New Economic OrderTourism as an Alternative Means of Economic Growth

Amanda Rodriguez

Tourism Senior Seminar

December 5, 2014

This research paper was written for Western Washington University’s Tourism Senior Seminar in Anthropology. Throughout the paper comparisons are made between two different strategies for economic growth. The first strategy comes from policies put forth by the International Monetary Fund, the World Trade Organization, and the World Bank, while the second strategy comes from community based tourism. This cross cultural research aims to show that the current loaning and regulatory systems put in place to help regions are, in reality, hurting more than they are helping. This paper argues that community based tourism can be a more rewarding and viable option for struggling economies.

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Many impoverished countries and communities around the world are

trying to survive in the new globalized arena. As people become more

connected, the societies and cultures that differentiate and define us are

being contested; western nations have expected the rest of the ‘developing’

world to conform to their ideologies concerning the economy, business, and

politics despite each region’s potential to ‘develop’ on their own terms. The

International Monetary Fund (IMF), World Bank (WB) and World Trade

Organization (WTO) are three international organizations that spread

western ideology and hold countries in contempt if they do not conform to

IMF, WB and WTO standards. This paper explores WTO, WB and IMF policies

and consequences while comparing them to community based tourism as an

alternate and less intrusive economic growth strategy.

In order to compare the two approaches of relying on international

monetary strategies or international tourism, a brief historical background of

the WTO, WB and IMF is given, followed by an overview of the requirements

made by these three loaning, regulatory organizations. One regional

example of each of the two strategies are given; one is about Mexico and its

relationship with the US through the three aforementioned international

organizations, while the other focuses on a town in South Africa that used

community based tourism as a way to bring itself out of a severe economic

decline. After the two examples are discussed in detail, this paper looks into

the specifics of what it takes for a place to become a tourist destination as

well as a couple of organizations that provide communities with the financial

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means to start new businesses. This paper then discusses the limitations of

this research and the downfalls of relying solely on tourism as a means of

economic growth. The conclusion discusses the different scales by which

these two strategies operate, and how countries can apply small scale

tourism led economic development model to their region. By the end of this

paper the reader should have some understanding of how tourism is a viable

option for countries to consider using (along with other more locally based

tactics) to revamp their economy and start anew with policies that help both

the wealthy and the impoverished.

Historical Context of the IMF, WTO and WB

Many are familiar with the idea of the International Monetary Fund,

World Bank, and World Trade Organization, but the logistics of what these

organizations actually practice is often left out of the conversation. This

section aims to answer some of these basic questions regarding the three

organizations. To clarify, this paper is written by someone who believes that

in theory, the goals set forth by the three are admirable, but in reality they

have proven to be ethnocentric, unhelpfully tautological, and focused

primarily on profiting from the unfortunate circumstances of those in need. In

a very brief expansion upon these proclamations, this paper examines the

history, requirements demanded of the loanee countries, and the

assumptions made by the three international organizations (Ho and Loucky

2012).

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According to Christine Ho and James Loucky in their book Humane

Migration, the IMF and WB started out as an attempt to help Europe rebuild

itself after World War II. The intent of these organizations was to be a “last

resort” lender to countries who had fallen into “desperate financial trouble”

(De Silva, Dakshina and Zhen 2007, 63). Europe declined help from the

World Bank on the basis that they did not want to sell their economy to

foreign bankers. When WB was rejected by Europe it simply altered its

mission to focus on “eliminating poverty in the third world”, and tried its luck

with newly developing nations instead (2012, 23-24). The WTO had a less

shoddy start in that it was carefully planned to take over the role of the

General Agreement on Tariffs and Trade (GATT) to better suit the needs of

US corporations. WTO does this by enforcing over-generalized rules that do

not always fit well within societies that differ from western standards, and it

favors corporate interest over human and environmental rights. Any

countries that do not adhere to the rules set forth by the WTO, IMF and WB

are subjected to harsh sanctions that the rest of the world must blindly follow

(Cavanagh and Mander 2004; Ho and Loucky 2012).

General Requirements of the IMF, WTO and WB

The requirements put forth by the three organizations are as strict as

they are unidimensional. Cavanagh and Mander provide great explanation of

the main requirements, which are summarized below from their book

Alternatives to Economic Globalization. Each location must:

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Cut government spending on education, health care, the environment,

and price subsidies for basic necessities such as food grains and

cooking oils.

Devalue the national currency and increase exports by accelerating

the plunder of natural resources, reducing real wages, and subsidizing

export-oriented foreign investments.

Liberalize (open) financial markets to attract speculative short-term

portfolio investments that create enormous financial instability and

foreign liabilities while serving little if any useful purpose.

Increase interest rates to attract foreign capital that has fled its home

country, thereby increasing bankruptcies of domestic businesses and

imposing new hardships on indebted individuals.

Eliminate tariffs and other controls on imports, thereby increasing the

import of consumer goods purchased with borrowed foreign exchange,

undermining local industry and agricultural producers unable to

compete with cheap imports, increasing the strain on foreign exchange

accounts, and deepening external indebtedness (Cavanagh and

Mander 2004, 55-56).

What makes the measures on the list unidimensional is that each aspect is

geared toward the assumption that capitalism is not only the best economic

system, but it is assumed to be the system that all “developing” countries

want to work toward. It should come as no surprise that the nations running

these three organizations are wealthy, predominantly western, and favor the

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ethnocentric idea that the only way to properly ‘develop’ as a nation is to

follow the path carved out by western nations (De Silva, Dakshina and Zhen

2007, 63-64).

Even as De Silva, Dakshina and Zhen argue that the IMF, WTO and WB

are not as bad as some documents (including this paper) suggest, the

authors do say the policies and strategies used by the organizations are

ethnocentric and employ an “economic determinist approach”, meaning they

do not take into account anything other than what they believe will work in

providing economic “creditworthiness” and possible expansion (2004). This

approach follows the “trickle-down” theory. It opens up an economy’s market

to already successful businesses. This model is based on the idea that if an

economy does well, the wealth the top businesses accrue will eventually

make its way down to the smaller businesses near these big, financially

secure businesses (Merriam-Webster 2014).

As stated by De Silva, Dakshina and Zhen, these organizations are not

run by anthropologists or sociologists, but by economists who are interested

in their mission to provide what is deemed necessary for a government to

have the potential to revive their failing economy (2007, 62-67). This means

economic determinists are not taking into account how cultures that differ

from western culture might react to their tactics, are not assuming

responsibility for what happens to the country after they have provided their

assistance, and not drawing upon humane measures with regards to hiking

up interest rates beyond what their loanees are able to afford. One example

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of these vicious and blatantly unsuitable policies is prevalent in Mexico, and

is discussed below.

IMF, WTO and WB Policies as Used in Mexico

Prior to late 1970s, Mexico was one of Latin America’s most promising

countries in the international sphere. It had its own international policies that

differed from all others during that time and was using its newfound growing

economy to its advantage. Unfortunately for Mexico, this new economy was

based upon oil exportation; once prices on oil collapsed in 1982, Mexico was

forced to reconsider its strategy. Mexico then looked to the IMF for help. As

with all who rely on the IMF to bail them out of unfortunate circumstances,

Mexico began to follow the IMF’s rules and allowed foreign markets to wash

over the most basic economic policies that had before given rise to Mexico’s

economic success. By 1987 the Mexican economy was still failing, and many

extenuating factors and new policies began to further exacerbate its

economic downfall (La Botz 2000).

In the midst of the economic alterations required by the IMF, Mexico’s

agricultural sector crashed. Pre-IMF Mexico was reliant upon its peasant-

farmer-based agricultural sector and had generated sufficient amounts of

revenue from their corn industry. The policies put in place to please IMF

requirements left peasant farmers unable to access electricity, fertilizer, and

water – all of which they needed to be successful farmers (Ho and Loucky

2012, 18-21) 1. After the IMF policies left Mexico’s farmers in despair, it 1 Interestingly enough around this time NAFTA had been initiated, and the United States was beginning to push its own corn-led agenda. Now Mexico is forced to buy its corn from the US because it cannot afford to reopen its own corn industry, and the subsidized US corn has proven to be too cheap for Mexican farmers to

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decided to enforce a hike in interest payments from 19% to a whopping 57%

in 1998. Now the Mexican economy is in significant debt to its IMF lenders

and cannot rely on the sector that had previously held the economy afloat to

help generate enough money to pay off the high debt (Bello, Rau and

Cunningham 1999; Ho and Loucky 2012, 18-21).

Community Based Tourism as Used in Stilbaai

Unlike Mexico, areas of South Africa have taken on a more bottom-up

approach through the Local Economic Development Fund (LEDF). LEDF is an

organization that provides funds to communities that are seeking to engage

in communal economic development through entrepreneurialism and local

tourism. Such developmental strategies are also funded by the government’s

poverty relief fund that provides support to tourism infrastructure and

productions in particular. A specific example of a town in South Africa that

was able to use tourism as a primary means of economic development

during a significant economic decline comes from Stilbaai, a former small

fishing town.

Stilbaai was a highly segregated town with mostly aged white people

living in large homes on one end of town and Black people living in a

settlement on the other. The town’s primary means of income was based on

fishing, but once 1970 rolled around, the industry hit a downfall due to

overfishing. Twenty years later, 80% of the town’s people were unemployed

and the town had become one of the poorest in the nation. In 1985 the compete with. All the while Mexican workers are being exploited by US corporations running along the US-Mexico border (called maquiladoras) for little to no benefit for the people or their government (Bello, Rau and Cunningham 1999; Ho and Loucky 2012, 18-21).

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townspeople came together to work out local economic development

initiatives that would bring their town out of despair. Through local

fundraising activities and donors from various places, the people were able

to open the Jagerbosch Community Care Centre that housed very old white

people and brought jobs to those that needed them. Its success brought on

more initiatives to better the town, which gave rise to the local Tourism and

Economic Forum (TEF) (Rogerson 2002).

The TEF began to advertise Stilbaai as a “family holiday destination”

with unique and naturally beautiful attractions (Rogerson 2002, 110). The

private sector invested in the marketing of the town and provided assistance

with infrastructure development and various marketing strategies. The

newfound industry created 191 new businesses and over 700 permanent

jobs in the area. According to Christian Rogerson in his article “Tourism Led

Economic Development: The South African Experience” (from which this

section is derived), “the Stilbaai LED strategy embodied a dual focus; first, a

“Stilbaai is a charming seaside village which forms part of the

famous “Garden Route” with its close neighbours Jongensfontein and Melkhoutfontein. It is situated along

the banks of the Goukou River estuary where it meets the Indian

Ocean on the Southern Cape coast of South Africa”

(http://www.stilbaaitourism.co.za/)

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market-led and business driven growth strategy oriented around tourism,

and second, a market-critical and community driven thrust towards

addressing poverty alleviation” (2002, 111). As one can see, the strategies

implemented by Local Economic Development (LED) organizations differ

greatly from those used by the WTO, WB and IMF.

If the South African government had cut spending on education, health

care, and the environment, the community would not have been able to raise

enough money to open the first community health centre that started

Stilbaai’s economic boom. Government spending was necessary for Stilbaai

to get back on its feet.2 In addition to this, if the government had devalued

South African currency the locals of Stilbaai would have been forced to pay

higher start up costs and would have been in need of even more assistance

than necessary without devaluation occurring3 (De Silva, Dakshina and Zhen

2004). As for tariff deregulations, Stilbaai did not need to rely on imports or

exports of anything other than tourists once they were fairly established as a

tourist town. Unlike the ‘IMF, WB and WTO, tourism based LED keeps their

markets open to either those within the country so that money remains

relatively close to home, meaning it is more likely to be put back into the

local’s economy, or open to private foreign direct investments. Little

2 Although government spending was needed in Stilbaai’s situation, it is not always a necessity for all situations – particularly those in areas that do not have a government with the ability to lend. This idea will be addressed further on in this paper.3 De Silva, Dakshina and Zhen’s article concluded with the notion that devaluing currency results in an automatic plummet of an area’s economy. This article shows that the economy does bounce back after a decade or so, though they fail to take into account social aspects that may have aided in long term economic growth after devaluation occurs.

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speculation occurs, and the likelihood of instability is decreased, but the

underlying concept is virtually the same (Cavanagh and Mander 2004).

Requirements for a Successful Tourism Industry

The policies set forth by IMF, WB and WTO would not have worked for

Stilbaai’s tourism based economy, but would Stilbaai’s policies work for

anyone else? There are a few fundamental necessities that an area must

have if it is to become a successful tourist destination. According to Lohmann

and Beer in their article “Fundamentals of Tourism” there are three things a

region must have to become a potential tourist destination: assets,

amenities, and accessibility. The five factors that play into a region’s ability

to provide and use assets, amenities and accessibility are the economy,

technology, society, demography and politics. As shown in the diagram

below taken from Lohmann and Beer’s article (87), the three fundamentals

can be achieved in various ways.

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Assets can be anything from landscapes to human made features, from

culture to weather; as long as someone is able to sell the idea that what they

have is special, an asset has been obtained (Lohmann and Beer 2013;

Rogerson 2002). Amenities can become a part of the asset a region can

provide, as amenities can be used to draw tourists in for a new experience

(such as living in a hut with a local family or staying at a hacienda to be

served by locals). As long as a region is able to provide basic necessities – or

provide good enough reason to neglect to give tourists typical western

necessities – they have amenities covered. Lastly and possibly most

important is accessibility. If people cannot get to a location there is little

potential for the region to become a tourist destination. As it stands, people

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have the technology to be able to get anywhere so long as they have enough

incentive to go (Lohmann and Beer 2013).

The factors of the described assets are a bit trickier. If a place does not

have the technology to advertise or to connect with those who can help put

forth the funds necessary to start a tourism trade, their chances of success

lessen. In addition to this, a society must exist in an area (this is where the

demographics portion fits in because without people there would be no town

to travel to), and the society must be willing to put effort into going along

with or contributing to the potential tourism industry. Possibly most

importantly, the political system of the region must be willing to, at the very

least, not prohibit any potential for an area to become a tourist destination.

This means the politicians must be willing to provide laws that will not get in

the way of an area’s tourism potential. Lastly, the economy plays a role in

the success of a new tourism industry. It can be much easier for a place to

build a new industry with funds provided by their own government (Lohmann

and Beer 2013). However, if the economy is struggling, and the funds are

hard to come by within a region’s own system, there are other options out

there.

Organizational Aid for Community Based Tourism

Tourism Cares is one such organization. It provides loans and grants to

communities that show interest in building or restoring tourism destinations

in their area, and it does so by working with locals to ensure the everyday

people of a region get the help and resources they need. According to their

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website, Egypt’s tourist intake has dropped 35% since 2010 and the industry

is facing tough times. Tourism Cares plans to work with smaller communities

to ensure they keep a competitive advantage, and to aid those who are most

at risk with the recent drop in the industry. Although Egypt is still well off due

to the billions they’ve earned in past years, their political system is still very

fluid which points toward the argument that even unstable political situations

can still potentially yield a decent tourism industry. Unfortunately this

particular example is still new and it cannot be accurately stated whether or

not their tactics will work, but Tourism Cares has been around for many

years and has various other regions in which they have successfully started

up or revamped tourism (“Tourism Cares” 2014).

Another organization that helps with loaning money at low interest

rates is Kiva. This not-for-profit organization uses money gathered from

various donations to help impoverished areas get back on their feet. With a

98.81% repayment rate, Kiva loans money at an affordable cost to those who

need it most. Since its founding in 2005, Kiva has lent $633,027,425 in loans

and has helped 83 different countries. Their lending system is not geared

toward tourism in particular, but the organization funds nearly any project

for economic development in areas of need. Their ‘social performance’

clause helps those who donate money, and those who borrow it, to adhere to

social performance condoned by the organization. There are six areas (which

Kiva refers to as “badges” that lenders and loanees can earn) where a

loanee can focus their money to helping make their area a better place while

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adhering to Kiva standards. These badges consist of anti poverty focus,

vulnerable group focus, client voice (feedback from third party members who

are being helped), family and community empowerment, entrepreneurial

support, and facilitation to savings (“Kiva - Loans That Change Lives.” 2014).

Of course, there are factors that make tourism a difficult path to take in

terms of economic advancement no matter how many resources exist within

an area.

The Limitations of Tourism and this Research

The scope of the issue regarding international regulatory and loaning

organizations as the readily accepted, main source of economic growth is a

vast one that this paper cannot explore in its entirety. In the same sense, not

every aspect of community based tourism as an alternative is given in this

paper. To be clear, this paper is in no way saying that community based

tourism is a perfect, stand-alone solution to economic problems in any area.

In theory, community based tourism could potentially be successful

anywhere, but the reality of the matter is that there is more to starting up a

tourism industry than having the fundamentals necessary to create the

industry. Although community based tourism is a great alternative that

allows for locals to get into the decision making process of their own

economies, it can only reach so far. Many problems can come out of relying

solely on tourism to sustain a region (Tammy Leland , personal

communication 2014).

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The biggest downfall to relying on tourism as a means of economic

expansion is that tourism fluctuates between regions no matter how much

effort is put into maintaining the industry. For example, no amount of

preparation can prepare a tourist area from experiencing things like natural

disasters. This exact situation is shown in a study that was conducted in

South Western China on tourist visitations that compared numbers of visitors

both before and after the Wenchuan earthquake occurred. Their findings

showed significant decrease in tourism after the natural disaster occurred

(Shi et al. 2013). Even simple seasonal fluctuations of tourism can bring much

hardship to areas that rely on tourists to survive.

There are many reasons as to why tourists might stop visiting an

overall popular destination. From wars to environmental disasters to a simple

shift in tourist-heavy seasons, areas all over the world have the potential to

lose out on tourist generated revenue, which can negatively affect even the

most seemingly unrelated institutions. Not only is this natural fluctuation

dangerous to the tourism industry itself, but it can be dangerous for other

businesses in the area as well. A study on hospital admissions through the

seasons in Switzerland says that seasonal tourists heavily impact the

emergency admission rates by up to 70.8% in surrounding hospitals. If

tourists were to begin drifting away from these typically popular regions

even seemingly unrelated businesses would be greatly impacted (Matter-

Walstra, Widmer, and Busato 2006, 25). Another example of this is prevalent in the

film The Refugee Show: the Plight of the Padaung Long-Necked People, as

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Padaung refugees living in Thailand are forced to rely year round on the

money tourists provide in payment for photographs taken during the three

months of tourist season (The Refugee Show 2007).

Due to the high fluctuation in tourist trends and unpredictable but

unfortunate circumstances, the tourism industry should, again, by no means

be the sole attempt of a region to achieve economic success. Tourism

business should be considered an option for local communities to be able to

come together, receive funding from organizations like Kiva, start a tourism

related business, and use the money made from the new business to invest

in other means of economic stability. By not relying on tourism alone, a

region can find ways to maintain itself without becoming desperate for

foreign income. Not only will this prevent further economic devastation, but

it will open up options for the posterity of a place to be able to have a future

from which to choose. In many regions reliant upon tourism alone, such as

the Padaung refugee camp, the youth have no hope that their future will

deviate from the only thing they know – dressing up for tourists to make

money (Tammy Leland, personal communication 2014; The Refugee Show

2007).

In Conclusion

The IMF, WB and WTO are not interested in the social aspect of their

economic policies; they are interested in creating an atmosphere that fosters

trickle-down economic growth. On the contrary, the smaller lending

organizations as well as the examples above operate with the idea that

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helping locals become successful in turn helps their surrounding economies

become equally successful in a relatively short amount of time. If one looks

into the previously discussed articles and examples, it can be seen that IMF,

WB and WTO requirements are significantly less effective on a smaller, every

day level than community based tourism (De Silva, Dakshina and Zhen 2004,

24; Cavanagh and Mander 2004; Ho and Loucky 2012; La Botz 2000; Bello,

Rau and Cunningham 1999).

Although the examples of tourism-led economic development provided

in this paper talk mainly about small town success, the potential for greater

economic salvation is possible. By working from the ground up, countries

could better ensure their entire population is taken care of rather than

having many slip through the cracks and remain impoverished. What starts

as a local, community-based tactic can result in a more widely used strategy.

No matter which economic system or developmental strategy is preferred,

the reality of the matter is that there is always more than one way to solve a

problem. Just because capitalism and free market economy worked well for

the United States (which is a debatable statement in itself) does not mean it

will work well for everyone. If humanity is to advance, we must stop limiting

ourselves and our potential by enforcing generalized laws that do not benefit

all, and encourage countries to find their own way within the new globalized

system (Cavanagh and Mander 2004).

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