A Model of Development For the Middle Level Country

New Directions

Volume 10 | Issue 2

Article 4

1-1-1983

A Model of Development For the Middle Level

Country

Edward Seaga

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Prime Minister Edward Seaga withDr.Geraldine Woods,chairman of the Howard University Board ofTrustees, andDr.Roger Estep(farright) vice president forDevelopment and University Relations.

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A model of Development

For the Middle Level Country

ByEdward Seaga

The following was excerpted from the

Mordecai Wyatt Johnson Memorial Lecture by the Prime Minister of Jamaica,

October 7,1982. Thelecture series, now inits fifthyear,is presented annually in

honor of the 13th President ofHoward University Ed.

Iam delighted to be backwithyou-par

-ticularlyso becauseofthe specialties this

distinguished university has developed

withJamaica and Jamaicans over many

years. A great many of our sons and

daughters have received andarerecei

v-ingtheir professionaleducation here,and Idare say that at least90%ofour dentists

have been trained atyourworld-famous

dental school.Indeed,oneofyour

gradu-ates is minister of agriculture in the

Cabinet of myadministration,anotheris in

theSenate,and a third isintheHouse of

Representatives onthemajority side.

Iam conscious ofthehonor you have

done me byinviting metodeliver the Fifth

Mordecai Wyatt Johnson Memorial Lec

-ture. I know inwhat esteemyou hold the

memory of Dr. Johnson - we are sur

-rounded bymany symbols of that esteem.

I believe the principles and traditions which hestood for- hischampioning of

thefree expression of ideas,the ground

he broke asthe first Blackpresident ofthis

great institution in bridging worlds and

advancing understanding between peo

-ples and races- that these arethe

pre-scriptions forthe survival of the civilized

world.

Inthe final analysis all democratic gov

-ernments arecommitted to improvingthe

qualityoflife and range of opportunity of

the people theyrepresent But to do so,to

achieve thosegoals of broad humanitar

-ian development to which wisdom and

compassion compel us, we must

exam-ine withdetachment the strategieswhich

give us the greatest chance ofsuccess

-fullyreaching them.

Iwish to talk toyou about thestrategy

which Ibelieve can best attain a qualityof

life forthe peoples ofmiddle levelco

un-triesof the developing world.

The jargon oftoday's media easily dis

-poses of the geo-political differences

among countries bya simplified classifi

-cation which labels these differences as

part of the "East-West struggle," the

"North-South dialogue," or both. While

this simplification is convenient, it repre

-sents an insufficiency of insight into the

nature of the political and economic

space between opposite poles.

Within this spaceis,in fact,a number of

quite distinct types of socio-economic

models reflecting transitional stages of

development Iwishto draw attentionto a

category of countries which is emerging

as a group, with itsown character and

international significance in the world

community

Welivein aworld of mass communica

-tion, which deals incontainerized cate

-gories,and toestablish aseparate iden

-tity entails being significant enoughto get

yourowncontainer.

This isthe predicament ofidentity d

efi-nition confronting a group of countries

merged within the broad span of Third

World nations. Irefer tothem as middle

level countries, but I have seen other

names attached asthey gradually attain

international recognition.

While it is truethat this group also oc

-cupies the middle income strata among

nations and could be identified by per

capita incomecriteria,a better

identifica-tion can be made in termsofgeogra

ph-icalspread and economic structure.

Themiraclegrowth countries ofso

uth-eastAsia-the Republic of Korea,Singa

-pore,Taiwan,Malaya-are the front

run-ners ofthe group,and its mostsuccessful

achievers. But other middle levelcoun

-tries abound in the Caribbean - Bar

-bados, Bahamas, Trinidad and Tobago, Jamaica-indeed, most of theCaribbean

islands. Thereareothers inOceania, in

the southern Pacific, as well as inLatin

America.

As a group, these countries stand

mid-way on the ladder of development.

Up to two decades ago, that was "no

-man's land": Toohigh uptheladder tore

-ceive full treatment in the bounty of aid

flows;too low down to attract serious

at-tention from external-private investment

resources.

But it isthe peculiar structure of their

economies that most clearly sets this

group apart. Inthesame societyandthe

same economy, different tiers of

devel-opment exist side-by-side. Being mid

-way on the development ladder brings

with it an internal aswell as an external

dynamic which has the effect of

produc-ing in the same country some sectors

which show thesophistication and co

m-plexity of first world development while othersremainunderdeveloped.

Observation readily establishes the

dual nature of such economies - the

bustling urban industrialsectorwith

mod-ern facilities and amenities, on the one

hand, the less responsive, sometimes

even dormant,rural agricultural sector,on

the other.

23

"

The system must devise

policies

to

continue

to

stimu-late rapid urban growth ...

generate greater response

from the rural sector.

"

This sectoral inequity has been

identified bywriters interested in the dis

-parities of economic growth, and is per

-haps most vividly and succinctly

de-scribed as "thegap between the haves

andthehave-nets."

Characteristically, middle level co

un-tries feature this gap as an inevitable

spread between the fastergrowing

mod-ern sector and the less responsive tra

-ditional counterpart.

The distinctivefeatures ofthismodel,in

turn,present anumberof challenges that require special strategies. The system mustdevise policies tocontinueto s timu-laterapid urban growth; likewise,it must

generate greater responsefrom the rural

sector.Finally,it must develop strategies

to containthe problems which flow from thedisparity of development between the

24 fast and slow growth sectors while at

-tempting to narrow the gap.

Many countries in which this model is

typified recognize that the disparity of de

-velopment internally can prejudice the

gains of rapid growth to narrow the gap.

At one extreme, some countries at

-tempt to artificially distribute resources on

awelfare basis to compensate for under

-development, only to find that the re

-source base dries up since a new product

is not being created.

At the other extreme, some attempt

(dictatorially) to suppress dissension in

the low growth sector to allow the fast

growth area to continue to thrive. Sooner

orlater this strategy ends in national strife,

instability, or revolutionary attack on the

system.

If these were the only choices of stra

t-egy,there would befew survivors. In fact,

the survival of those which constitute the

broadening band of successful middle

level countries, with growing records of

achievement, can be attributed to a strat

-egy of enlightened pragmatism that es

-chews extremes: Creating the climate to

promote rapid private sector develop

-ment of the modern industrial part of the

economy and improving buoyancy and

therevenues, on the one hand, while utiliz

-ing these revenues through public sector

projects to stimulate rural growth, narrow

the gap, and reduce inequities, on the

other.

In other words, a mix of strategies is

involved, which cuts across East-West

and North-South compartments and the

capitalist-socialist labels too easily asso

-ciated with them.

This interdigitation of strategies may

sound like the compromise of a "mixed

economy," except that there are many

types of "mixed economies" some of

which, by virtue of the incompatibility of

the mix, create "mixed-up economies."

The world abounds in"mixed economies"

which fail to stimulate either the private

sector component or to generate a public

sector thrust.

Insuch areas, thereasons forthe failure

NEWDIRECTIONS JANUARY1983

are not difficult tofind. They are alack of

definition of the boundaries within which

state intervention begins and ends; even

worse, a policy of state intervention which

is negative in direction.

Unknown boundaries in state interv

en-tionist policies leave an atmosphere that

can cloud and befog the climate for

growth, inhibiting confidence inthefuture.

A contraction of confidence in the fu

-ture will create a contraction of commit

-ment to the present. Initiative disappears

and motivation stagnates; the prevailing

instinct is to carryon as usual with little

venture and investment. People play safe

and avoid risk; the energy that drives en

-trepreneurial endeavor dries up and the

engine of growth stalls.

"Overreliance on industrial

developmen

t

and heavy

in-puts into the modern sector

does distort

t

he benefits of

the development process.

"

Worse yet, a policy ofnegative interven

-tion by the state generates irreversible

flight and panic. The policy I refer to here

is one which sees the narrowing of the

gap between fast and slow growing sec

-tors as a"pulling down" process by which

the surplus from above is deliberately

re-distributed to the needy below. Recent

history is replete with the failure of this

ap-proach. With the contraction of the pro

-ductive sector inthe "pulling down" proc

-ess the cake fails to grow and the slices

get thinner as the distribution gets wider.

At the end of the line, poverty-not wealth

-is distributed.

The antithesis, of course, is a "pulling

up" process, deliberate policies to pro

-mote development atthe bottom, to ge

n-erate growth from the bottom up.

This hasthe dual effect ofboth stimulat

-ing new growth and narrowing the gap.

The "pulling down" process, on the other

hand, only narrows the gap; it fails to

create new growth.

The cynics, of course, dismiss any

model which attempts to reduce the dis

-parities in economic development by a

strategy of generating growth as a

"trickle-down" theory. They argue that

growth in GDP is not initself a good thing if

that growth injects input only atthe top, for

the best that can be hoped for is that

some benefits will"trickle down"

The criticism is not to be dismissed

lightly if, in fact, investment is based on

heavy concentration on urban industrial

development. Overreliance on industrial

development and heavy inputs into the

modern sector does distort the benefits of

the development process.

But the critics can beconfounded by a

specific and deliberate policy to boost i

n-vestment in the lower levels of the

econ-omy, to generate additional growth and

development capable of pulling the tra

-ditional sector into the mainstream of

de-velopment.

None of this, however, can be effective

as instrument of policy without a mecha

-nism ofimplementation.

Too often countries with dual

econo-mies fail to give the necessary thrust to

both levels, flying only on one wing as it

were. A deliberate policy must be backed

by a deliberate mechanism to ensure

completion.

The Jamaican Example

Itis appropriate atthis stage to interject

the Jamaican example as a case in point.

The effort to re-build our shattered

economy demanded an approach which

would lead tothe quickest path to recov

-ery The logical strategy was to generate

heavy investment and contain inflation; to

induce real growth and employment wit,r

prudent financial management; to reduce

deficits on both fiscal and external ac

-counts.

Allthis has been done with remarkable

results. In 1981we achieved:

• Positive growth for the first time in nine

years;

• A 26% increase in capital formation

after an average of 6% (per annum)

25

Dr. Carl Anderson, VicePresident for Student Affairswith Prime Minister Edward Seaga

r

:

26

• 100new investment startsin oneyear,

compared with very few new inves t-ments over the previous eightyears;

• A balance of payment surplus in

1981-82fiscal year,the first inseven years;

• Marginalreduction inunemployment;

• A dramatic fall in inflation from an

eight-year annual average of 23%to

4.7%in one year.

The strategy which produced this tur n-around mustcontinue to be a majorfactor in our recoveryprogram.

But by itself, it cannot ultimately pro -duce the resultof narrowing thesectoral

gap unless it is supplemented by other measures to induce investment at the

lower level of the economy as well as to

give effecttothe pullingup process.

To implement this policy,we havethis year (1982) introduced a unique concept of stimulating growth in the informal economy

The informal sector encompasses petty

trading, low level skills, cottage indus-tries,and thesmallfarm agricultural area of the economy It lacks bothinvestment and skills.

"A special institution has

been created ..

.

to close the

gap .... "

Our government's deliberate policy is

to provideboth.Heavyinjections ofava il-ablecredit resourcesare being provided through specially structured institutions.

Given availableresources,themec ha-nisms required were not too difficult to

fashion to provide significant credit to those sectors.

The real challenges emerged in the

creation of a mechanismfortraining in low

level skills, both for employment and

self-employment, therationale being the needto convert surplusunskilled and u n-employable persons to skilled members ofthelaborforce capable offinding em-ploymentor generating self-employment. Only in this way can the development

process ensure meaningful participation

injobcreation at thislevel.

To effect this, aspecial institution has

been createdwith the acronym H.E.A.R.T

- Human Employment And Resource

Training.Its purpose isto recruitand train enough persons, mainly youth, to close the gap for skills trainingin categories re-quired in the informaleconomy over the next five years.

In fact, this challenge wasmet by the

shifting of apart of thetrainingtothe

pri-vate sector.To ensurethis,a3% payroll tax waslevied onemployerson the basis

that this taxcould beavoided by spe

nd-ingtheequivalent totrainyoung school -leaversfor one year in any areaofopera -tion undertaken by the participating en-terprise.

The program is structured for three years,withtax credits inexcess of75%to the employers for continued training in

yearstwo andthree.

Other aspects ofthe program involve

residential traininginyouthcamps (o

per-ated by the government) covering a range ofvocational skills.

One expected effect of the H.EAR.T program is the recovery of precious human resources which would havebeen

bypassed in any development strategy

not aimed directly at the informal

econ-omy

But theultimate result will be a creation

of additional growth, generation of new

employment and the conversion of

wasted talent into creative activity,and a more effective strategyfor balanced and

equitablegrowth.

To balance growth withdistribution o b-jectives hasbeen a long sought formula

for harmonious development. Generally, one is at the expense of the otherwiththe dire consequence that exclusionof either

furtherdeprives theunderprivileged.

It istrue that thisproblem of growth and

gaps isamiddle level country phenome -non, and the strategy of redress as o ut-lined herewillhave impact on this group ofcountries.

But this is not to be underplayed. A

special characteristic ~ middle level

countries isthatthey occupy the

hierar-chical position next to achieving self-sus -taining status. They are the next

gradu-ates in the system from the ranks of the poor.

27

"

Amodel for development is as

good as what it does to

enhance the opportunity and

welfare of the people. "

Thisstrategywhich I have outlined as-siststhe development process toward a point oftake-offs ensuring thatthe dev el-opment stage is not transfixed.

To be sure,themiddle levelcountries

themselves have different levels of

achievement and still many problems

theyhave notyet solved.

No comparative collective assessment

can overlook the positive gains ingreater measure, which canbe madein address

-ing economic wants and social needs through balanced economic strategies

forjobs,treatthe sick,tendthe poor,teach the young, harvest the crops, build the

homes, stock the shops, install the

ma-chines - without running out of

re-sources, opportunity,or hope.

Some economic systems can

spec-tacularly allocate and distribute

re-sources to do allofthesethings until the

resource base driesup.

The balanced strategy of which I

speak, the countries of which I speak,

have bestdemonstrated in the dev elop-ingworld howto build on opportunity,to

create more,to preserve gain, to distrib-utemore,sothatpeople mayderive more.

Inthefinal analysis,this is the bottom

line:A model fordevelopment is asgood as what it does to enhance the oppo

rtu-nity and welfare of the people. The final

testofany strategy is,and will continue to be, whether itisamore efficient way of reducing poverty,unemployment,

malnu-trition and illiteracy- all those ills that plague thedeveloping world and assault the consciences of us all,andtempt many

a politician tolet frustrationleadtorhetoric without understanding that it isthe rheto-ric of performance that will finally speak

loudest. 0