The economic rise of the dragon and its influence in the Caribbean

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Research project – China’s Rise in the Global Political Economy

MSc Political science – Political economy

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THE ECONOMIC RISE OF THE DRAGON AND ITS INFLUENCE IN THE

CARIBBEAN.

Author: Jamal Andrew

Student ID: 11370548

First reader: Dr Julian Gruin

Second reader: Dr Farid Boussaid

Date: 21

st

_{June 2019}

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Acknowledgement

Firstly, I would like to express my gratitude my supervisor Dr Julian Gruin for his continuous support, patience, and immense knowledge throughout the process of completing this thesis. In addition to my supervisor, I would also like to extend my deepest gratitude to Professor Michael Golombok and Dr Pearson Broome for their insightful comments and recommendations while completing my thesis. My sincere thanks also go out to Maxwell Poitier, who from the beginning of my research process provided useful insights and tips. I would also like to express my sincere gratitude to my friends, Taisha and La Chelle for their endless support and understanding throughout the process of completing this research. Last, but by no means least, I say thank you to my family. To Emil and Jeroen, thank you for your unconditional love and support.

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ABSTRACT:

China’s rapid growth within the last decades has led to its emergence as a key player in the global economy. As a key global player, China has actively engaged in south-south cooperation. Moreover, China has extended its relation to the Caribbean, at a time when traditional partners like the United States and the European Union have turned their backs on the Caribbean. This thesis, therefore, aims to investigate whether the rise of China within the global pollical economy can indeed create a new developmental path for the Caribbean. This thesis further shows that China’s rise and engagement with the Caribbean present Challenges which can hinder the development of the Caribbean region.

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1) Introduction

The rapid growth of the People’s Republic of China, hereafter referred to as China, within the last decades has led to its emergence as a key player in the global economy. China’s transformation from a poor socialist country to global power is taking place in a multipolar era. China has had A remarkable gross domestic product (GDP) growth, which has allowed China to be the second fastest growing economy in the world. Additionally, China has positioned itself to be an important engager and stakeholder in the global economy. This has led other leading powers, civil society organizations, academia, and Nongovernmental organizations to carefully study the rise of China and the potential impacts it poses for the global economy. As a key economic player in the global economy, China engages in trading with other leading economic players, however, China has also actively engaged in south-south cooperation. Moreover, China has invested heavily in developing countries since the traditional aid which these countries received are limited.

Additionally, China has acted as an alternative to the conditional loans and development aid, which developing countries receive from international financial institutions like the World Bank and the International Monetary Fund. It is important to note that China attaches fewer conditions to their loans and aids, hence developing countries can freely determine their own path to development. China has also extended its relations with developing countries to include trade and foreign direct investment. The question remains, to what extent are these developing countries allowed to determine their own path? And what makes China’s relations with developing countries any different from the traditional western partners? Many have argued that China’s involvement with developing countries is a form of Neoliberalism (see for instance Masterson, 2014; Li, 2017), others believe that there are many opportunities for developing countries to develop themselves. On the other hand, there are critics who argue that China’s rise and engagement with developing countries have created a new form of dependency for developing countries (for example see Schellekens, 2013).

China’s rise in the global economy sparks many debates about development. The fundamental way in which development is defined, ought to be reconsidered. Moreover, international financial institutions like the World Bank and the International Monetary Fund must be reshaped, incorporating new ideas and practices. Development assistance must also cooperate with other sectors in order to achieve development. This thesis thus focuses on China’s trade, foreign direct investment, development aid with the Caribbean. More specifically, this thesis will look at whether China’s relations with the Caribbean presents a new developmental path, while also considering some of the implications that arise as a result of China’s relations with the Caribbean.

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Furthermore, there are many unanswered questions with regards to development. The Washington Consensus approach to development is not necessarily the way in which most non-western countries pursue development. Evidently, many developing countries have rejected the conditions and recommendations of these neoliberal western institutions like the World Bank and the International Monetary Fund. This is not very surprising since, history has proven that in the initial stages of development, developing countries are better off without these conditions and recommendations. This view was shared by Chang & Grabel (2004) who argues that the vast majority of developing countries perform better under state interventionism than under free-market policies. Mojo (2009), takes a more radical stance by arguing that developing countries are better of in achieving developing without the assistance of development aid since these development aids often lead to more corruption in developing countries.

Given China’s economic rise and increased engagement within the Caribbean through trade, foreign direct investment, and development aid the following research question is proposed.

1.1 Primary Research Question:

Does China’s economic rise present a new developmental path for the Caribbean?

1.2 The aim of the research

This research aims to investigate whether the economic rise of China in the global political economy presents a new developmental path for the Caribbean. Specific attention will be paid to three dimensions of China’s relations with the Caribbean; namely, trade, foreign direct investments, and development aid. These dimensions will be examined to show how the Caribbean engages with China.

1.3 Defining the Caribbean

The necessity for a separate treatment of the issue of China's relations with the Caribbean stems from the region’s lack of visibility in discussions of China – Latin America relations. As a result of this lack of visibility, two problems arise: firstly, there is the uncertainty that the term Latin America includes the Caribbean (Bernal, 2015). It is risky to apply generalizations about Latin America to the Caribbean. This proves to be dangerous since little or no data is included on the Caribbean in discussions that review Latin America. Secondly, it can not be assumed that China’s relations with the countries of South and Central America are the same as with the Caribbean. The developing economies within the Caribbean differ significantly from those in Latin America, both in

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size and or level of development (Bernal, 2015). It is, therefore, important that the “Caribbean” be defined.

Norman Girvan once asked, “what constitutes the Caribbean?”. The answer to this question varies. When speaking about the Caribbean, Anglophones uses the term “Caribbean” to refer merely to the English-speaking islands or the member states of CARICOM (Caribbean Community) (Girvan, 2001). The term “wider Caribbean” is then used to describe “the others”. This, what I call incomplete definition of the notion “Caribbean” can be attributed to the degree of cultural ignorance which Anglophones display.

There are four broad notions which constitute the Caribbean. In the words of Girvan

“First is the Caribbean as the island Chain lying in the Caribbean Sea. Second is the Caribbean as basin, comprising the countries lying in and around the Caribbean Sea. Third is the Caribbean as an ethnohistoric zone, comprising the islands and the adjacent coastal communities in south and Central America sharing a similar history, culture and ethnicity. The fourth, and most recent, is the idea of the Caribbean as a transnational community that embraces the Caribbean Diaspora overseas” (Girvan, 2000, p31-32)

The above conceptualization of the Caribbean reflects the historical development and geopolitical perspective of the region. Furthermore, the notion Caribbean has been continuously reinterpreted in response to both the external influences and the internal affairs of the region (Girvan, 2000). For the purposes of this thesis, “The Caribbean” shall mean, “A Socio-historical category, commonly referring to a cultural zone characterised by the legacy of slavery and the plantation system” (Girvan, 2001, p1). This definition embraces the Caribbean islands and parts of the adjoining mainlands and it can also be used to incorporate the Caribbean diaspora. Although, the emergence of a broader socioeconomic definition of the Caribbean to include the Caribbean diaspora is recent I am of the belief that this is a step in the right direction. The continued migration and the growing economic, political, and social influence of overseas Caribbean nationals must be considered a real phenomenon (Girvan, 2000), hence the Caribbean diaspora must be embraced.

This thesis focuses on 14 independent Caribean states, namely; Grenada, Jamaica, Barbados, Trinidad and Tobago, St Vincent and the Grenadines, St Kitts and Nevis, Antigua and Barbuda, Dominica, St Lucia, Haiti, and The Bahamas. Attention will also be paid to 2 geographically located South American countries that are also considered to be in the Caribbean – Guyana and Suriname. Lastly, Belize is included as a Central American country.

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The first part of this thesis evaluates the general literature on China’s economic rise and establish the context for the three cases. The second part will address the underlying theories in which the cases are studied. The third part focuses on the Methodology of the study. The fourth part will examine China’s relation with the developing world, with a closer look at China’s relations with the Caribbean. This will be followed by a fifth section that will evaluate the case studies. Thereafter, the conclusion and recommendations will follow.

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2) Literature review

To most accurately explore the issue of China’s economic rise and whether it presents a new developmental path for the Caribbean, literature on China’s economic rise, China’s relations with developing countries, and China’s relations with the Caribbean proves to be important.

2.1 The economic rise of China.

There is a growing body of literature that recognises the importance of China’s rise. China’s transformation that occurred over the past few decades proves to be one of the most important interconnected economic, political, and social processes in the global order. The economic rise of China has sparked many debates about the impacts it can have on the global order. Campbell (2008), argues that in the first decade of the twenty-first century, China has been able to engage with the countries of Latin America and the Caribbean, the association of southeast Asian nations community, and observers in the Shanghai cooperation organization. Wang (2012), shows that China’s rapid economic growth over the past decades has propelled it to become the world’s second-largest economy today, and potentially the largest in the years to come. The author further claims that the relative success of China’s ‘socialist market economy’ challenges existing critical thought especially with regards to theory on transitional economies.

Moreover, Naughton (2007), makes the claim that China is in the midst of “economic development”, a process whereby the country’s economy experiences vast transformation. Moak & Lee (2015) further show that China’s economic rise is an opportunity and not a threat to the global economy. This point was further elaborated on by Li (2008) who argued, the economic rise of China has contributed positively to global economic growth for decades, ensuring that even during the global financial crisis, the world economy stayed in check.

2.2 China’s relations with developing countries

China’s increasing engagement with individual countries and regions throughout the developing world has generated a lot of attention. Existing literature on China’s foreign policy towards developing countries see several positive signs regarding China’s recent trends of engagement with developing countries. A prominent example is Dittmer & Yu, (2010), who reviewed the way in which China is changing the developing world. The authors argue that China has shifted its policy towards developing countries from one guided largely by ideology to one focused on mutually beneficial economic and political relations. Earlier works by (Mitchell, et al., 2007) points to China’s strategic partnership with developing countries. Mitchell, et al. (2007) argues that China has vow to help developing countries to overcome difficulties and build capacity for

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self-development. The authors further claim that China has provided an increased level of trade, foreign direct investment, and development aid with developing countries thus enabling these countries to develop themselves.

2.3 China’s relations with the Caribbean

In recent years, China has expanded its economic relations with the Caribbean. The motto of China’s presence in the Caribbean is basically the same as in other developing Countries: economic cooperation without the need for any political intervention in the internal affairs of any country. From the perspective of the Caribbean, this proves to be the opposite of what they received from western partners in the past as economic cooperation always has been a tool of political intervention into the affairs of Caribbean countries. In this relationship, Beijing has placed emphasis on win-win cooperation, that is, both the Caribbean and China enjoy mutual benefits as a result of this their relations.

China – Caribbean relations can be explained in two ways, as outlined by (Osterveld, et al., 2018). Firstly, the increased presence of China in the Caribbean can be understood as China trying to garner goodwill in the Caribbean, with the intention of building diplomatic support. Furthermore, Bernal (2010) argues that China’s motivation in the Caribbean is largely for diplomatic recognition. Within the United Nations system, each Caribbean country has one vote, China is guaranteed to win the vote of many Caribbean countries on several issues. Secondly, the Taiwan recognition issue is often advanced as an argument. The general consensus is that Caribbean countries which hold diplomatic ties with Taiwan miss out on the generosity extended to the other Caribbean countries by China. Given the China-Taiwan rivalry in the Caribbean, it is often argued that China – Caribbean relations are largely ideology driven.

The gap in the literature is then that relatively few scholars have examined whether China’s economic rise in the global economy can indeed create a new developmental path for the Caribbean. Moreover, few scholars have looked at China’s relation with the Caribbean with regards to foreign direct investments, development aid, and trade. There is a vast literature on traditional foreign direct investment, development aid, and trade from traditional partners to the Caribbean, yet studies on China’s engagement with the Caribbean remains limited. The general consensus is that China’s rise and relations with the Caribbean is a win-win opportunity for the Caribbean. This is due to the fact that China’s trade, foreign direct investment, and development aid with the Caribbean is free from the conditionalities (at least in theory) which traditional partners have tied to these aspects of relations with the Caribbean. Moreover, it is believed that China’s lack of intervention into the internal affairs of Caribbean states are allowing these states to develop

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themselves according to their own social, cultural, economic, and political realities. However, what is unclear, is to the extent which China’s engagement with the Caribbean creates a new form of dependency for Caribbean states.

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3) Theoretical framework

3.1 Introduction

In answering the central question of this thesis, Does China’s rise present a new developmental path for the Caribbean? It is important to fully understand the concept of development since it is directly related to neoliberalism. The following theoretical framework will provide a robust understanding of the concept development, with careful attention to the theory which has dominated the development thinking, Neoliberalism. I argue that Neoliberalism has been the main economic blueprint for the development in the Caribbean, Howeverever China’s rise and engagement has enabled Caribbean countries to move away from this fixed set of policy prescription. This will be followed by a discussion of The Washington consensus along with the implications it poses for development. Additionally, the dependency theory will be addressed, with a concentration on how China’ rise and relations with the Caribbean have created a new form of dependency for the Caribbean.

The second half of the twentieth century is generally referred to as the era of development. Development is not a new concept, however, it gained significance since the end of the Second World War (Allen & Thomas, 2000 ). What was new, however, was defining development in terms of escaping from underdevelopment. Two-thirds of the world was considered underdeveloped, and hence “had to look outside of their own cultures for salvation” (Allen & Thomas, 2000, p5). Various strategies have been employed to achieve development, often with varying means and approaches. The issue of development remains a highly contested issue; therefore the following section will outline some of the arguments surrounding the issue of development.

The concept of development remains hotly contested, with no common agreement on the definition or understanding of the concept. Development is often thought of as trade and investments, socio-economic growth, assistance and aids, human development among others. There are ongoing debates with regard to development aid. Historically, development aid flowed from the global north to the global south, for various purposes. A considerable amount of development aid which flows from the more advanced industrialized countries to the underdeveloped countries can be said to be created as a result of the post world war II era (Ellermen 2006). Indeed, special attention was given to the modernization and transformation of developing countries, though little attention was paid to poverty alleviation (Ellerman 2006). Indeed, international institutions remain vital for development, hence their conceptualization of development has serval implications for developing countries. The presence of the International Monetary Fund and the World Bank in developing countries goes back to the 1960s (Muhumed, 2016). Both these institutions attempt to

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contribute to global stability and growth by providing both technical and financial assistance to developing countries that struggle financially. However, critics have often questioned the claims by these institution of assisting developing countries. Muhumed (2016) have examined the extent to which these international financial institutions can influence growth and development within developing countries. The author argues that these institutions represent “imperialism tools used to exploit the resources of the developing world and to protect the interest of the west. They provide painful and destructive financial and technical support leading to retarded growth, expanded inequality, and occasionally global instability” (Muhumed, 2016, p38). It is of vital importance therefore, that development aid is reconsidered, taking in a more integral approach that will be beneficial to developing countries.

Moreover, developing countries ought to be given more policy space, which will enable them to pursue their own home-based development. Developing countries should be allowed to develop themselves, with their own development path. China serves to be an excellent example of how developing countries can develop on their own. Developing countries are increasingly relying on China’s model for developing themselves. However, one may ask, what is the China Model? This thesis aims to answer this question.

Evidently, China has determined its own development path relying on some support from the World Bank and to a lesser extent the International Monetary Fund. One can conclude that China has developed without necessarily adopting the blueprints of these International Institutions. Whenever these blueprints were used, it was done gradually. China has proven to be an excellent source of development aid to developing countries. China’s involvement in the global south has taken on three dimensions, namely; development aid, trade, and foreign direct investments (Guerrero & Manji, 2008 ). It is becoming increasingly clear that developing countries are moving away from the Washington consensus, which is solely based on neoliberal thinking.

Development levels have varied over the last few decades, with various types of developmental paths used – of which the Washington consensus is one of. The Washington consensus and neo-liberalism which proves to be the main theoretical consideration in which the Washington consensus is wrapped has been under fierce criticism for its failure to address the financial problems within societies. It can be said that China’s development path differs significantly from the traditional western approach. Often, China’s trade and investment in developing countries is independent of the internal political situation in these countries. It is important to highlight that China’s involvement with developing countries is largely based on mutual benefits, that is, to move

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beyond loans and lines of credits and concentrate on unleashing entrepreneurial capabilities of developing countries through trade and foreign direct investment.

There are several consequences of the ideological underpinning of the Washington consensus for developing countries. The World Bank (WB), The World Trade Organization (WTO), and The International Monetary Fund (IMF) are all pawns of Neoliberalism. Moreover, it must be said that neoliberalism is embedded within the international political-economic system. This neoliberal system remains a great challenge for developing countries since it does not provide developing countries with enough market opportunities. It remains to be seen if China’s rise can change this system. This will be looked at throughout this research.

3.2 Development.

As previously stated, development remains a hotly contested concept. Although it is widely argued that development is not universally possible at present moment, it should be noted that development is subject to the material and cultural vision of a particular society (Peet & Hartwick, 2009). Peet and Hartwick (2009) argue further that development is making a better life for everyone. A better life for most persons mean in this context, meeting the basic needs; like sufficient food, shelter, clothing, affordable health care services, and to be treated with respect and dignity (Peet & Hartwick, 2009). Cowen and Shenton (1996) highlight that development was to compensate for the negative effects of capitalism, which includes getting rid of unemployment and poverty. Indeed, the World Bank Report has concluded that poverty alleviation is one of the key objectives of economic development (Allen & Thomas, 2000).

The way in which development is conceptualized poses several challenges for strategies deployed to achieve any development goal. Development ought to be seen in terms of improving both human development and the gross domestic product. Efficiency and economic growth accompanied with poverty alleviation, human development, sustainable development, and full employment are all necessary to achieve the development goal (Chang, 2003).

Furthermore, development can be said to be a founding belief of modernity (Peet & Hartwick, 2009). Modernists make the argument that all societies were initially poor, hence there should be an explanation for wealth and not poverty. Modernity has been used to explain the different types of economy, and the western way of developing, that is, when developing countries pursue the policies of the developed world in an effort to develop themselves. Willis (2005) argues that urbanization, the increased use of technology within the various sectors and industrialization makes up this modernity.

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Additionally, development is often spoken of in economic terms. Much of the work carried out by international organizations like the World Bank and the International Monetary Fund is underpinned by the blueprint of the conceptualization of development. The World Bank, for example, focuses on the economic development of countries (the Gross National Product per capita), as a result, they have placed countries into various categories, such as; low income, middle income, and high-income countries.

As (Willis, 2005) points out, the use of wealth to measure a country’s development is considered appropriate since, it is assumed that education, quality of life and improved health will be accompanied. However, that is not always the case, as Peet & Hartwick (2009) points out, economic growth can occur without necessarily touching problem like inequality, proper education and poverty since the wealth goes to a few individuals. Furthermore, using the Gross National Product to measure the development of a country, does not provide a true reflection of other factors, like education and poverty.

Additionally, human development is used as an indicator of development. Human development generally focuses on improving people’s lives, with economic growth being one of the means by which that can be achieved. Moreover, human development places a lot of emphasis on the opportunities and choices of people’s lives. The United Nations Development Programme (UNDP) uses the human development index (HDI) as a means of measuring development. Acceptable living conditions, education and knowledge, and a healthy life are all measures of development that the human development index is comprised of. It is important to note that scales are necessary when measuring development, one can measure the inequality within a country using spatial scales. Therefore, what may lead to development in one country may lead to inequality in another country. It is, therefore, important that countries pursue a high Gross Domestic Product and human development in their efforts to develop. I argue that while the Gross Domestic Product remains important to measure the economies of countries, human development indicators are just as important. It should be in the best interest of countries to simultaneously pursue high gross domestic product and human development. Pursuing a high Gross Domestic Product does not guarantee that fundamentally issues, like extreme inequality will be eradicated. However, I am of the opinion that pursuing a high gross domestic product can lead to an improvement in human development.

3.3 Neoliberalism

Neoliberalism remains a highly contested concept today. Neoliberalism can be understood as a set of policy prescriptions with a highly logical perspective which is being enforced through

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American hegemony in global governance and Financial Institutions. Furthermore, Neoliberalism speaks to the theory of political economic practices whereby human beings can advance themselves by giving the right to individual entrepreneurial powers and skills within an institutional framework which consists of strong private property rights, free trade and the free market (Harvey, 2005 ). In the last few decades of the twentieth century, the world’s political-economic framework changed to a neoliberal form (Evans & Sewell, 2013). Liberal thinking dates back to the enlightenment period, with the ideas of private property and individualism as a forefront. Indeed, this political philosophy provided support to the voices of farmers, artisans and producers (Peet & Hartwick, 2009). Selfishness proved to be the main difficulty at that time, however, this was kept in check by social institutions. Evidently, modern liberalism is founded on the beliefs of civil liberties, individual natural rights, and equality of opportunities.

3.4 The rise of Neoliberalism

Within the last two decades of the twentieth century, the world has witnessed conservative governments elected in both North America and West Europe. Moreover, there was the use of stabilization policies in Latin America, the collapse of Soviet states in Eastern Europe and the Soviet Union, and importantly the pursuit of Market economies (Campbell & Pedersen, 2001). This period has been referred to as the rise of neoliberalism, that is – market deregulation, decentralization of state entities, and the reduction of state intervention within the market. Neoliberalism has largely been concerned with institutional changes and transformation of political and economic settlements, which includes the labour market, and welfare programs among others (Campbell & Pedersen, 2001).

One calls to mind the likes of Margaret Thatcher (UK) and Ronald Reagon (US), as the leading champions of the neoliberal movement. Both individuals set out a range of neoliberal policies which were intended to reduce state intervention and allow the market to set prices and wages. The United States of America led the neoliberal charge with the abandonment of the Bretton Woods system. This led to the opening up of the domestic capital markets within the United States. However, it should be noted that while the guiding ideas of the Bretton Wood era were given up some of the institutions like the World Bank and the International Monetary Fund remained.

Additionally, neoliberalism was strengthened by the oil and debt crisis of the 1980s. The decrease in oil production by the Organization of Petroleum Exporting Countries (OPEC) led to an increase in oil prices for the countries importing. Furthermore, Saudi Arabia recycled its petrol dollar via the New York investment bank, this means therefore that there was a large number of funds available. As a result of this, developing countries were encouraged to borrow heavily. This

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ultimately led to the promotion of the liberalization of both the international credit and financial markets (Harvey, 2005). Moreover, many countries in the global south were faced with high accumulated debts. It is not surprising, therefore, that Latin American countries saw the need to adopt neoliberal policies due to the failure of their substitution industrialization and prevalence of domestic political and economic conditions.

Many have argued that developing countries need more state intervention than developed countries due to weak markets. However, neoliberalism argues differently. Indeed, Chang (2003) contends that developing countries need less state intervention since their political institutions are weak. Neoliberalism has many policy prescriptions that have been applied to developing countries, though the results of these prescriptions can be questioned. Indeed, these neoliberal prescriptions have brought economic stability to some countries, but in other instances, it has brought chaos – for instance in Sub-Saharan Africa and Latin America. Thus, Neoliberalism proves to be an important theoretical perspective for this thesis since it has been the main policy model which drives development in the developing world. The Asian Tigers stands out as the exception.

3.5 The Washington consensus

The term “Washington Consensus” was introduced by John Williamson in 1998. The term constitutes a desirable set of economic policy reform which is meant on stimulating development (Marangos, 2009 ). Moreover, the Washington Consensus “incorporated the International Monetary Fund (IMF), the World Bank, and the US executive branch, the Federal Reserve Board, the Inter-American Development Bank, those members of Congress interested in Latin America, and the think tanks concerned with economic policy” (Marangos, 2009, p 197). The following are 10 policy actions which Williamson argues are desirable; “Budget deficits, Public expenditure should be redirected, Tax reform (to broaden the tax base and cut marginal tax rates), Financial Liberalization, A unified exchange rate, Quantitative trade restrictions to be rapidly replaced by tariffs, Abolition of Barriers impeding the entry of foreign direct investment, Privatization of state enterprises, Abolition of regulations which prevents the introduction of firms or competition, and The provision of secure property rights, especially to the informal sector” (Kuczynski, 2003, p323)

The suggested policy actions can be viewed as an extension to the already existing neoliberal framework. Both the International Monetary Fund and the World Bank employs neoliberal economic ideas, which can be in seen in their structural adjustment programs. I, therefore, argue that China took a different approach than the Washington consensus towards liberalization and privatization, though it has applied some of the prescriptions of the Washington Consensus. Moreover, it is worth noting that the Government had strong control over these processes.

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3.6 Post-Washington Consensus.

Williamson’s (1990) original Wahington consensus was based largely on 10 commandments – a set of policy actions (Summer, 2006). Evidently, these policy actions sought to bring about institutional reform, progressive taxation, and a welfare system. However, the consensus which many international financial institutions employ can be viewed merely as ‘state bashing’ – that is, they are destructive in nature, dismantling the developmental state (Summer, 2006). The point of departure for the Washington Consensus was the chaos which was present in the postcolonial countries as a result of state interventions. The policy prescription of the Washington consensus was based on privatisation, liberalisation, and deregulation with the final outcome aimed at economic growth and stability (Summer, 2006). There are, however, several fundamental flaws which can be attributed to the Washington Consensus, such as; its design, sequencing. Moreover, there is the incompleteness of its agenda which omits important reform needs like inequality, technological innovation and institutional changes (Birdsall, et al., 2010).

Rodrik (2006) makes the argument that a list of second generation reforms has been added to the Washington consensus. Fine, et al (2006 ) further points out the conservative nature of the post-Washington consensus. It should be stated, however, that the post-Washington consensus favours privatization and free trade. Moreover, it does not oppose state deregulations and liberalization. This leads one to conclude that the post-Washington consensus is advocating for a more easy opening up of markets. Government's intervention to tackle market failures are welcomed, however, the limits of these government interventions are not clear. Furthermore, international financial institutions are often viewed as necessary for successful development, yet it remains unclear how developing countries can build institutions that can interact and participate alongside international financial institutions. As a result (Fine, et al., 2006 ) concluded that the policy prescriptions of the post-Washington consensus remain vaguer, thus making it hard for developing countries to determine for themselves what policy is acceptable or not acceptable.

3.7 Objections to the Washington consensus

There have been many objections to the Washington consensus. Critics have pointed fingers at the measures which are being undertaken by the Washington consensus. A prominent critic of the Washington consensus, Dani Rodrik, makes the argument that the Washington consensus is bound to disappoint since it “offers an agenda that is insensitive to the local context and need” (Williamson, 2004, p205). It is only logical that reform should be undertaken based on the social

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context of a country. The idea that a “straight jacket’ can and should be applied to all developing countries as the golden solution is flawed.

Moreover, there is a general agreement that the policies of the Washington consensus did not work out as it was intended to. In both Latin America and Sub-Saharan Africa, growth has been rather slow. By way of example, in the 1960s Ghana’s gross domestic product annual growth rate reached an astonishing 6.01 per cent by 1996 and 9.72 per cent by 1970 (The World Bank, 2019) outperforming South Korea, however, to date that is not the case. Additionally, in Sub-Saharan Africa, the market-oriented reforms proved to be unsuitable given the social conditions that were present. Given these shortcomings of the Washington consensus, the Chinese Model presents itself as the alternative to developing countries (This will be discussed later). The policies of the Washington Consensus are aimed at the Gross Domestic Product. The general success of the policies of the Washington Consensus lies within the implementation of these policies. Should these policies be successful, an increase in trade and eventual income is likely. However, the Washington consensus can have severe consequences for developing countries. This thesis assesses as to whether Chinese engagement with the Caribbean is enabling resistance to the Washington Consensus and the neoliberal policies of the west. I argue that Chinese engagement is allowing the Caribbean to move away from the Washington consensus.

3.8 Dependency theory

Dependency is generally considered as an “explanation of the economic development of a state in terms of the external influences – political, economic, and cultural – on national development policies” (Ferraro, 2008, p59). Dependency theory argues that resources flow from the underdeveloped countries to the developed countries, which in turn enrichens the developed countries at the expense of the underdeveloped countries. It is important to note that the term dependency generally speaks to an important aspect of the policial economy of the global south, where both the politics and the economy of third world countries are heavily impacted by their dependency relationship with the more advanced countries. Initially, the dependency theory is said to be originated from Latin America, at a time when Latin America provided natural resources for the development of European Capitalism. External dependencies by these developing countries can indeed lead to internal structural deformation (Kuhnen, 1986-87). This can have severe consequences for developing countries. One can, therefore, conclude that the core countries became develop due to the exploitation of the countries at the periphery.

Raul Prebisch argues that poor countries export their raw materials to the rich countries, who then manufacture products out of these raw materials and export them back to the poor countries. In

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return, the poor countries can not afford the manufactured goods, due to the value added by manufacturing. Prebisch suggested, that a country should take the necessary political and economic measures which will allow them to develop, what he calls (conditions of development). Prebisch further proposed that poor countries should look to import substitution industrialization, which will prevent them from depending heavily on the rich countries for manufactured products. Import substitution industrialization has been applied throughout Latin America, with varying success. Small internal markets and little income from exports proved to be some of the shortcomings for these Latin American countries, which led them to borrow heavily (Willis, 2005). It is worth noting that Prebisch argument represents an alternative to the Chinese led development as well as Western (USA) focused development.

Through the lens of the dependency theory, one can view China as a core country exploiting the resources of the countries at the periphery. Countries in the periphery will thus be dependent on China for imports. This overtime ensures that countries in the periphery would not develop.

This thesis examines the implications of China’s rise and engagement with the Caribbean from a dependency theory perspective. Furthermore, I argue that although Caribbean countries have somewhat moved away from relying heavily on the Washington Consensus as a result of China’s engagement, dependency is not necessarily lessened. Indeed, dependency takes on different forms, it does not necessarily have to be neoliberal nor within the Washington Consensus.

3.9 Hypotheses

From the perspective of Caribbean countries, China’s economic rise and engagement in the Caribbean provides an opportunity for the development (both gross domestic product and human development) of the Caribbean. China’s increasing presence in the Caribbean is evident with the increase in trade, foreign direct investment, and development aid which China gives to the Caribbean. Moreover, China’s engagement has enabled Caribbean countries to move away from the Washington consensus, however, there is a general feeling that a new dependency is created. Building on the theoretical framework above, the following two hypotheses are created:

H1: Chinese engagement in the Caribbean has enabled Caribbean countries to drift away from the fixed policy prescriptions of the Washington Consensus.

H2: The move away from the neoliberal ideology and the Washington Consensus does not guarantee that Caribbean dependency is necessarily lessened.

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4) Methodology

This thesis, in its study of whether the economic rise of China presents a new developmental path for the Caribbean, is venturing into a new path. There have been increased discussions on China’s relations with the developing world, however, discussions on Caribbean-China relations are largely absent from academic discourses. There are two reasons which can be held accountable for this dearth of literature on Caribbean-China relations. The first and most obvious reason is that the topic is quite new. China’s renewed engagement with the developing world grew during the 1990s as the Chinese economy expanded, hence there was a need for natural resources which the developing world has. Given that this topic is quite new, it does not come as a surprise that there is relatively little literature available on the issue.

Another reason which can be held accountable for the absence of literature on specifically Caribbean-China relations relates to the fact that there is very little foreign relations literature on the Caribbean itself. The Caribbean is often intertwined in discussions about Latin America. At a closer glance, one will come to understand that Caribbean-China relations and Latin America-China relations are quite different, and as a result, they should be treated differently.

Given the scarcity of literature on Caribbean-China relations, this thesis makes extensive use of newspaper articles and official government documents across the Caribbean region. Moreover, this thesis relies on the recent peer-reviewed articles, policy papers, and books from scholars within the Caribbean on Caribbean-China relations. Although these articles and books are quite recent, they prove to be important for this thesis. The access gained to these articles and books makes this thesis one of the few to explore whether China’s economic rise can indeed present a new developmental path for the Caribbean.

In order to identify the pattern of Caribbean-China relations, data was collected from the various ministries of foreign affairs and trade ministries selected for the case study. Analyses were also done with respect to China’s foreign direct investment (FDI), trade, and development aid with Trinidad and Tobago, Jamaica, and Grenada with much of the data coming from The Observatory of Economic Complexity (OEC). Given the increased trade between China and the Caribbean, it was also important to highlight the trade patterns. This involves studying the available data and identifying the general trade flow.

4.1 Methodological Approach

This thesis is a qualitative study of whether China’s economic rise can provide a new developmental path for the Caribbean. I have used case studies because it allows for a more

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in-depth examination of the particularities of the issue at hand. A case study can be defined as a “study of a social phenomenon: carried out within the boundaries of one social system, or within the boundaries of a few social systems, such as people, organisations, groups, individuals, local communities or nation-states, in which the phenomenon to be studied enrols” (Swanborn, 2010, p13). The cases for this research are Trinidad and Tobago, Jamaica and Grenada.

4.2 Case study.

I have chosen three Caribbean nations as cases, namely: Trinidad and Tobago, Jamaica and Grenada. The focus shall be placed on three dimensions; Trade, Foreign direct investment, and development aid. Both Trinidad and Tobago and Jamaica are two of the leading Caribbean countries, in terms of natural resources, population size and landmass. Moreover, both Trinidad and Tobago and Jamaica were two of the first Caribbean countries to establish diplomatic relations with China. Grenada, on the other hand, is a smaller Caribbean state in terms of economy, population and land mass, it also stands out as one of the few Caribbean countries to have changed diplomatic relations with regards to Taiwan and China. Grenada presents itself as an excellent case study to evaluate China’s relations with Caribbean countries. It can be said that the three cases selected are sufficiently similar, that is, they share a similar colonial history, and have similarities between the structures of their political systems, while at the same it can be said that they are sufficiently different given to the size of their economies and natural resources endowment. For instance, Grenada does not export non-agricultural resources, while Trinidad and Tobago remains a petro-state to date, hence it stands out among the economies within the Caribbean. Jamaica was also an exporter of bauxite, hence all three economies prove to be significantly different. This thesis will, however, show that the result obtained from all three cases can be generalized and extended to include the other Caribbean states which have established diplomatic relations with China.

4.3 Ethical issues and limitations

There are several ethical issues which ought to be considered when doing research. The Belmont Report of 1979 identified three ethical principles which researchers must comply with, they are; Respect for persons, Beneficence, and Justice (Mauthner, et al., 2002). It is, therefore, important that due care and attention is given to these ethical issues and limitations within this research. The most important ethical considerations for this thesis are honesty and acknowledgement and citation. Special attention was paid to the acknowledgement of the sources used within this thesis, with regards to ideas, theories, and concepts used.

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Limitations.

There are a number of limitations which arise given the method used in this research. Firstly, there is a lack of previous studies in the research area. Given that the issue of China – Caribbean relations is quite new, it was difficult to find scholarly papers addressing the issue. Moreover, data on Chinese Foreign direct investments, trade, and development aid in the Caribbean is not available, which makes it difficult to conduct a comprehensive analysis. It is the case that most Caribbean countries simply lack official reported data, hence it is difficult to accurately trace Chinese foreign directions, trade, and development aid in the Caribbean. Furthermore, the scope of the discussions proves to be a limitation of this research. Due to the researcher's lack of experience in conducting researches of such a large size, the scope and depth of the discussion in this thesis maybe undermine when compared with other scholarly work.

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5) China’s foreign policy with the developing world – A walk away from The

Washington Consensus

For a very long time, The Washington Consensus has been the main economic blueprint for the development policy in the developing world. Developing countries depended heavily on the financing from international financial institutions like the World Bank and the International Monetary Fund in order to finance their development. Unlike most developing countries, China’s development did not rely heavily on the blueprint of the International Financial Institutions. China's rhetoric has attracted the attention of developing countries, thus enabling them to deepen economic and financial ties with China in order to improve their developmental prospect. This chapter will provide a robust discussion of the “Chinese Model”. I argue that China has adopted its own approach to development, one which stands out from the policies of the Washington Consensus. I further argue that the success and influence of the Chinses Model have drawn developing countries to China for three reasons. Firstly, China goes by policy rights, that is, allowing developing countries to determine their own development path. Secondly, China has a unique demand for localisation, and lastly, there is a flexible means to a common end. Moreover, I argue that China has focused on a foreign policy of peace, while at the same time adopting new approaches in its foreign policy given the current international order. This chapter ends with a discussion on China’s relations with the Caribbean. Over the years, China has deepened its relationship with the Caribbean. I argue that as a result of the neglection of Caribbean countries by traditional allies, Caribbean countries have welcomed China’s renewed relations since it creates an alternative for the acquisition of a new developmental path for the Caribbean. However. I have also argued that China’s growing presence in the Caribbean has several implications for the Caribbean.

5.1 The Chinese Model

“… coexistence of a single-party communist political system with a mixed economy, which each day becomes more market-driven, is a curious and unique social formation, which is best described as ‘Market Leninism’. (Bernal, 2010, p282)

The phenomenal economic rise of China has raised many questions about the reason for its achievements and the implications it poses for the broader debates concerning the appropriate development strategies which developing countries can employ to develop (Scott, 2010).

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Furthermore, it is believed that China’s economic success challenges conventional beliefs on what are the appropriate strategies the state can employ to achieve development.

The Chinese Model is a phrase employed to describe China’s economic development and approach to governance which has been used since the era of reform in the late 1970s (Bell, 2015). Although the phrase has been interpreted differently amongst scholars, it is generally used to refer to China’s approach to the creation of free-market capitalism within an authoritarian one-party state, in which emphasis is placed on political stability. As an economic model, it is evident that China has created aspects of a free market economy, one in which there is the free flow of labour and commodities.

One calls to mind, Joshua Cooper Ramo, who labels what he sees as China’s economic rise and economic approach as the “Beijing Consensus”, differentiating it from the Washington Consensus, which indicates a more conventional approach to development (Scott, 2010). Ramo’s argument which grew in the wake of the financial crisis of 2007-08. Ramo (2004) rightly puts it that

“China is marking a path for other nations around the world who are trying to figure out not simply how to develop their countries, but also how to fit into the international order in a way that allows them to be truly independent, to protect their way of life and political choices in a world with a single massively powerful centre of gravity. I call this new physics of power and development the Beijing Consensus” (Ramo, 2004, p3)

Notwithstanding this turn of events, the original conceptualisation of the Beijing consensus cannot be considered as a competitor to the Washington Consensus. This is as a result of the misguided and inaccurate account which Ramo (2004) represents of China’s reform experience (Scott, 2010).

Fukuyama & Weiwei (2014 ) highlight three important characteristics which they believe constitute the Chinese Model. Firstly, the Chinese model is one that is based on a centralized, bureaucratic and authoritarian government (Fukuyama & Weiwei, 2014). This is largely due to its legacy which “comes from earlier Chinese history in which there was a high degree of institutionalization within the government and within a very complex bureaucracy ruling over an extremely large society” (Fukuyama & Weiwei, 2014, p62). Within China’s government today, accountability moves directly towards the Communist party, thus it can be concluded that there is

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accountability. Chinese accountability is based largely on Confucian ethics as opposed to traditional Maoist or Marxist approaches.

Secondly, the Chinese Model is focused on the economic development of a particular type. Like many of the fast-growing economies in East Asia, the Chinese Model has largely been based on export orientation and adequate government policies which are meant to encourage industrialization (Fukuyama & Weiwei, 2014). The Chinese government has committed itself to finance, infrastructure development, and a currency regime which would enable its exports to become much more competitive. Thirdly, the Chinese Model is a “relatively modest social net when compared with other developed countries” (Fukuyama & Weiwei, 2014, p63). Evidently, the Chinese model has tried to create a high level of employment, though it started at a very low level. It should be noted that more should have been done to assist the poor and to narrow the wealth gap despite the fact that China’s society remains communist and they have also imbued the society with more Confucian approaches.

Regardless of the weaknesses of Ramo’s original concept of the Beijing Consensus, it remains a useful benchmark with which one can assess the evolution of developmental paradigms, differentiates China’s experience from others, and pinpoint the most outstanding features of China’s experience (Scott, 2010). Additionally, China’s experience can be used to evaluate the development prospects of other developing countries.

5.2 Why developing countries opt for the Chinese model?

The prospect of rapid economic growth without the need for liberalization has regained popularity among the developing countries that are against the “one-size-fits-all” approach by the Washington consensus. Developing countries are increasingly gravitating towards the Chinese Model since it provides an alternative to the Washington Consensus. As Li et al., (2009) notes, “China’s Phenomenal economic growth since its reform and opening up and the sharp contrast to the disappointing performance of most parts of the developing world in the 1990s makes China’s development model distinctive and attractive” (Li, et al., 2009, P299).

Given the success and influence of the Chinese model, widespread attention has been generated towards the Chinese Model. Developing countries are beginning to see the Chinese Model as the one available distinctive and successful model that will enable them to achieve development. China’s economic miracle is something which many countries are trying to emulate.

While the Chinese model has had a huge impact on public discourse and received praise, it has also drawn its fair share of criticism. Scholars in the west have often focused largely on the

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negative aspects of China’s development (Li, et al., 2009 ). By no means do I suggest that the Chinese Model is perfect. Undoubtedly, they are some challenges which China faces, however, these challenges should be understood as development problems. At some point in the process of Development, these challenges will present itself. To date, there is no country that experienced growth without challenges. It should be noted, however, that there are other challenges to the Chinese Model are yet to be addressed, such as the theoretical issues.

It is well known that the Chinese model contains some initial conditions, however, “people may have overstated their contribution to the success of China’s reform” (Li, et al., 2009, P300). What is important, is the manner in which China has been reforming its economy. For instance, it is generally agreed that well judged financial reform is better than sudden financial reforms and “good economic policy should produce favourable outcomes and therefore should prove also to be good politics” (Rodrik, 1996, P10). These prove to be part of China’s development and hence contributes to their economic reasoning. Therefore, developing countries can learn from China despite the fact that they may not have similar initial conditions.

The following principles make developing countries opt for the Chinese Model. Firstly, China goes by policy rights. Chinese leaders have for a long time argued that every nation should have the freedom to determine its own path, one that will allow that country to develop accordingly whilst at the same time free from outside interference. It is in this thinking that China does not allow other countries to dictate China’s local policies and at the same time, China tries not to interfere with the internal affairs of other countries. As the Chinese Premier Zhao Ziyang rightly puts it “developing countries have the rights to choose development strategies according to their domestic conditions, and developed nations should not make the domestic reform of developing countries as the precondition of establishing the new world order” (Li, et al., 2009, P304).

Secondly, China has a unique demand for localisation. “China’s new physics involves a kind of chain-reaction of indigenous growth wherever it is copied” (Ramo, 2004, p28). China wants to create its own way of life, one which sets China apart from the Washington Consensus. Moreover, China has no intentions of following or copying the rest of the world. Chinese leaders believe that because of the different stages of development both developed and developing countries face, it is important that countries pursue development based on the local situation, rather than copying the path of other countries without caution (Li, et al., 2009 ). The principles of Chinese localization clearly demonstrates that the Chinese Model is fundamentally different from the Washington consensus in that China refrains from promoting a universally accepted development model. One can argue, however, that the Chinese model is similar or has some characteristics in common with

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other development models that have come before it, for instance, the Singaporean model and Japan’s model.

The third principle is a flexible means to a common end. Western economic theories and policies are largely based on the conditions of developed markets. Developing countries often try to follow the general direction of these economic theories and policies, however, the route and pace at which developing countries can transition to these policies are much more complex than what economic theories had predicted (Li, et al., 2009 ). Therefore, for developing countries, the process should be flexible both in its design and implementation with regards to the policy side of the economy.

Despite the controversies which surround the Chinese Model, I conclude that the rhetoric of the Chinese model – that is, the actual practice of how the model works sets it apart from the Washington Consensus and the neoliberal principles of the international financial institutions like the International Monetary Fund and the World Bank. However, closer attention ought to be paid to China’s practices in the global economy. The following section addresses China’s foreign affairs and China’s relationship with the Caribbean. This will be followed by some of the implications for the Caribbean as a result of China’s relation.

5.3 China’s Foreign policy

While China has focused on a foreign policy of peace, China has also adopted new approaches and adjustments in foreign policy given the current international order (Chen, 1993). These new approaches and adjustments are based largely on three principles. Firstly, China has pursued good-neighbour relations with neighbouring countries. Critics may argue that is not the case and that China only pursues good-neighbour relations when they recognize your sovereignty as a nation, especially given China’s treatment to Taiwan and Tibet, however, a discussion of this is beyond the scope of this thesis. A key element of China’s foreign policy is the engagement of developing countries (Chen, 1993). To date China continues to maintain contact with these developing countries, one can look to the increased fruitful cooperation between China and the countries in the global south as proof of China’s open policy towards developing countries.

Secondly, China has adopted an omnidirectional approach in its diplomatic policy, this is “defined as improving relations with all countries, both developed and developing, the United States and Russia, Japan and Germany, West European countries and East European countries, Arab countries and Israel” (Chen, 1993, p242). Although there are still some disputes between China and some of the neighbouring countries, China has promoted friendly relations with these countries.

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Importantly, China has also normalized its relationship with both Western Europe and the United States of America. In sum, it can be concluded that China would like to keep good relations with all countries on the grounds of peaceful coexistence (Chen, 1993).

Finally, China continues to play an active role in the international community, with the aim of sustaining peace and stability and stimulating global prosperity (Chen, 1993). China has played a vital role as a permanent member of the security council of the United Nations over the years. Additionally, China has made positive strides towards arms control, thus promoting and safeguarding world peace and stability (Chen, 1993). It is important to note that these decisions by China, are in accordance with China’s approach in international affairs, to play a positive and active role.

All three approaches and adjustments in China’s Foreign Affairs proves to be important. However, I argue that China has included “development aid” in its good-neighbour relations approach, especially amongst developing countries, in particular, the Caribbean. A discussion of China’s relation with the Caribbean will follow.

5.4 China’s relations with the Caribbean

In recent years, relations between China and the Caribbean have multiplied and deepened. China within the last decade has made a more concerted effort to consolidate and expand its relations with Caribbean states (Bernal, 2016). Questions have been raised about whether the relations that Caribbean states have with China falls in line with “follow the leader” dynamic. However, at a closer glance, it is clear to see that the rationale for Caribbean states engagement with China has never been about following the actions of other states. Caribbean states have for a long time pursued a foreign policy based on the attainment of economic development. Caribbean governments and political leaders have for a long time felt overlooked and taken for granted by traditional allies, particularly the United States and the European Union. Thus, China’s renewed relations with the Caribbean represents an option for the acquisition of a new development path for Caribbean states.

The enhanced engagement by China in the Caribbean reflects an effort to strengthen relations between Caribbean states and China, and to intensify the efforts to get Caribbean states that have diplomatic ties with Taiwan to switch their allegiance (Bernal, 2016). Wenner & Clarke (2016) argues that

“Up until 2008, China pursued “Chequebook Diplomacy” in the Caribbean and with many other small, low-income states located in Central America, Oceania,

The economic rise of the dragon and its influence in the Caribbean

___________________________________________________________

Research project – China’s Rise in the Global Political Economy

MSc Political science – Political economy

___________________________________________________________

THE ECONOMIC RISE OF THE DRAGON AND ITS INFLUENCE IN THE

CARIBBEAN.

Author: Jamal Andrew

Student ID: 11370548

First reader: Dr Julian Gruin

Second reader: Dr Farid Boussaid

Date: 21

June 2019

Acknowledgement

ABSTRACT:

Table of Contents

1) Introduction

2) Literature review

3) Theoretical framework

4) Methodology

5) China’s foreign policy with the developing world – A walk away from The

Washington Consensus

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