The Multinational Monitor

MAY 31, 1985 - VOLUME 6 - NUMBER 6

S E A G A   U N D E R   S I E G E

Cutting Capitals's Strings

An interview with Michael Manley

For the last four years Former Jamaican Prime Minister Michael Manley has had a chance to reflect on the difficulties facing a country wishing to choose an alternative path to development.

Manley, who lead Jamaica from 1972 to 1980, pushed through an extensive program of social reforms. During his tenure, the number of houses built annually doubled, a literacy campaign slashed the number of those considered functionally illiterate by half, a national health care plan was created and lower education was no longer on a tuition basis.

But Manley's insistence on political nonalignment and democratic socialism raised the ire of Washington. Despite the fact that investments continued to generate profits and that nationalized industries were compensated, investors were wary. To compound problems, the International Monetary Fund demanded a severe austerity program and foreign loans trickled to a halt.

By 1980, Jamaica faced overwhelming obstacles: nearly a third of the population was unemployed; the government and the IMF were at a stand off, severely limiting the amount of foreign capital available; and industry, skilled workers and professionals were fleeing the island.

Although Manley's democratic socialism was blamed for the country's economic ills, the election of Edward Seaga, a conservative who promised a return to free market ideals, has done little to improve the lot of most Jamaicans. Unemployment remains high - over 26 percent, and inflation has continued to eat away at quickly deteriorating incomes. At the same time, the foreign debt has skyrocketed - Jamaica now owes more than $2.8 billion to foreign creditors.

Josh Martin, the Multinational Monitor's U.N. correspondent, talked with Mr. Manley about the difficulties dependence on foreign capital poses for developing countries and how its influence can be limited.

Multinational Monitor: You have been highly critical of existing aid agencies and lending institutions for the pressure they put on lesser developed countries, often forcing them to follow a particular path to development. If you were to recommend an alternative aid package, what would the basic components be?

Michael Manley: What I would like to see is the United States work primarily through the regional institutions that exist - the Caribbean Community (CARICOM) and its Central American equivalent - all of which can be under the umbrella of the OAS [Organization of American States]. I think realistically what is needed is to get CARICOM to come up with its own plan of regional economic development; to work in cooperation with Caribbean experts in designing a sort of minimum program of economic development. [The participating states could] then say, `here is the amount of technology we can help you with, the amount of project management we can help you with and the amount of capital we can help you with.'

We can't tell America what it can do, but if you were to do something like that you would achieve a number of things: you would ensure that what came up was directed towards strategic economic development; that it was a response to something that was conceptually Caribbean or Latin American as the case may be; that it strengthened what is critical - that is the economic integration process in these parts of the world; and finally, that it would be completely outside any possibility of a charge of hegemonic manipulation, of big power bilateral foreign policy activity.

In addition to that, if you want to pursue your own bilateral foreign policy which is your inalienable right as a sovereign nation, it doesn't stop you from doing that. If you want to express your approval of Mr. Seaga in Jamaica by lending $50 million to help him over his foreign exchange crisis, nobody can stop you and even if you want not to offer Nicaragua $50 million in foreign exchange, that equally is your right. But to pretend that you have a regional program when you really are pursuing a traditional foreign policy of supporting right-wing governments and trying to undermine all progressive governments, should be exposed for exactly what it is. It's the right of the United States to do it but don't try and fool us.

Monitor: Is there also an honorable way for the U.S. to extricate itself militarily from the region?

Manley: The Contadora group has given the United States a classic opportunity to shift the focus of what it does within a completely respectable umbrella of international action. The Contadora countries are eminently respectable in terms of U.S. perception. There is not even a remotely radical government among them. They know that region in a way that Washington can never know it because they are part of that region. They can provide a means through which all of the contending elements - Nicaragua and the contras, Nicaragua's relationship to Honduras, El Salvador and the rebels, U.S. power and Cuban interests, etc. - can begin to negotiate. They can provide a comprehensive political solution to which everybody can subscribe in the end because they will have had an input into the dialogue. It is the classic way to disengage with complete honor.

Monitor: If the United States did turn to the Contadora group would U.S. political interests be protected?

Manley: I think the United States is being impelled along a course where [what is of utmost concern is protecting] multinational corporate interests. I think what you're seeing is an attempt to make the world safer for multinational corporations and to conceal that objective under the allegation that you're part of a great East-West confrontation being fought out in Latin America. Which I think is a lot of nonsense.

Monitor: Would U.S. economic interests be protected if the United States were to bow out and let the Contadora group take over?

Manley: Absolutely. The Contadora group is a group of countries that each have very strong U.S. private investment presences that are absolutely respected and safeguarded. One does not detect anywhere along the line, either in Nicaragua or El Salvador, any intention of trying to expropriate U.S. capital. (See April 1985, Multinational Monitor) They are very clear in their commitment to respect private foreign investment. There is nothing to suggest any hostility where that is concerned, they ask only good corporate citizenship.

Monitor: Do you think that the hard-line U.S. position - especially toward Nicaragua - forces the Sandinistas to take a more radical stance toward U.S. multinationals in the country?

Manley: No. I think they've shown commendable self discipline and common sense in not allowing themselves to be provoked in that way. But I think that this "right radicalism" which puts Nicaragua and other countries under such intense pressure, inevitably does tend to radicalize those processes. You put them to the sword and certain consequences follow immediately. A country at war is more prone to an idea of strong central direction than a country at peace. That's the first thing that happens. The second thing is that to the extent that the United States behaves like an imperialist power in this kind of situation it lends credence to a particular argument.

Monitor: How has the U.S. Caribbean policy - the Caribbean Basin Initiative, the Kissinger Commission, etc. - affected Jamaica?

Manley: As far as U.S. policy is expressed by President Reagan's 'we're going to make the capitalist model work in the Caribbean and Jamaica will be our test case,' it's been a disaster. The country has been disrupted economically.

We've run out of foreign exchange, and from every point of view we are now pursuing internally contradictory policies. One minute the government nationalizes one place while it divests somewhere else. [The United States] was promised a pure divestment model where all the state enterprises would be put back in private hands. But Seaga nationalized the oil refinery, he nationalized one of the major sugar estates and he's hardly divested anything. I think one or two hotels have been divested.

So the whole program is in confusion. He's eliminated controls and allowed Jamaica to go on this free import model where we're flooded with beautiful cars, caviar, and exotic wines, the result is a horrendous expansion of Jamaica's trade gap, which has more than trebled in the last three years. Foreign exchange just hemorrhages out of the country. So we face utter disaster, and [the government is] having to retreat on all the policies which the United States abused us for following: foreign exchange management, import controls, and even some nationalization.

Monitor: So the free market ideal which Reagan seems to want to export doesn't hold up in Jamaica?

Manley: The idea of a true democracy making the free enterprise model work in the Third World is a joke because it can only work if there is a flood of foreign capital, and there is no flood of foreign capital that is going to any democracy overseas. If it goes anywhere at all it goes where there is a dictatorship the U.S. can trust. It will go to Taiwan, it will go to South Korea, it will go to Pinochet [in Chile] and at one time it was going to Brazil.

Do you think that anybody with capital is going to [choose to invest in countries with] governments that pass pollution laws and environmental measures and have trade unions that may strike. You have to live with that in your own home why live with it somewhere else.

It's an absolute contradiction - this notion that it is democracies that foreign capital goes to. Foreign capital goes to strategic resources if it has to - metals, uranium, perhaps to tourism. But the manufacturer that has a choice about where to put a plant, or where to invest, is not going to choose a democracy if he can help it. He'll tell you, "why go here? If I go there, the army runs things, I feel secure, in ten years time the laws will still be the same. " He's going to go there and you cannot blame him.

Monitor: Do you think that the strings corporations attach to their investments in specific countries are short sighted, and is there an alternative that can give them the same return?

Manley: I think that the really imaginative firms will not try to impose those strings now. The really imaginative ones will say to you, `Here's my deal; I want to know that I can get what I want in terms of raw materials and that I'm free to manage my company without political interference. I want to know that I can repatriate my profits in accordance with agreed procedures. Now, what would you like?'

Monitor: The Group of 77 has moderated its stand on several economic issues, some people say to attract investment and to encourage the transfer of technology. Do you think this will produce any results?

Manley: Well, perhaps. When I make the criticism that free enterprise doesn't work in democracies, I don't mean 100 percent of the time. Of course some businessmen are interested in the adventure of investing in a democratic country. Jamaica gets a little foreign capital and even in our time we got a little foreign capital. To the extent that multinational capital comes, and it's a good corporate citizen, and helps train local labor and local management and all the rest of it, of course it's helpful. But I don't believe it will ever solve the Third World's problems, because bound up in the movement of foreign capital is too profound a contradiction. If you're going to have the kind of society that multinational corporations find attractive, then you're not going to deal with your own internal problems. What you have to do is always have your essential economic strategy resting upon several possibilities. Whatever you can do for yourself, whatever you can mobilize internally, you do. Secondly, on inter-Third World cooperation, wherever you can find a practical solution together, you work together. All of which gets topped off by that extra bit of foreign capital which you're glad to get. But you should never think that you can solve your problems with foreign capital.

Monitor: It seems that no matter what you do, you are still going to be highly dependent on that foreign capital.

Manley: It's a question of how you can manage that foreign capital so that it comes in as part of a national development exercise, fully respected, with full rights of repatriation and a climate with which to make reasonable profits, but where it comes as part of an international arrangement, in an amount that is consistent with your interests as well as its own interests.

It's an economic relationship, and some corporations are beginning to learn that good corporate citizenship is not only good business nationally, but can be good business internationally.

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