Sun | Jun 24, 2018

Briefing | Economic transformation a new approach to inclusive economic growth

Published:Wednesday | June 28, 2017 | 12:04 AM

Jamaica's aspirations to increase economic growth to a consistent five per cent per annum in the next couple of years depend on the country's ability to mobilise meaningful increases in the value added and productivity of local industries. Traditionally, a high percentage of the citizens in developing countries like Jamaica are employed in the production of primary products and/or services that do not normally provide great returns.

As a result, the scenario arises where people work very hard but receive very little pay because they do not benefit from the increased mark-up arising from value added created when the product is vertically or horizontally diversified.




This slavery-type of economic structure endorsed in the formal economy of many developing countries often acts as a demotivator to young people to enter the local labour market formally. Many turn to criminal activity, and many have to juggle to survive. There are a few who acquire higher education to increase their earning potential to escape poverty legitimately. However, not everyone can afford higher education and/or has the inclination to absorb and employ higher education. And sometimes where higher education is acquired, the structure of the economy is not sufficient or diverse enough to provide employment for the majority of those with tertiary education. As a result, people migrate and so many of these countries also suffer from brain drain. Fundamentally, this cycle of underdevelopment continues due to the fact that aspirations for growth ignore the fundamental principles and importance of the aspirations to achieve economic development.




Economic development requires the efficient coordination of economic resources, including people to assist the country's productive engine to function so that it can gradually move forward progressively. This economic locomotion requires careful management and employment of the country's skill set with minimal inefficiency and wastage.

Countries that have managed to move from developing to developed have done so through this process, coupled with production of goods with value added where the citizens earn a higher income to increase their standards of living. Likewise promote local ownership this way, some of the profits earned can be reinvested locally through patriotism or presence and not repatriated elsewhere at the end of business day.




Countries that have managed to transition positively through the process of development understand the importance of improved standard of living and employee compensation to the efficient functioning of the labour force, which reduces friction and tension in the economy. They also employ people where they are most suitable and have been trained to perform and are constantly improving training to meet local and global needs.

On the other hand, countries like Jamaica that have failed to elevate above the developing threshold remain less likely to advance due to their disregard for knowledge, competence and efficiency. There is politics everywhere. Promotion in some work-places in some instances is not transparent and sometimes done based on assumed loyalty rather than output or productivity of the staff. Economic transformation is therefore necessary to assist a country to properly align its labour demand with supply, which is required if the country desires to increase economic growth inclusively through the process of economic development.




Economic transformation is the process through which a country improves how it employs its labour force; moving labour from low-productivity sectors, for example, agriculture, to high-productivity sectors, for example, manufacturing. The aim here is to increase the value of the goods and services the country sells to the rest of the world, thereby increasing the income the country earns from the rest of the world, which reduces how much the country has to borrow from the rest of the world and increase how much is invested in infrastructure and social services - for example, education, health care and crime prevention.




The International Economic Development Group sees economic transformation as the innovative approach to economic growth. They explain that there is no doubt that economic transformation can help to alleviate poverty and increase growth and development of a country inclusively and sustainably.

However, not many developing countries get the picture. Despite the clear advantages, developing countries have failed to properly implement policies necessary to facilitate the transformational growth process. As a result, many of these developing countries will continue to experience low output and little growth in the value of the jobs their citizens do.

- Dr Andre Haughton is a lecturer in the Department of Economics on the Mona Campus of the University of the West Indies. Follow him on Twitter @DrAndreHaughton; or email