But a swathe of the archipelago now finds itself in an economic and financial quagmire. Some of its industries – such as banana and sugar production – have been uncompetitive and wilting for decades. But tourism is the Caribbean’s dominant business and the Great Recession clobbered it. Even where tourists still turn up in good numbers they spend less than they used to.

The combination of economic distress and rising crime is accelerating an already acute “brain drain” as the region’s professionals seek a better life in the US, Canada or the UK. This is further winnowing the middle classes, the taxpaying bedrock of government revenues and the foundation of civil society. Some even fret that the Caribbean’s democracies could come under threat as a result. “I see a danger of loss of legitimacy for political authorities if you find that greater and greater numbers of people continue to exist in situations of poverty,” concedes Peter Phillips, Jamaica’s finance minister.

Peter Phillips, finance minister, Jamaica©Andrea de Silva

Peter Phillips, finance minister, Jamaica

Across the Caribbean, governments are now cutting into public spending, raising taxes and praying for better times. But some experts are concerned that many politicians and countries still don’t grasp the extent of the region’s economic crisis – and the social strife that could follow. “The tragedy of the times is that we are in the throes of a major crisis like the Caribbean has never experienced before but we are refusing to face that reality that confronts us,” St Lucia premier Kenny Anthony warned at a recent lecture at the Barbados campus of the University of the West Indies. “All of us are engaged in one form or another of self-denial.”

When Jeffrey Meeks grew up in Kingston in the 1960s the economy was tough but parents could let their children run freely in their neighbourhood and not fear for their security. Those days are over. “My kids cannot even take the bus,” he says. Meeks is an orthodontist who runs his own practice, Island Smiles. The bespectacled father of two sits on the board of The Hillel Academy, an international baccalaureate school nestled in the foothills of Jamaica’s Blue Mountains range. He admits that if he was younger and wasn’t entrenched in the local community he would uproot his family and move abroad. His practice “hit a wall” in 2007 when the economy nosedived; he has had to cut staff and he might soon have to let his junior orthodontist go. He expects she will probably be able to find a job abroad.

An IMF paper found that about 12 per cent of the Caribbean’s labour force left for the developed world between 1965 and 2000, the highest rate in the world. Even this understates the impact on these small island nations. About 70 per cent of all Caribbeans educated beyond high-school level have emigrated, according to the same data. Remittances are a fillip but do not outweigh the cost of educating people who then emigrate and the indirect economic toll of lost skills, reckons Prachi Mishra, the paper’s author.

The IMF study is not telling people in the Caribbean anything they have not seen happen in their neighbourhoods. Meeks has witnessed a succession of Hillel Academy teachers taking more lucrative jobs in the US in recent years. On many islands most families now have a member who lives abroad. Blake, the undertaker, has an uncle, sister and a brother in New York. “Things used to be much better. But times changin’,” he says. “People knew right from wrong. But the good people have gone.”

Crime

Jamaican soldiers

11.3: Murder rate per 100,000 in Barbados in 2011, compared with 4.7 in the US

Crime has long been the scourge of the Caribbean – but it has both been worsened by and contributed to the economic malaise. Although most countries are tiny, the region is among the most murderous in the world. Jamaica and Trinidad and Tobago, the two most populous English-speaking countries, have higher homicide rates than Mexico. Even the more placid states have rates that outstrip the US. Barbados, for example, had a murder rate of 11.3 per 100,000 people in 2011, compared with 4.7 in the US, according to the UN Office on Drugs and Crime.

Rampant criminality affects almost every aspect of people’s lives. Meeks lives in a gated community and has an alarm both at home and at the office that connects to a security company; all the windows have iron bars. He estimates that various safety measures cost him up to $200 a month, excluding the salary of a full-time office watchman and a family driver. “If only I had been in the security business instead of orthodontics,” he deadpans.

Crime is an intensely sensitive subject in the tourism-­dependent countries and the authorities are keen to downplay it. Tourists are largely shielded by either partying safely in ­protected resorts or only coming in for day trips on cruise liners. But as the crisis bites deeper there have been more reports of attacks on tourists. There has even been a spate of assaults on yachters – modern-day piracy in the Caribbean. More recently, the region’s crime problem has been exacerbated by the return of drug cartels from South America. A security clampdown in Mexico and Central America has encouraged many of them to reactivate old smuggling routes through the Caribbean, which is now hopelessly unprepared to combat the resurgent threat.

. . .

Avinash Persaud was born in Barbados in 1966, the year the country gained full independence from the UK. His father was a Guyanese economist who taught at the new University of the West Indies’ Cave Hill campus, and Barbados was about to experience a long growth spurt that would make it one of the most prosperous states in the Caribbean. “It was a time the ­country and the Caribbean buzzed with economic and developmental debates,” recalls Persaud, now a prominent economist and an adviser to the Barbados government.

After a career in international finance, he decided to move back to the country in 2007. But his homecoming coincided with the downturn, and after decades of almost uninterrupted growth, Barbados is now facing its greatest economic challenge since independence. Although the immediate trigger was the financial crisis and the fall-off in tourism, the island also faces challenges that symbolise weaknesses common to the wider Caribbean.

Avinash Persaud, economic adviser to the Barbados government

Avinash Persaud

‘The Caribbean can overcome these challenges [to growth], as other small states have, but it requires courage’

Some are unfortunate quirks of geographical fate. Aside from Jamaica, the English-speaking Caribbean is mainly made up of tiny statelets that will never have multi-faceted economies. The trappings of statehood – whether foreign embassies or even an international airport – weigh heavily on countries with populations that in many cases would barely qualify for small-city status in Europe. Even basic services are more expensive as a result. “I used to think that it was a crutch, an excuse they used, but it’s a real, and significant, disadvantage,” Persaud says.

Natural calamities are also a grave threat. The IMF estimates that for most Caribbean countries the chance of being hit by a hurricane in any given year is above 10 per cent – making the Caribbean one of the most disaster-prone regions in the world. Small storms cause misery and hinder economic growth; big ones can be ­devastating. Hurricane Ivan killed scores of people across the Caribbean in 2004 and caused billions of dollars’ worth of damage. Tiny Grenada was almost levelled.

Yet some economic woes are self-inflicted. Most countries in the region are simply uncompetitive after letting prices and wages appreciate over the years but fixing their exchange rates to the US dollar. Many hotels now look tatty and faded compared with the luxurious offerings of newer rival tourist destinations. Most of all, unrestrained public spending has allowed government debts to creep up to levels that threaten their solvency.

Gerard Johnson, the head of the Inter-American Development Bank’s Caribbean department, argues that the priority has to be dealing with government debt. “You can do stimulus programmes to pump [the economy] up for a year but you’re not going to be able to return to the kind of growth the Caribbean saw after independence unless the fiscal demon is slain,” he says. But the scale of austerity needed will be tough to implement. Inescapably, the challenges faced by many Caribbean countries are caused or exacerbated by a failure of governance.

Corruption and nepotism are pervasive problems. Even in Barbados, ranked joint-15th cleanest country in the world according to Transparency International’s Corruption Perceptions Index, local people say that bribes are not uncommon. “Everyone wants to get ahead, and it helps to give ‘The Man’ a little,” says one Barbadian businessman, who declined to be named due to his political links. In countries such as Trinidad and Tobago and Jamaica, activists and foreign diplomats say it is endemic.

Caribbean map

Even the region’s crime problem can be partly blamed on the Caribbean’s political leadership. In some countries gangs have become entrenched in local communities by providing help that the authorities cannot offer. At times the gangs are in effect both the local economy and the local government, and even have ties to established political parties, activists say.

Persaud blames an “anti-growth coalition” for the Caribbean’s plight, a tight-knit nexus of politicians, business interests and unions that benefit from the status quo – one of the invisible flaws of small states where everyone knows one another. “The Caribbean is at a crossroads, it desperately needs political leadership,” he argues. “It can overcome these challenges, as other small states have, but it requires courage.”

Some fear that the erosion of the local middle classes – both the backbone of civil society as well as the most demanding voters – eases the pressure on politicians to shape up. “The depletion of our brightest graduates, our middle class and some of our most enterprising workers has drained the foundations of our society,” laments Trevor Munroe, a Jamaican academic, former union leader and founder of National Integrity Action, an anti-corruption watchdog. “Remittances are a big plus, but the big minus is the weakening of society’s internal drivers for reform.”

Not everyone is so pessimistic. Local politicians point out that no economic downturn lasts for ever. A recovery will eventually help the Caribbean tackle crime, stem some of the brain drain and improve the health of government budgets.

The Caribbean enjoys many natural advantages. For centuries the world’s great powers fought for control of the islands, which were considered tremendous wealth generators. When they gained independence many were considered development success stories thanks to investment in health and education. This transformed proto-states scarred by centuries of slavery into fairly prosperous, democratic countries. In time – and with some sacrifices – they could resume this more positive trajectory. “It seems to me that there are features about these islands – the location, the democracy, the education, the language, the timezone – that could make them worth fighting over again,” the IDB’s Johnson says.

Norman Blake, funeral home owner in Kingston, Jamaica©Andrea de Silva

Norman Blake, funeral home owner in Kingston, Jamaica

Back on Jamaica’s Orange Street, Norman Blake is less hopeful. He makes a valuable contribution to Jamaica’s shaky finances through the taxes he pays. Yet the seemingly unending downturn and constant threat of robberies is wearying. He has had to shut down a branch in nearby Spanish Town due to the slump in business. He questions whether any businessman would dare to invest in Jamaica these days. Blake’s biggest concern, however, is for his children – sons of eight and 17 and a nine-year-old daughter. He has never considered abandoning Jamaica but constantly ­worries that his children will become victims of a stray bullet. “Every day I hear about more murders on the radio,” he says. The situation is now so bad that he would like his children to emigrate when they are old enough. It is a damning indictment.

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Robin Wigglesworth is the FT’s capital markets correspondent.

To read more from the series, go to Caribbean in Crisis

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