Industrialization by Invitation

Topics: Investment, Economics, Development economics Pages: 5 (1698 words) Published: March 24, 2013
Industrialisation is the process of social and economic change whereby a social group is transferred from a manual labor based structure to a more technologically driven society and where the economy gains much more capital via manufacturing industries. Caribbean economies have been labeled as weak and dependent, and controlled by stronger foreign states and institutions (The Plantation Economy). Sir Arthur Lewis, St. Lucia’s first Nobel Prize winner, has released several publications on the issue of underdeveloped nations in the Caribbean and solutions to correct this underdevelopment. Of these publications is the concept of “Industrialisation by invitation”. Lewis felt that this was a step needed to be taken for the British West Indies to develop. Sir Arthur Lewis policy aided in the development of the B.W.I but the policy itself also hindered development as well as left out major aspects of development. After Lewis studied the system known as Operation Bootstrap (policy of deliberately inviting foreign direct investors) in Puerto Rico, he set out to adopt and implement similar in the British West Indies. The economies of the British Caribbean were mainly agricultural and there was a need to stimulate industrial growth and trade in manufactured goods, to diversify the economic base, since these economies were mainly monocrop economies. This term not only refers to the dependence on sugar and bananas, it also characterizes the dependence on tourism or the oil industry. Lewis therefore proposed the strategy to invite foreign investment as a way to stimulate growth, not only in industry but also agriculture, and therefore to reduce the dependency on the export sector. He reasoned that the British West Indies had a great abundance of unskilled labour in agriculture and amongst the unemployed. These countries did not have much capital. Thus multinational corporations (MNCs) with millions of dollars at their disposal were to be invited to the British West Indies where they could earn huge profits by employing cheap surplus labour from agriculture. They would also benefit from tax holidays for the first five or ten years of their operations, and other concessions such as subsidies. In other words incentives would be offered to encourage these corporations to invest . Caribbean governments popularly adopted this policy in the 1960s. Several foreign based companies that are established today in the Caribbean are the result of Sir Lewis’ policy. This is most apparent in the tourist industry many foreigners have invested in hotels which employ the majority of people.

Several countries within the Caribbean have attempted Sir Arthur Lewis’ concept of “Industrialisation by Invitation”, with the outcomes being mixed. This meaning that it expanded direct foreign investment, injecting capital into local institutions. However, this increase in foreign investment brought about a higher dependency level on technology, raw materials and capital from abroad. Without these investments, the Caribbean would still be in a pre-industrialised state, with little growth in the economies. It has been argued that Caribbean economies have achieved a lot of growth; however without or in fact limited development. Yes, the region’s infrastructure has improved dramatically but their industries and companies are mainly foreign and therefore a substantial amount of profits made are sent abroad. Development therefore has been limited with the major organizations within the economy being foreign and not indigenous. Sir Arthur Lewis’ concept of “Industrialisation by Invitation” was not completely successful since the “development” of the countries’ economies did not reach the limits Lewis predicted. Currently the world market has a major negative effect and influence on the Caribbean economies due to the region’s dependence on foreign investments.

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