2014

University of the
West Indies Cave
Hill Campus

19906815
NAME: Jepter Lorde
Multilateralism
COURSE:
GOVT can simultaneously advance and undermine the interests of small developing
3049 Caribbean
International Politics
states
in the global
LECTURER:
Dr. system. Critically discuss
Wendy Grenade
Purpose This
essay critically discusses how Multilateralism can simultaneously advance and
DATE: 17th March,
undermine
the
interests
of small island developing states SIDS in a now highly competitive
2014

geopolitical system.
Design/methodology/approach The essay defines Multilateralism, evaluates recent events in
multilateral trade associations inter alia.
Findings The hypothesis to a large extent was supported by the effort. The paper asserts that
the Caribbean has, to a large extent, been disadvantaged by/excluded from both trade agreements
and decision-making processes at the international level.
Research limitations/implications This paper only serves as an introductory critical discussion
to a subject that is far more complex given the circumstances of the recent 2008 global economic
failure, the paper argues that, to some extent, any attempt to moderate the impact of any
geoeconomic variation in the future is premised on a greater understanding of what drives and
influence the cooperation of states.
Practical implications This study is important to identifying that past strategies are no longer
appropriate if the regions growth and development are to be secured in the future.
Originality/value Paying attention to global trade, particularly the growing influence of
multi/supra national organisations to the institutional exclusion of the Caribbean will result in a
trading space forced to reassess its current position.
Key Words Multilateralism, SIDS, Trade, Caribbean.

ABSTRACT
This essay critically discusses how Multilateralism can simultaneously advance and undermine
the interests of small island developing states SIDS in a now highly competitive geopolitical
system. The sustained changes in global trade, particularly the growing influence of multi/supra
national organisations MNCS to the institutional exclusion of the Caribbean has resulted in the
trading space forced to reassess its current position. While paying close attention to the
Caribbean the essay defines Multilateralism, evaluates recent events in multilateral trade
associations in the name of the European Partnership Agreement (EPA), the cost and benefit of
multilateral relations and institutions which have impacted the Caribbean multilateral efforts
World Trade Organisation WTO, International Monetary Fund IMF among others. The paper
asserts that the Caribbean has, to a large extent, been disadvantaged by/excluded from both trade
agreements and decision-making processes of these powerful pacts/institutions referred to above
and despite attempts to balance the asymmetric relations do not understand that past strategies
are no longer appropriate if the regions growth and development are to be secured in the future.

INTRODUCTION
There has been increasing acceptance of the multilateral doctrine in world politics, the areas of
finance, trade, economics, the global environment and war have become accepted theatres of
operation for the new found International Relations tool. This is borne out of a realisation that
challenges to the business cycle, income/wealth distribution, poverty, pollution and territorial
disputes/incursions among others, are too vast and complex a matrix for any one nation to
effectively manage on its own according to Jean Francois Rischard (2002). It has become
apparent given the globalised setting within which these geo-political actors operate that the
action or inaction of a country can and will affect the existence of all countries and peoples. This
is not to say that it (Multilateralism) is a panacea for all that ails a complex global environment,
this paper observes that while well intentioned and benevolent in the short run it has been used as
a tool of convenience by the worlds only super power quickly becoming malevolent in the long
run. Might, in the case of the United States, is right. This, to a large extent, is achieved by
ignoring the multilateral norms designed to moderate such decisions by the use of what President
Dwight D Eisenhower described as the military industrial complex. Not to be left out Jamaica
and Trinidad discarded, under the egis of absolute sovereignty, the Federation in 1962. Thirty
years later Dominica, Jamaica and Barbados sided with an imperialist U.S. foreign policy
negating, once again, the value of multilateralism and invaded the sovereign state of Grenada
less the support of Trinidad and Tobago. It should be noted this gun boat type diplomacy through
invasion falls 10 years beyond the 500 years since Christopher Columbus invaded the West
Indies. This paper seeks to critically discuss how multilateralism can simultaneously advance
and undermine the interests of small developing states in the first instance and develop three
strategies that Caribbean states can implement to advance their interests in the second instance.

To achieve this, the essay is developed in two parts enveloping the relevant sections. Part 1
explores the definition of multilateralism, costs and benefits of multilateralism and the
contribution of the island states to their current position. Part 2 addresses three strategies small
island states can implement to advance their position. The essay is finally summed and
concluded.

PART 1
MULTILATERALISM
Barry Eichengreen (1995) in evaluating the theory of Hegemonic Stability from the perspective
of the international trading system plausibly argued the following:
The only example of successful multilateralism the historical record provides coincides with a
period of exceptional economic dominance by a single power. And the growing difficulties of the
GATT have coincided, of course, with US relative . . . economic decline.

He then goes on to ask intuitively, Why might this be? This essay in seeking a working
definition that reflects as far as practicable the geopolitical tensions that are currently in play
observes, also, a multilateral complexity highly correlated to the concept of the hegemon. The
hegemonic stability theory asserts that a stable international system is more probable when there
is a single dominant state imbued with a sufficiently large share of resources providing strong
leadership, willing to set policies, willing to implement policies necessary to create/maintain a
liberal economic order consolidating political power backed by military power according to
Martin Griffiths and Terry OCallaghan (2002). Finally and most importantly the hegemon must
follow policies that other major actors believe are relatively beneficial. Is it then, therefore, a
conclusive assertion that a hegemon is both necessary and sufficient for an open economic
(multilateral) system to succeed? There is no doubt that the USA has played a major role in
creating, maintaining and enforcing an open, stable, monetary, trade and aid regime while
concomitantly affording subordinate states the necessary incentives to abide by the regime
principles, norms, and rules Peter Behr (2009). The use of both rewards and coercion is not a
new strategy although the degree to which they can both be applied has been the subject of much
debate, the effectiveness, however, cannot be denied toward a functional multilateral base.

Another use of the term multilateral describes an international arrangement amongst states
presenting in the form of an ism, suggesting an association to an ideology rather than a
straightforward state of affairs according to Eichengreen (1995). This international arrangement
has de facto neo-liberal ground rules establishing free market access and the US holding the
major cards by virtue of its huge consumer market, its overwhelming financial power, and its
unchallenged military might David Harvey (2003). Harvey went on to paint an imposing picture,
he argued. With some accuracy that the USA sought to
Manage by a centralised multilateralism (epitomised by the so-called 'Washington Consensus' of
the mid-1990s). The multilateralism was increasingly organised around a regionalisation of the
global economy with a triadic structure of North America (NAFTA), Europe (the EU), and the
loose confederation of interests built around trading relations in East and South-East Asia
dominating.

This essay observes no room in the assessment for the Caribbean and a level of coordination and
ordering by more advanced countries with the dominance of the hegemon being clear. Fred
Bergsten (2014) captures succinctly how multilateralism acts to influence world trade:
Barbados going to the World Trade Organisation (WTO) to get a fair deal selling rum to the
United States will be like climbing Mount Everest..its like the Common Market and the
European Union which trade with each other and therefore discriminate against outsiders..the
WTO for all its historical focus on the most favoured nation principle and non discrimination,
commits lots of discrimination.

What, given this revelation by the respected economist, are the chances of small developing
states? This essay, while recognising a compelling case affording the use of the theory toward
cohesive trade relations, maintains it (multilateralism) lack fundamental characteristics necessary
to the effective coexistence among nation states namely mutual respect predicated on equality. To
achieve this, given the obvious unequal environment in which small open economies are forced

to operate, a close examination of the following should help unpack the essential elements. In
order for the process to work there is need for a level of cooperation, coordination and
organisation which James Caporaso (1992) was able to more effectively articulate. As Caporaso
explains:
As an organising principle, the institution of multilateralism is distinguished from other forms by
three properties: indivisibility, generalised principles of conduct, and diffused reciprocity.
Indivisibility can be thought of as the scope (both geographic and functional) over which costs
and benefits are spreadGeneralized principles of conduct usually come in the form of norms
exhorting general if not universal modes of relating to other states, rather than differentiating
relations case-by-case on the basis of individual preferences, situational exigencies, or a prior
particularistic grounds. Diffuse reciprocity adjusts the utilitarian lenses for the long view,
emphasising that actors expect to benefit in the long run and over many issues, rather than every
time on every issue.

To a large extent Caporaso (1992) has presented a balanced comprehensive definition but with
major implicit assumptions that must be isolated and examined to determine practicability within
the small island context. One such assumption based on economic utility establishes similarity of
goals from which trade off achieves maximisation. If the debate is extrapolated into the realm of
trade states must possess diversity in goods necessary to achieve exchange resulting in
maximisation. It is the assumption of goal similarity, given the penchant of the island state to
engage in dispute over the most trivial of matters, that brings this essay greatest pause.
This paragraph sought to present the many faces of multilateralism by unpacking definitions and
application to real world situations. Aspects of hegemon use, ideology and homogeneity of issues
between states were examined to fully define the process with indivisibility, generalised
principles of conduct, and diffused reciprocity offering a superior definition. It is the price of
multilateralism, however, that offers greater insights to its viability.

COST ANALYSIS
This sub section will look at the cost/benefit of Multilateralism attempting to sum, at the end, its
economic practicability based on trade relationships, economic/political imperatives and general
costs. Participation in a trade relationship where asymmetry of power is skewed obliquely toward
the larger of the two in both size and economic terms best describes the Caribbean association
with CARIBCAN, CBERA and EPA as trade preferences remains a challenge for most small
islands because of clear supply-side constraints as argued by Alfred Schipke et al. (2013)
including inadequate roads, ports, shortages of skilled workers; high production costs; high
energy and telecommunications costs; inadequate access to investment financing; low levels of
innovation; and in the opinion of this essay an underdeveloped ineffectual private sector. The
demand side is marred by Non Tariff Barriers (NTB) which seeks to use international standards
in production, health and packaging to frustrate exporters from the Caribbean unable to invest in
and maintain international certification. The situation is further exacerbated by economies such
as Barbados becoming more oriented toward international trade in services (tourism) rendering
the trade preferences for exports of goods less relevant to its economic future according to
Catherine Sunshine (1988). Consensus by individual states diverges as to whether the
aforementioned economic or political inconsistencies have had deleterious effects on Caribbean
survival. Since the 1970s the wind of change with regard to trade preferences has increasingly
blown against the interest of Caribbean states. Kathy McAfee (1991) explained this was due
mainly to a resurgence of regional nationalism, calls for political non alignment, an equitable
economic order and a growth of socialist parties. With these events complicating the tenuous
nature of multilateral trade by some island states it should not be surprising that internal strife
would be a consequence. CARICOM leaders for some time did not speak for most of the 1980.

While not enough to pass judgment the stage is set to examine multilateral lending interrogating
the phenomenon for an improvement in fortunes for the island state. Multilateral lending through
the International Monetary Fund (IMF), the International Bank for Reconstruction and
Development (IBRD) are examples of multilateral institutions significantly benefitting from U.S.
capital as their major financier. Recall previously by Schipke et al. (2013) of supply side
constraints inhibiting island states participation in global trade. These constraints would
obviously require investment to overcome them based on the capacity to pay. This, however,
according to Kwame Nkrumah (1965) has never been the case, he describes how western
economic interest control the prices of primary inputs by lowering the prices they pay and
extracting some $41 billion in profits from 1951 to 1961 through value added. He further argued
they profit from high rates of interest: "while capital worth $30,000 million was exported to
some fifty-six developing countries between 1956 and 1962, it is estimated that interest and
profit alone extracted on this sum from the debtor countries amounted to more than 15,000
million." The hemorrhage continues today with Multilateral aid of all things, USAID is described
by Tom Barry et al (1984) as being more like a bank than a social development agency providing
capital for new export projects bananas in Jamaica, flowers in the Dominican Republic and
coconuts in Dominica. The truth as presented shows the local farm companies forced to purchase
fertiliser, seeds and technology from the USA using loans secured from USAID. These
countercyclical flows show the money invested is never allowed to stay in the economy and is
almost immediately repatriated to the country of origin (USA). To really grasp the possible long
run costs for the Caribbean the Jamaica experience looms large that while given preferential
loans in the 1980s by the IMF and World Bank the island state has struggled with successive
Structural Adjustment Programs (SAP). Jamaica has repaid more money ($19.8bn) than it has

been lent ($18.5bn), yet the government still "owes" $7.8bn, as a result of huge interest
payments. Government foreign debt payments ($1.2bn) are double the amount spent on
education and health combined ($600m) as detailed in an IMF (2013) report.
This essay is of opinion that given the attempts at a definition earlier the aims of multilateral
engagement should emphasise some level of simplicity and efficiency with continued good
governance being a concern. In recent years, the multilateral aid system has become more
complex prompting the following comment from the DAC report (2008).
Indeed, some claim that the multilateral development finance system is not a
system but a non-system, because it is unplanned, incoherent and is,
basically, a child of spontaneous disorder. The complexity of the multilateral
system leads to high transaction costs for both donors and partner countries.
Too many multilateral organisations, duplication of work, complex funding
arrangements, and a multiplicity of requirements for accounting and reporting
seem at odds with the aid effectiveness agenda.
If at any time there is an opportunity for the island state to rethink its current position
it is now. The unpredictability of international trade imposing costly constraints, a
lending arena that has continued the extraction of wealth with loans that ultimately
lead to long term debt in the case of Jamaica has no place for a Caribbean seeking
equality. Corruption and the description of the process being a non-system by Barry
et al (1984) and DAC (2008) is enough reason for a rethink in the opinion of this essay
but with consideration of the good that could also be had. For that consideration the
following section is presented.

BENEFIT ANALYSIS
Multilateralism, as it is presently specifically engineered, represents an environment where the
developing country vote can outnumber the developed country vote presenting an opportunity (at
least in theory) to exert influence on agenda, policy as well as implementation at the highest
level. This is contrast to The Hague Peace Conference of 1899 and Hague Conference of 1907
where the slated general goals were toward peace, security and the settlement of disputes without
violence being engineered by large states only. This essay observes that the concept in general
terms (Hague1899) has morphed into an ideology in more specific terms (Multilateralism) that
could possibly provide a democratic means of determining how global issues are addressed and
more importantly, in the context of the circumstance, how states small or large should address
them. Powell (2003) argues limited representation is preferable to the complete lack of
representation given the ability of developed countries to shape the international agenda. This
section examines some of the benefits of engagement toward balancing the cost previously
discussed.

PROTECTION OF RIGHTS
A multilateral trade system that is, to a large extent, rules-based, open and transparent, could in
principle, provide rights protection for small states. It is therefore possible that an appeals
procedure free of undue asymmetric influence could dispense justice in an accountable,
transparent and equitable way. This essay recognises the Antigua and Barbuda example. Antigua
referred the USA to the WTOs DSM in a dispute over Internet gaming and won. The argument
presented showed that Antiguas ability to conduct cross-border gambling was being constrained
by US measures to restrict such activities. According to Richard Bernal (2006) the ruling
demonstrated how important multilateral trade rules are to small countries, he argues that trading

partners of whatever size can have adjudication at the level of the WTO, but they can also have
enforcement of rights and privileges by way of compelling offending countries to adhere to
multilateral rules. He is further of opinion that the aforementioned could not be attained by
bilateral engagement alone concluding the success enjoyed by Antigua to date presented a clear
uniqueness of how the system has worked. This essay respectfully reminds Bernal (2006) that
Antigua is yet to receive any compensation from the judgment in part because the USA has no
intention of complying given its sovereign right to regulate the actions of its citizens within its
borders especially if its ability to tax economic activity is in any way hindered by a third party
(Antigua).

DISTINCTNESS OF INTERESTS
Setting the agenda is central to any global meeting essentially it determines the issues to be
discussed and direction chartered by states. The imperative therefore ought to be participation by
the state to have a voice. Bernal (2006) insist that small island states must engage in trade
negotiations to ensure that their particular interests are treated to. The observance is one where
although necessary to ensure voice it is not seen as sufficient toward meaningful successes. It is
argued that small states can enhance their limited advantage through consensus and by strategic
alliances. No doubt a reasoned strategy but Clive Thomas (1973) asserts that Caribbean states
hold limited influence in trade negotiations because of small national markets and an
insignificant share of world trade provide little or no leverage in bargaining. It would appear that
while on the one hand prospects for influencing trade policy are in fact grounded in a rules-based
multilateral trading system the process of ensuring special but differentiated interests of small
states is fraught, however, with problems. That said there is the small issue of reciprocity and the
insistence of trading blocks of CARIBCAN, CBERA and EPA minimising the aforementioned

challenges is a means of ensuring balance. How, then, is this distinctness of interest to be

maintained? The essay turns to the contribution of Clement Rohee (2004) for guidance.

NEW MULTILATERALISM
The Rohee (2004) position embraces a thinking and approach that could offer a working
solution
The multilateralism of the past, with only one package or set of economic policy prescriptions
for the global trading system consistent with the Washington Consensus, has not managed for the
most part to lift most developing countries economic status. What such multilateralism has
done has been to widen the wealth gap between developed and most developing countries, and
contributed to a continuing decline in the long-term development prospects of the latter. The
multilateralism of the future, the one that developing countries believe in and strongly support,
should be one in which the WTO helps create an enabling environment in which developing
countries will be able to flexibly assess and adopt various policy models, approaches, and policy
mixes in support of their development goals. It is one in which the policy space of developing
countries to adopt and implement policies for the management of their economies and the increase
in the standards of living of their peoples is preserved and maintained.

Although collectively making a case for the multilateral process the model tends to fall
apart when the USA continues to undermine the efforts of Caribbean producers to export
bananas to Europe to the extent that trade is almost nonexistent. It further falls apart when
Antigua is unable to receive compensation from the USA with respect to the gaming and
betting ruling in its favour. It gets worst as Dr. Fred Bergsten (2014) observes the bias
nature of the institution underpinning world trade in the IMF as biased toward European
countries and inadequate in managing the global economic system. He went on to add
that a better mechanism was unlikely since the emerging markets and developing

countries now accounted for half the worlds economy but a distinct minority of votes on
the IMF executive. While the efforts of Bernal (2006) and Rohee (2004) are recognised
as worthwhile this essay also recognises that the realm of international trade is
inextricably bound to multilateral lending which is controlled not by one country one
vote but by the size and contribution of country. Where is the Caribbean in all of this? In
the opinion of this essay sandwiched in the middle.

A MULTILATERAL CARICOM
Prof. Anthony J Payne (2009) puts it bluntly:
Since the West Indies Federation ended in 1962, the region has, in effect, wasted a generation. It
partially redeemed itself with the establishment of CARICOM in 1973, but it now needs to seize
the (Rose Hall) moment, to establish and properly fund a CARICOM Commission and to charge it
with nothing less than charting all aspects of a region-wide development strategy capable of
coming to terms with globalisation.

Sir Shridath Ramphal following on from Payne (2009) concluded that the West Indies did not
seize the moment; instead the generational waste worsened. It is not the intention to unduly
criticise the efforts of the Heads of Government because there has been some good extracted
during the 45 years what is of concern, however, are the glaring examples of ineptness that single
handed threatens the continued growth and development of the region. The first major crisis
presented itself with the formation of the West Indies Federation a logical enough endeavour
given the geopolitical position of post war Europe. The union lasted 4 years and suffered from
what Sridath Ramphal (2011) referred to as local control or more bluntly put by this essay
selfishness. A brief look at what a multilateral Caribbean has been able to accomplish should
show how its interest has been either advanced or retarded at its own hands.
Ideological differences in the 1970-1980 were rife within/among island states which saw leaders
not communicating for 5 years. Democratic socialism in Jamaica, cooperative socialism in
Guyana and a revolution still born in Grenada splintered the islands as the geopolitical tensions
of the cold war were played out East versus West with the Caribbean sandwiched in the middle.
Academia was not to be spared as a voice of the masses in Dr. Walter Rodney was constrained in
Jamaica in 1968 with the help of US and British intelligence according to Michael West (2005).

Bilateral and multilateral clearing arrangements which lasted from 1969 to 1977 were replaced
by a multilateral arrangement which dissolved in 1983 not because of a structural inability to
perform; the reason for the eventual failure lay in its attempted unintended usage according to
Karl Bennett (1982). Its primary purpose of simply minimising the foreign exchange requirement
for intra-regional trade was replaced by some members as a balance of payments support facility
to allow them continued purchasing rights (credit for conspicuous consumption) given the
limitations in their export sector and level of foreign exchange reserves as by argued Bennett
(1982). Is it not surprising the position taken by the IMF and World Bank when lending on a
multilateral basis to these states. If the states cannot get multilateral lending to work regionally
how then will they get it to work internationally?
Where do these botched, failed, selfish attempts at multilateral relations leave the Caribbean?
This essay is of opinion woefully lacking if this approach is to be taken to the international arena.
Ideological differences occasioning wasted valuable time toward collective development has
been criticised by academics but to no avail. The inability to vote collectively on important
foreign policy issues, inability to lend when it is most critical and the inability to trade has
opened to many fronts on which the Caribbean is unable to fight. The preceding section offers
what is believed to be viable options available to the small island states of the Caribbean.

PART 2
DEVELOPING STRATEGIES
A strategy is a process to be followed in an attempt to achieve predetermined objectives/goals
this according to Michael Porter (1980). The process alluded to can, given the circumstance,
adopt a traditional planning cycle or dynamic planning cycle as a tool given the availability and
applicability of resources. The emphasis here, irrespective of choice, is the ability to plan
strategy doing so efficiently and effectively as articulated by Robert J. Stimson et al (2008). This
section will argue competitive strategy, through strategic planning, is relevant for the Caribbean
to compete on the world stage. Its purpose must be the efficient maximisation of resources that
gives it a unique advantage in allocation, distribution, stabilisation and implementation in a
resource based economy.

ALLOCATION
The goal in allocation is basically short term efficiency improvements by way of public goods
health care, defense, education seen as merit goods that government should provide. Counter
cyclical direct intervention in the area of national insurance, tax credits, transfers and pensions
have been able to establish a safety net in times of external economic shock. This socialist
approach and one to which the Caribbean has become accustomed is one of taxation based on
ability to pay, economic activity being driven from the base. The contention of this essay is that
the latter is what the Caribbean must concentrate on. Take for example the drug trade which is
estimated at 500 billion US dollars impacts on small open economies firstly through an
underground economy that does not contribute to national GDP, increase criminal activity
affecting business and investment and health reducing the productive capacity of the island states

young men and women to contribute to overall GDP. The solution is clear, a regional response
system that would effectively deal with this threat on a multilateral basis. Member states would
make the requisite contributions, the legislation passed in the territories to enable timely response
in case of emergency with the allocation of the necessary resources. Most would argue and
rightly so that there exist such a mechanism through the Regional Security System. Dr. Ralph
Gonsalves at the just conclude 25th Inter session meeting 2014 made clear the following:
The implementation deficit should be placed squarely where it belonged. Each government had
the obligation to put in place arrangements to facilitate speedy implementation of CARICOM
decisions. While the CARICOM Secretariat was the administrative body of the Community, it did
not have the authority to compel the enforcement of decisions.

Powerful words, while not specifically speaking to the Regional Security System RSS
situation, the words lack substance for this essay wonders to what extent the genuineness
of these utterances are a pretence at an integration process long sense stalled by the
present crop of political elites. Guyana, Trinidad and Jamaica are yet to sign on to the
regional security body, St. Vincent, Jamaica are leading growers of the marijuana crop
while Guyana and Trinidad are established transhipment points for South American drug
interest and St. Kitts and Nevis supports a minority government still welcomed at a Head
of Government meeting.

DISTRIBUTION
The extent to which the varying class structures of a society share in the aggregated wealth of
that society is an indicator of integrated participatory governance. Active political participation is
the only way to ensure interests are articulated at the local, national and regional level. Due to
the betrayal of a parasitic elite business/political class this distribution has been illusive to most

in the Caribbean. Frantz Fanon (1963) suggests the ways in which political leaders often betray
the national working-class:
Before independence, the leader generally embodies the aspirations of the people
for independence, political liberty, and national dignity. but as soon as
independence is declared, far from embodying in concrete form the needs of the
people in what touches bread, land, and the restoration of the country to the
sacred hands of the people, the leader will reveal his inner purpose: to become
the general president of that company of profiteers impatient for their returns
which constitutes the national bourgeoisie.
Ramphal (2011) describes them as local control this essay describes them as a myopic,
insular and opportunistic class symmetrical to an overdeveloped post colonial past. For
too long party politics in the Caribbean has revolved around a select few. Some have
argued a Westminster system has assured the Caribbean a gradual, incremental approach
to change with minimal social dislocation. While this may be true to some extent when
juxtaposed against cyclical economic upheaval occasioned by idol political solutions to
clear economic problems support of active interest articulation by the vast majority
becomes paramount. The price therefore of freedom is eternal vigilance. This essay
argues term limits, the power of recall, runoff between MP and implementation of the
Proportional Representative System. This political framework would engender a level of
participation facilitating that distribution needed for growth and development among our
people essentially no one group will think they can rule ad infinitum with the checks and
balances necessary. Trinidad so far has made the effort but alas most other islands are
mute or lukewarm to the suggestion.

STABILISATION
Ordinarily peaks in the business cycle are linked to balance of payment issues which, to a
large extent, are further exacerbated by counter cyclical of deficit spending by politicians.
The value of goods imported (value added) exceeds the value of goods exported (primary
inputs) creating a persistent current account deficit which has to be financed (stabilised)
on the capital account side by savings, investment, borrowings or a combination of the
aforementioned. Courtney Blackman (1998) argues two very salient points to be
considered:
Fiscal discipline is the bedrock of balance of payments stability. Unsustainable fiscal deficits in
highly open economies lead swiftly to balance of payments collapse. The power of money creation
should be vested solely in the Central Bank Directorate.

The Barbados case is especially instructive due to a pre independence economic decline
occasioned by a 1960 - 1961 recession in the USA during this time the dependence
affected agriculture mainly through sugar, in 1974 the global oil crisis induced recession
negatively impacted the tourism sector observe the replacement of the mono crop sugar
with tourism, in 1981 and 1982 real GDP fell due to recessionary conditions in the US
and Europe resulting in a sharp decline in tourist arrivals. In 1991 and 1992 Barbados
experienced a deep recession largely attributable to the Gulf war which adversely
affected the tourism sector, the September 11, 2001 terrorist attacks in the U.S, caused a
domestic banking liquidity crisis; which resulted in economic contractions in 2001 and
2002 and within 6 years Barbados is yet again to endure another shock in both 2008 and
2009 a combination of financial liberalisation (through deregulation of the banking sector
globally), has caused a negative spill over effect which has tenaciously lingered to date.

The constant in each of the declines has been a penchant, by successive administrations, to spend
by way of stimulus to re-establish growth. This essay suggest, pandering to a politically
mendicant electorate by spending the economy out of trouble, is wrong. Clearly the structural
deficiencies that plague each island will not be corrected in the short run what is needed is a
multilateral approach requiring each state contributing to a bank of last resort. An independent
monetary agency with the necessary lawful authority to monitor, recommend and intercede if
necessary in an effort to stave off economic decline thus ensuring the stability needed to take
advantage of growth opportunities when they are presented. David Harvey explains:
It is highly unlikely that an open and unified world market economy could be created and
maintained unless there were a dominant power able and willing to use its political, economic,
and other resources to encourage other states to lower trade and other economic barriers, to
prevent free-riding, and to apply sanctions to states that failed to obey the rules or regimes
governing the liberal world economy.

Following on from Harvey (2001) the OECS central banking model has been to date a
durable mechanism that has served in establishing this dominant power willing to use
political, economic and other resources (monetary). While fiscal action is seen as the
policy of choice for most Caribbean states effecting robust macroeconomic response see
Prosper Skeete (2012) for a more through explanation the reasoned, compelling argument
of Blackman (1998) cannot be discounted:
As it turns out, many of the economic and associated social ills in the region can be traced to the
abuse of the money creating powers of central banks or the misapplication of central banking
theory and techniques. This hypothesis is confirmed by the superior economic performance of the
so-called less developed OECS, where Ministers of Finance are denied the facility of deficit
financing through central bank credit.

The pure economic fundamentals are beyond the purview of this essay but two items are
worthy of mention namely fractional reserve banking and full reserve banking. Fractional
reserve banking is premised on the lending activity of banks effectively creating new
money by way of new bank deposits essentially, the money supply of the real economy
depends entirely on the lending decisions of the banking sector. Mervyn King, the
Governor of the Bank of England recently identified these changes in the money supply
as being central to any financial crisis:
"At the heart of this crisis was the expansion and subsequent contraction of the balance
sheet of the banking system."
In contrast, in a full reserve banking system, the effective money supply is unaffected by
the lending activities of banks. An economy running on a foundation of full reserve
banking will be less prone to pro cyclical tendencies and less inflationary than an
economy based on fractional reserve banking. The view that separation of the activities of
lending money and creating money would lead to better stability in the financial sector is
also supported by Governor King:
Eliminating fractional reserve banking explicitly recognises that the pretence that risk
free deposits can be supported by risky assets is alchemy. If there is a need for genuinely
safe deposits the only way they can be provided, while ensuring costs and benefits are
fully aligned, is to insist such deposits do not coexist with risky assets.
This proposal for full reserve banking ensures that risk free deposits in the payments
system do not coexist with risky assets. The proposal to achieve this is simple: this
essay recommends that banks to keep safe the money which customers wish to keep
safe, and invest only the money that customers wish to be invested.

CONCLUSION
In International Relations the state is observed as facilitating exchange through a network of
regional and international organisations numbering more than three described by Caporaso
(2003) as Multilateralism. The overarching issue, therefore, is to what extent this relatively new
tool can moderate the self interest agenda by the state amid the present organisation of the
international system. An examination of the data shows the cost of multilateral relations in
general as well as in trade, lending and aid seems to be out stripping benefits of distinctness of
interest and protection of rights Bernal (2008) and new multilateralism Rohee (2004). These
argued that beneficial equilibrating influences were relevant in a fast becoming globalised world.
The essay understanding the possible disequilibrium drew into focus the contribution of
individual states in not grappling effectively with the complexity of the topic and collectively
still falling woefully short of accepted solutions. Faced with the aforementioned limitations and
toward strategies that Caribbean states can implement to advance their interests in the
multilateral arena instead of a thief as its impelling efficient energiser (self interest) and its
salving accomplice moral rectitude (sovereignty) Sandiford (2000) four worthwhile points of
interest were proposed. A fully functioning CARICOM Single Market and Economy, Caribbean
Stock Exchange to meet investment issues, a CARICOM Secretariat entrusted with the
coordination of collective foreign policy positions and active monetary policy action coordinated
by a regional central bank. The paper asserts that the Caribbean has, to a large extent, been
excluded from both trade agreements and decision-making processes at the international level.
This essay finally concludes that in the face of all of these considerations individual approaches
has limited strategic application for the island states of the Caribbean and the only logical
approach by which global trade issues can be addressed is the perfection of the multilateral tool.

If this is achieved then engagement globally will equate to a community achieving the attributes
articulated by Caporaso (1992).

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