Some Attitudes Impeding Economic GrowthAuthor(s): Michael FaberSource: Caribbean Quarterly, Vol. 9, No. 4 (DECEMBER, 1963), pp. 25-37Published by: University of the West Indies and Caribbean QuarterlyStable URL: http://www.jstor.org/stable/40652868 .

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THE DEVELOPING SOCIETY: TWO STUDIES

EDITOR'S NOTE: The Caribbean Quarterly's policy, as a rule, is to en- courage those contributions that deal with specific and particular aspects of the Caribbean community. Our need for detailed information and analysis is urgent, and if this review's gathering of such information and analysis seems to be sometimes haphazard, it is only because we are, nearly, a singular collecting agency.

We break precedent below and publish two general essays of reflection under a main title chosen by the editors. Both of these essays were submitted independently and neither of them, although they make reference to the Caribbean, deals with an exclusively West Indian topic. However, they seemed to be of such relevance to the West Indian situation, and to complement each other so effectively, as to more than merit their inclusion.

I. Some Attitudes Impeding Economic Growth Michael F aber

This is a study of ideas. More particularly it is a study of ideas of what economic tasks a government should and should not undertake.

In the most general terms, it is easy for all to agree upon the role of government in the economy. We should begin by saying that the economic task of government is only one of its tasks, and not necessarily the most important. Were we to say that that economic task was to raise the standard of living of the country's inhabitants as fast as possible and to raise the condition of those who are poorest fastest, we should not expect to encounter much contradiction. It is rather in the application of this general principle to particular areas of policy that dissension arises.

We shall argue that such dissensions arise partly because there is so little attempt to interpret what the results of different lines of policy are likely to be. Policies instead tend to be judged by whether they are advocated by parties or governments abroad, outside the West Indies, which the particular judge himself admires or abhors. Even amongst university students the analysis seldom goes deeper ithan "This is a policy advocated by socialists, and I am in favour of socialism, therefore it must be good" or, more rarely, "This is a policy advocated by social- ists, and I am against socialism, therefore it must be bad." Usually there is not even an attempt to discover whether the particular policy favours or imperils the group interest of the class to which the speaker belongs. Instead, a label is recognised and an emotional reaction follows. Tic tac, as fast as that. It is a kind of 'rigor mentis', the assertion of an attitude based not upon critical appraisal but upon conditioned re* sponse. Indeed, many of the attitudes that are made manifest are not only uncritically arrived at in themselves. They also run counter to the 1 3 * 25 4

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requirements of that general principle which all were ready to agree to. That is what we mean when we say that, within the Caribbean, inherited attitudes are amongst the most powerful preventatives of economic growth« The Attitude to National Income and National Product

It is a truism that, subject to various adjustments, national income equals national product, in other words that the real value of the goods and services which the inhabitants of a country earn depends ultimately upon the value of what they produce. But it was not a truism to argue, as Keynés did in the General Theory, that aggregate supply (in other words the national product) would depend upon aggregate demand (in other words upon the expenditure upon consumption and investment out of national income). Within the context of the depressed industrial economies of the 1920' s and 1930* s this insight was to prove profoundly valuable. Unfortunately however, it gave rise to a concentration upon the income or demand side of the national accounts which, through no fault of Keynes, was to endure for a generation. In the post-war world such an emphasis has been out of place even in the developed countries. It has been even more out of place in underdeveloped countries where the only way to increase real national income has been through increas- ing, not national demand, but national supply. Indeed, over the longer period, it is often necessary that consumer demand should be restricted in order that supply should be increased. Thus the prescriptions and attitudes taken over uncritically from Keynesian theory have proved to be doubly inappropriate. Such attitudes tend to direct attention towards national income rather than to national product, ignoring the fact that incomes can only be increased after production has been increased. Such attitudes tend also to emphasise the importance of expanding con- sumer demand at the expense of savings, when the exigencies of devel- opment often require that home savings to finance investment should be increased even at the expense of consumer demand«

The Attitude towards Importo Most of us assume that, once we have earned our money, we should

be free to spend it as we wish. We recognise that some socially harmful goods may be banned, and that other commodities may be taxed as a source of public revenue, but beyond that we believe that citizens should be allowed to buy whatever goods they most want, whether such goods are produced at home or abroad. Tariffs may be levied on imports, to protect "infant industries" or to raise revenue, quotas may be necessary for balance of payments reasons or to improve a country's negotiating position, but beyond these requirements, die "consumer's sovereignty99 is recognised as sacrosanct.

But this reverence for "consumer sovereignty9* is itself a relic of laissez-faire economics, which endangers a correct determination of economic policy in developing nations. In such countries, the suitable outlook is not one which suggests that a consumer should be entitled to buy whatever imports he likes. It should rather be an outlook which regards all consumer- good imports as luxuries for as long as there are unemployed factors of production in the home country capable of turning * 26

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out a remotely comparable product. There are two reasons why this is so. First, because the purchase of the import, even if some duty has to be paid upon it, is likely to deprive some fellow citizen of the income he could have earned by creating the product, even if his version might have been of lower quality and of higher price. Those who have jobs and money in poor countries should recognise their obligation to increase local production, employment and incomes even if this involves foregoing imports for somewhat inferior and more expensive local goods. Second, consumer-good imports should be kept to a minimum also because the limiting factor on a young nation's growth is likely to be the exigencies of the balance of payments. Internally (or in an entirely self contained economy) it would always be possible to increase employment and capital formation by deficit finance or direct monetary creation. But, in any under- developed economy, the import content of capital formation is high, the income generated by the capital formation will itself be spent partially on imports, and the inflationary effect upon the lteme currency may tend both to render importa comparatively cheaper and also to discourage the inflow of foreign capital (and to encourage the outflow of home capital). Thus any aggressive policy of development through home credit creation will sooner or later be checked by the need to safeguard minimum foreign reserves. It follows, therefore, that the more effectively consumer demand for imports can be held in check, the further a national programme of development can be taken before it has to be slowed down for balance of payments reasons. This way of looking at imports is particularly relevant because it demonstrates too that the choice for a developing country is not between more imports or less imports, but between essen- tial capital-good imports and inessential consumer-good imports.

In other words, we may say that the level of imports depends upon export earnings, capital inflows, and the buoyancy of foreign reserves (i.e. the total availability of foreign exchange). The extent to which home income can be forcibly increased will then depend upon the overall propensity to import. If the propensity to import is % (which means a third of total income is spent on imports), then home incomes can safely be allowed to increase to three times the level of imports. If the propensity to import can be reduced to % (which means that only a a quarter of total income is now spent on imports), then home incomes can safely be allowed to increase to four times the level of imports.

For both reasons, therefore, to increase home employment and to make possible a larger development programme, it is desirable to restrict private expenditure on consumer imports. There should indeed be, not a presumption of consumer sovereignty, but a positive feeling of guilt in under-developed countries associated with the purchase of any un- necessary import. The Attitude towards Home-Produced Goods

Associated with the new attitude to imports, there should also be a new attitude to home-produced goods. The mental outlook inherited from colonial days was itself an outcome of laissez-faire economics. It laid heavy stress upon the desirability of international specialization

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of labour and decreed that countries should concentrate their production upon commodities for which they enjoyed an international comparative advantage and should import their other needs. The main justification for a tariff in such a system of thought was the need to protect an ''infant" industry during that limited period of time while it was growing to such strength that it could dispense with protection.

But even European economists tend to regard the classical "Free Trade" arguments as a rationalization of the temporary advantages which Britain herself was in a position to derive from Free Trade. The "infant industry" argument for the tariff has been shown to be too narrow, and particularly inapplicable in countries whose very lack of indus- trialization deprived any single new industry of those advantages sum- marily called "external economies". The argument for the temporary protection of a single "infant" industry thus gave way to an argument in favour of temporary protection for all industries in an "infant economy". But the trouble with this later, broader argument is that it gives no in- dication as to when an economy will cease to be "infant"; indeed it provides no grounds whatsoever for believing that today's underdeveloped economies will ever be fully "mature" in the sense of catching up with the infra-structure and the 'external economies' that obtain in developed countries.

Thus, for practical purposes, an entirely new criterion is required for judging the desirability or "justification" of founding any particular industry in an underdeveloped country. The principle is, in fact, a simple one - namely, will the founding of this industry add to the net national product? But there are severe theoretical difficulties involved in the attempt to interpret this principle. These arise partly because of the assumptions that have to be made about alternative uses of the various factors of production, and partly because the process of local manufac- ture may lead to a price raise that will not truly reflect any rise in net national product.

But from the point of view of practical policy, and even more so from the point of view of "attitude", these refined difficulties are not too important. Speaking generally, the founding of a new local industry will be justified providing that

(a) it makes use of previously unused local factors of production, and (b) the cost of the materials which the industry may have to import

is substantially below the cost of importing the finished product. For policy purposes, it will not generally be necessary to distin-

guish precisely between all industries that it is worth starting and those which are not. What is needed instead is a system of priorities which will order potential new industries in terms, first, of the net home income and employment the new industry will generate, and second, of the net increase in price that is likely to result. The greater the new income and employment generated, and the smaller the anticipated increase in home price over the cheapest import, the higher up the priority list a local industry will belong. The "infant" industry which really can dispense with protection after a brief period thus becomes a "special case" of

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very high priority. But it must be recognized that a young country's programme of industrialization must go far beyond that special case« The Attitude to Government Participation in the Economy

The very idea that a developing country needs a programme of in- dustrialization raises the question of who should be responsible for carrying that programme through. Once again we find that developing countries are often bedevilled by pre-determined ideas of what a govern- ment may "properly" do. Thus, in western economies, manufacturing industry was traditionally left to private enterprise, so that we now sometimes hear in developing countries that "government has no business in business". In fully developed western economies, there are undeniably sound reasons for leaving secondary industry primarily in the hands of private manufacturers. But in developing countries these reasons are largely irrelevant. They are irrelevant because private capital, private entrepreneurship, and private managerial and technical skills are in desperately short supply. They are even more irrelevant if foreign private capital, as it tends to be nowadays, is shy about moving into under- developed countries to take advantage of even the most obvious and profitable opportunities which exist. In such circumstances, the choice in the manufacturing sector is not truly between private or public enter- prise, it is between public enterprise or no enterprise at all.

In other words, the appropriate attitude here should be ... such and such an industry is required in terms of our development programme. If private individuals can be induced to start it by means of capital assistance from the government and all the common concessions, well and good. But if private enterprise is still unwilling to start it, and the in- dustry is economically justified, then the government should take the initiative in starting it instead. To this end, managerial, technical and promotional talents will have to be trained by government for their own use, and systems of administration and control will have to be worked out rather different to those which are common in the civil service. But once this has been achieved, any government will have a greatly in- creased power to speed economic development. Indeed, the whole pro- gramme of government spendine; - particularly on capital account - will no longer be restricted to the traditional development of social services and public works. It can instead le considered in the light of what con- tribution such spending will make directly to increased production, and thus to higher standards of living. The Attitude towards Nationalization

Such pleas for government initiative in manufacturing do not repre- sent a cry for socialism - they are, on the contrary, part of the argument that the old aims of socialism or capitalsim are, for developing countries, largely irrelevant to the solution of their economic problems. The plea is not "Government enterprise in all things"; it is rather "Let private enterprise do all that it is willing to do, but let government enterprise act wherever private enterprise will not."

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Because they fulfil essential wants and also provide assured sources of revenue, many of the economic activities which are now commonly state-owned in developed countries were initiated by foreign private capital. Thus electric power, telephones, water supply, railways, dock facilities, and bus services often remain in the hands of privately-owned companies.

What are the arguments in favour of nationalizing such companies? There are five main economic arguments. First, it is argued that as monopolies they are in a position to restrict supply, raise prices, and so exploit the consumer. Second, it is argued that considerations of social benefit may require that such services are greatly expanded even if this entails running them at a loss, while the requirements of private profit prevent this happening. Third, it is argued that such utilities, left in private hands, find it difficult to raise sufficient new money for expansion even if the directors can show that such expansion would be profitable. Fourth, it is argued that as long as such public services are owned by foreign capital, it will be necessary to go on paying out foreign exchange in interest and dividends. Fifth, it is sometimes argued that foreign private companies give preference to foreign employees over local staff of comparable qualifications.

All of these arguments have some weight, and yet neither taken singly nor together do they add up to à conclusive case for nationalisa- tion. This is so because, in many if not most circumstances, all the disadvantages of private ownership can be overcome by a combination of persuasion, pressure, legislation, tax inducements and tax penalties, and - if necessary - direct subsidies. Fares and rates can be set by a board, expansion can be induced by tax concessions or by subsidies for unprofitable extensions, production targets and minimum services and rates of profit on capital employed can be settled by contract, new capital can be provided or guaranteed by the government, and the amount of profit and interest to be exported can be settled by negotiation or set by legislation. As for the employment of expatriates, foreign com- panies in newly independent states are even more eager than home-based companies to employ as many local staff as possible in order to retain the favour of the local population and government. Indeed, a newly in- dependent government which has at its disposal the ultimate sanctions of nationalization or confiscation, is in a very strong bargaining position vis-a-vis foreign companies, especially against those whose capital is tied up in large quantities of immovable stock.

There may be occasions when negotiated settlements and effective control cannot be reached, and when outright ownership thus becomes unavoidable. No one would deny that. There may even be occasions when the downright inefficiency of the privately-run enterprise makes nationalization necessary. There will be occasions too when the owners of the enterprise themselves wish to sell out to the government. There may also be irresistible political, social, or military reasons why national- ization is necessary. Butonce all these contingencies h ave be en admitted, the balance of economic advantage still remains, generally, on the side

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of leaving privately-run utilities in private hands - even if the private companies are foreign controlled«

There are many reasons why this should be the case« Privately run companies are usually more efficiently run than nationalized indus- tries - especially in developing countries. Both the absence of appoint- ments and promotion for political reasons, and the greater freedom to hire and fire purely on grounds ofperforman ce make this so. Top managerial talent is likely to leave if it is subject to political directions. There is not the same temptation to award valuable supply contracts in exchange for political support. An overseas link with a parent company may make technical advice and equipment easier to acquire, and if some foreign engineers or professional workers are needed, they are likely to be available cheaper as part of a world-wide organization, than if they have to be brought out specifically to a single government-run operation.

Beside this, it is plainly inconsistent for the government of a de- veloping country to call out for foreign loans, investment, and aid on the one hand, while the other hand nationalizes foreign investments, thus necessitating the repayment abroad of much of whatever foreign capital has been successfully raised. There will be occasions when nationalization is advantageous. There will even be occasions when outright confiscation is the right policy. Rut what we are concerned with here is only an attitude. And that attitude should be to regard the matter of public vs. private ownership not as an ideological issue, but one of administrative convenience. In poor countries especially, the amount of capital and of administrative competence at the service of government is likely to be scarce. Therefore if private enterprise is doing a job efficiently at a reasonable cost, it is sensible to allow them to continue to do it. If private enterprise is not, let the government step in. And let us all realize at the outset that this pragmatic approach is likely to result in the government undertaking some functions that are normally left to private enterprise, and private enterprise undertaking some func- tions that are normally the monopoly of government. The Attitude towards Foreign Capital

The question of nationalization of public utilities naturally leads into a discussion of the appropriate attitude towards foreign capital as a whole. In developing countries generally, particularly in those which are former colonies, two mutually inconsistent attitudes are extremely common. On the one hand there is widespread distaste at the prospect of foreigners owning and controlling important sections of the home economy, and the fear of 'neo-colonialism*. On the other hand there is a realization that development requires capital formation, and that since local savings are scarce, much of the capital formation has to be financed with capital imported from abroad. One result of this particular conflict of attitudes is the expressed preference of many "developing" govern- ments for financial assistance from the World Bank or other international organizations, or, failing that, for direct government-to-government loans «ad other types of "aid without strings".

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But international assistance and government-to-government loans are not sufficient, and frequently do not lead to investment in just those sectors where investment and entrepreneurship and technical competence are most required« Thus one frequently encounters an ambivalent, almost hypocritical mode of behaviour in developing countries. The evils of foreign exploitation and of private capitalism in general are castigated from the public platforms; but in private all sorts of incentives are offered to foreign investors to induce them to invest. This is perhaps easily understandable, but one other consideration also requires to be understood. It is that the public castigation of private capital not only discourages capital formation, but actually leads to the type of "ex- ploitation" which it most deplores. For a hostile attitude to private capital and the threat of expropriation both drive down share values and force investors to offer a higher rate of return on capital invested than would otherwise be required. This higher rate of return, directly caused by the depressed share values and by shareholders' nervousness, is then cited as an added proof of ruthless exploitation. A fine example of this can be seen in the recent history of the Jamaica Public Service Company. Despite a good dividend record, the market valuation of the shares in Canada is now so low that the company's earnings as a pro- portion of market value are three times as high as those of similar enter- prises in Florida. And this same situation makes it virtually impossible for the Company to raise additional capital either by loan flotation or through the issue of new equity capital in any foreign market.

Is there a moral for governments in this? Yes. It is. "If you are going to nationalize, go ahead and nationalize. If you are. going to ex- propriate, go ahead and expropriate. But if you are not really in a position to do either, realize that threatening to do so deprives you of investment, pushes up the required rate of foreign earnings, and slows down your programme of development."

And yet respect for foreign capital must not be taken too far, nor be undi scriminati ng. It should not be taken too far lest it degenerate into subservience, and because foreign capital is chiefly required only be- cause local savings are not sufficient to finance the desired rate of capital formation. Locally-financed investment is, in a sense, doubly valuable in comparison with foreign investment, for it both manifests the emergence of local entrepreneurship and it also obviates the necessity of paying future earnings overseas. And this respect for foreign capital should not be undiscriminating because some forms of capital inflows are far more valuable than others, and some forms are actually harmful to local development. The problem here - and it is a very awkward problem - is to keep out the undesirable investments by the type of controls which will not actively discourage the desirable investments. The criterion of "desirability" is whether the total effect of the invest- ment adds to local production. Investment in export industries and in new import-substitute industries usually do. Investments in machinery to replace labour intensive methods sometimes add to total local produc- tion and sometimes do not. Investments in land alone, popular for avoid- ing European or American death duties, commonly do not increase 4 32

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production. Instead they tend to raise land prices, keep land in exten- sive forms of farming, and thus serve to hold back production increases«

The Attitude towards Money The recognition that home-financed investment is more valuable than

an equivalent foreign- financed investment introduces the question of a nation's attitude towards its money. Money is traditionally defined as a store of wealth, a measure of value, and a medium of exchange. It is all of these things. But it is also an extremely potent weapon for spurring economic development and for redistributing incomes. The traditional pre-Keynesian conception of money lays emphasis on the sanctity of money and the necessity - almost a moral necessity - of maintaining the value of the coinage. But the requirements of development may some- times dictate that new money be created in order to bring increases in production. The issue is a practical one, not a moral one. The appropriate attitude is that growth without inflation is better than growth with in- flation, but that growth with inflation is better than no growth at all.

It must be stressed that inherent inflation has many disadvantages. But if foreign capital is not forthcoming, and if the home economy is not capable of generating savings either in the private or the public sector, then credit-creation may be the only way of financing any capi- tal development at all. Such credit-creation will be opposed by bankers and by those who hold money and therefore do not wish to see its value lessened. Such people may even succeed in spreading the impression that it is somehow morally wrong to create money.

What we are concerned to repeat here is that this is not a moral issue at all. It is an economic issue in so far as there may be a choice between squeezing more savings out of the economy or creating more money. It is a political issue in so far as monetary creation will tend to devalue the earnings of those who have jobs, while making possible the creation of more jobs for those who previously had none.

The Attitude towards Trade Unions The legitimacy of workers' trade union organizations and the bene-

ficial part they have played in economic development has been recog- nized in western countries since the beginning years of this century. In the West Indies, trade unions enjoy more than normal prestige because they have served as the training ground for many political leaders, and because trade unions and political parties still tend to be intimately linked. This very fact, and the power that it bestows upon trade unions make it more than ever necessary to examine the effect of trade union activities upon production and upon economic growth.

The general purpose of trade unions is to press for higher wages and better working conditions for their members. Now an increased standard of living for all workers is part of the programme of all demo- cratic governments, so that there is no prima facie conflict between the aims of the unions and the aims of governments. However if in practice various trade unions are in a position to press their claims too suc- cessfully, the effect may paradoxically be to slow up the rate of economic growth.

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The mechanism of this paradox is complicated, but worth examining in detail. A successful wage demand may have any of several effects. It may leave prices and production unchanged, but redistribute earnings away from profits and towards savings. This is desirable on grounds of income re-distribution, but will also tend to diminish both savings and the profit-incentive to further investment. Alternatively, a successful wage claim may lead to the producer meeting the claim without raising the price of his product, but substituting machines for labour in the pro- cess of production. The higher wages will then be paid, but to a smaller number of workers, and the import content of production will (harmfully) have risen. Or again, where the finn facing the wage claim is in a mono- polistic position, it may meet it by raising the price of its product, which may in turn lead to a slight decrease in production. Finally, the wage claim may be met by a more efficient use, by the employer, of all his factors of production« In this case, the effect of the claim will have been entirely beneficiai; but in the other cases cited, the effect will be, at the best, ambiguous.

It will be ambiguous because in each case the socially desirable rise in wages tends to have a restrictive effect upon savings and pro- duction. But this statement itself does not reflect the situation accurate- ly. For higher workers' incomes may lead to the founding of certain new industries to satisfy their demand, thus encouraging new production. On the other hand, the redistributive effect of wage increases may not be altogether desirable. There will have been a favourable re-distribution of incomes in so far as the unionized worker's position will have im- proved vis-a-vis the businessman, the land-owner, and professional work- ers. But there will have been an unfavourable re-distribution in so far as higher wages may serve to reduce employment and to increase the number of unemployed. The differential between rates of return in union- ized occupations as compared to non-unionized occupations is also likely to increase.

The balance of these considerations gives no simple answer to the question of what is an appropriate attitude in developing countries to- wards trade union activities. The answer is complex, but the attitude which it suggests is assuredly different from either the "all for" or "all against" attitudes which are most common in the Caribbean today« The first part of the answer is that the extent of wage increases should not exceed increases in productivity. Or, if this familiar part of the answer is a counsel of perfection, at least the extent of wage increases should not push up prices faster than is occurring in the territory's main trading partners. If prices do rise faster than abroad, the eventual result will be devaluation. Moreover, if it is really considered desirable that a terri- tory should be able to dispense with foreign capital inflows, this will only be achievable (without devaluation) if productivity is allowed to rise faster than spendable incomes.

The second part of the answer is that where an industry, such as the bauxite industry in Jamaica or the oil industry in Trinidad, is in a position to pay abnormally high wages, it is preferable that these high

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company earnings should be paid to government in taxation or as royal- ties, rather than that they should be paid to workers in exceptionally high wages. Or if this is a counsel of perfection, they should be granted to the workers themselves, but in the form of pensions so that the capi- tal of the pension fund can be used to finance capital development and to provide jobs for less privileged workers. "Abnormally" or "excep- tionally" high wages in this context refer to wages that are higher than would normally be required to attract the desired number of workers into the occupation. No blame of course attaches to the union which succeeds in winning "abnormally" high wages for its members; it is perfectly proper and natural that the union branch should exact from the company all the increases which the company is in a position to pay. We are only pointing out that the interests of development would be better served if a government capital fund, rather than the union members, were to siphon off the extra money. For not only is it desirable that this money - espe- cially if it arises from the production of a wasting asset like bauxite or oil - should be used for capital formation rather than for consumption. It is also desirable to avoid a "dual" wage structure which is both so- cially unjust, and a potential disincentive to new industries which may need to employ comparable types of labour.

The third part of the answer is that workers' organisations should be induced to pay attention not exclusively to the interests of their own members, but to the interests of all workers as a whole. This is particu- larly important in territories where actual and disguised unemployment is likely to run as high as 20 per cent of the working population. The implications of this are that wage claims should not be pressed to an extent that is likely to reduce employment - at least, not until other employment opportunities have been created in equally remunerative sectors.

In the recent past, it should be noted, both governments and trade unions have been able to ignore the most harmful effects upon employ- ment of their respective policies, because emigration served as an outlet for a substantial number. But with the possibilities of emigration now drastically reduced, the need to fashion new trade union attitudes, if necessary by legislation or control, has become urgent. Tbe Attitude towards Migration

It is, for instance, no longer possible to regard constant emigration as a safety valve, or outlet for surplus population. The implications of this fact alone for the larger islands are tremendous. It means that a definite policy of population control will soon have to be initiated. One only has to reflect that at present rates of natural increase the Jamaican population will become 5 million by the year 2000 and no less than 28 million in only a hundred years' time. It also means that a much more energetic programme of job-creation will have to be pursued, both in the agricultural sector which will have to produce more foodstuffs for the local market (particularly milk, vegetables and meat) and in the manu- facturing sector, on whose products much of the increased personal in- comes will be spent.

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The absolute necessity for a much faster rate of job creation in the West Indian economy reinforces the need for those changes in attitude towards the proper scope of government activity, consumer sovereignty, and the role of foreign capital, which we have outlined above.

Hie Attitude towards Income Distribution Finally we should say a word about income distribution. Broadly

speaking, three distinct attitudes may be plotted. First, there is the egalitarian position - that all should share equally. This position is usually dismissed as being Utopian and unobtainable, and in the present state of the world such a judgment is certainly right. The second posi- tion may be described as the "Catch-as-Catch-Can" laissez-faire atti- tude towards income distribution, which views inequalities as inevitable and considers that the most a government can really do is prevent the poorest from starving, re-distribute marginally through progressive tax- ation, and hope that things will work out more evenly once free educa- tional opportunities are extended to all. The third possible attitude is one which, recognizing equality as unobtainable, nevertheless strives for a deliberate ordering of income distribution in a way that will recon- cile the need for rapid growth with the minimum claims of social justice.

Broadly speaking, the second attitude towards income distribution is today most common amongst West Indian governments, probably be- cause it was this attitude that was inherited from the regimes of the past. And because it is most common, we must understand what it en- tails. Under such a system the best qualified and wealthiest members of the community receive earnings that are comparable with those in Europe or North America, precisely because they are able to transport their capital or their talents elsewhere if their remuneration in their Caribbean homeland is below the international standard. Semi-skilled workers in industry are not so fortunate. Generally they are not now able to migrate elsewhere. However, because of union activity and the rela- tive scarcity of their semi-skills in their homeland, they are usually able to reach a standard about half as high as that of comparable workers in European countries. The unskilled and the small farmers are not inter- nationally mobile at all, for other countries would not receive them (ex- cept temporarily or in minute numbers) even if they were able to muster the money to migrate. Nor are they unionized, and the untrained capaci- ties which they possess are currently in excess supply in their own homelands. Between them they must share whatever is left of the national product after the owners of capital, the professionally qualified, and the unionized industrial workers have taken their slice. Consequently their standard of remuneration is only about 1/5 of the standard of comparable workers in Europe.

Now if the wealthiest in a Caribbean community enjoy remuneration comparable to that in European, the semi-skilled earn half as much, and the unskilled earn only a fifth of European standards, it must follow mathematically that the distribution of income in Caribbean territories is far more uneven than it is in Europe. It can even be shown that, since income per head in the advanced countries is rising faster than in the

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backward countries, the distribution of income in such backward coun- tries is likely, under laissez-faire, to become more uneven as time passes.

Is there anything that can be done about this? It is indeed difficult to know. One solution would be to forbid the emigration of highly skilled nationals, as is done in communist countries, thus blocking the equality of remuneration that flows from international mobility. Imported special- ists would then have to be paid on a higher scale than equivalent local personnel for whatever time they were needed. But such a policy would be vastly unpopular, if indeed it were possible at all.

The time has come, perhaps, to remind ourselves that we are con- cerned not with specific policies, but with changes in attitude. In this respect, the change in attitude that is required from the best qualified people, especially those who have gained their qualifications at public expense, is quite clear. It is a change away from the presumption that their home countries owe them a standard of living comparable to what their qualifications could obtain for them abroad. Such an attitude per- petuates the uneven distribution of income, and slows up economic growth. It is a change towards the realization that, if an under-developed country is poorer than a developed one, all classes of workers should be prepared to accept a relatively lower standard of living in the in- terests of the development of the country. If the professional man would be content with 2/3 of the European standard instead of comparability, the unskilled worker might be able to rise to 1/4 of comparability instead of 1/5. Ultimately, there might even be a general realization, translated into legal enactment, that social justice in underdeveloped territories required at least that all who labour by hand or brain should willingly accept a roughly equal proportion of the normal remuneration received for their work in fully developed countries. This would still of course be a far cry from complete equality. Rut it would at least prevent the distribution of income in "developing" countries from being so much more uneven than it is in "developed" ones.

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