|Volume No. 1 Issue No. 26 - Friday, August 16, 2002
||An Analysis of the Banana Industry
Are the Heartless Actions of Powerful Nations to be Blamed for its Demise?
by: Dr. Emanuel Finn
In recent years the number of banana farmers began decreasing at an alarming rate as a percentage of the total population and the decreasing profitability of banana farming. As a high school student some twenty plus years ago, I spent most of my vacations working on my uncle's banana farm at Newfoundland estate at Aux Delice.
I remembered the backbreaking work, which included cutting the bananas, carrying them and delicately loading the truck and driving to Rosalie Boxing plant (see inset) in the middle of the night to sell them. At that time, banana was king and the lifeline of the countryside and country. It was a way of life and almost everybody got into the act of planting bananas. Why the sudden decline after all these prolific and successful years?
The phenomenon that is being realized in the industry is because of basic economic theory and free market principles. This is beyond anyone's control and is by no means the fault of the present or the previous governments. Is it because of International trade and heartless actions on the part of powerful nations?
Shouldn't International trade and commerce improve the economic well being of developing countries? The answer is rather complicated and is not a simple yes, no or maybe. Of course, one cannot (and should rationalize) this type of reasoning or any theory on economics to a hardworking farmer who has to feed his family. Indeed I feel his pain, disgust and frustration.
Countries will produce and trade goods (exports) in which they are efficent in producing, and where profitable markets can be found in order to sell these goods. They will trade (import) goods for products that they are less efficient in producing (or cannot) produce. Economists describe this concept as having 'comparative advantage' on a sector.
In the late sixties and seventies, as a result of comparative advantage and preference on the British market (due to mercantilism), Dominica realized dynamic growth in the banana industry and in its economy. Bananas were the most abundant and efficient factor of production. So what happened?
Countries will adjust trade to produce goods that use their relatively abundant factors of production causing the prices for these goods to converge among trading countries. Twenty-five years ago, Dominica had abundant labour and banana production was very high. Market forces were favorable which resulted in favorable market prices.
However in recent years, factors such as technology, migration, exodus of banana farmers from the plantations, demographic trends and capital investment, world political and economic dynamics have caused a disruption in the banana industry. Today, bananas have been expense commodities to grow in comparison with other countries in Latin America. Hence Dominica and the Windward Island lost their comparative advantage in the industry.
When countries trade with each other, there exists an optimal level of efficiency in the allocation of the world's resources relative to production costs, consumption and preference. The global market (similar to a free market) moves towards this optimal level of efficiency. The world economy is prevented from functioning at his optimal level when countries impose trade barriers.
Tariffs aimed at reducing or preventing imports and exports to protect market, disrupt this free market concept. Dominica is facing some trade barriers and forces such globalization; international economics and trade policies, geo-politics and policies and the World Trade Organization (WTO) and the giant super power to the north. These factors and dynamics are some of the culprits to blame for the demise and collapse of the industry.
So what are the policy solutions that should be implemented by the government in order to answer some of the vexing and frustrating questions that this dilemma poses for the economy and more personally, for the farmers?
In addition to waiving loan repayments, government should provide cash assistance to compensate farmers who have had their incomes reduced as a result of the debacle in the industry. Another solution is to offer short- term subsidies or insurance to long time farmers. During this time, diversification efforts should be pursued with the greatest urgency.
Whether we accept it or not, barring a miracle, as singer David Rudder said in his hit song, 'Banana is dead'. No amount of Cardio Pulmonary Resuscitation (CPR) will revive (this ailing industry) the dying patient.
Bandage solutions and temporary policy gestures and politics will just prolong the eventual and agonizing death of the industry. We dont have a choice, but to accept the painful reality, and move on. It is high time that the government (of the day) and people understand and accept this inevitable fact