This chapter provides an overview of the economic philosophy of CARICOM governments before and after independence, and it shows that the changing economic philosophy of governments mirrored, except in a few instances and for relatively short periods, the dominant economic philosophy in metropolitan nations. One may therefore think that the two groups of nations experienced similar domestic economic conditions simultaneously, but this was not so and many CARICOM governments implemented, or were advised to implement, monetary, fiscal and trade policies that were inconsistent with the attainment of their economic development objectives.

It is often assumed that governments have the independence and effective economic policy tools to pursue their objectives of promoting economic growth, high GNI per capita, full employment, an equitable distribution of income, price stability and balance of payments equilibrium. The reality, however, is that governments have varying degrees of independence to use monetary, fiscal and trade policies to achieve these objectives. Some even argue that governments have little or no independence at all, but merely execute the wishes of the ruling classes. Governments in less developed nations generally have a small degree of freedom of action, owing in some measure to the influence of external elements, to pursue their economic objectives, and this may help to explain the low level of development of their economies. Some CARICOM governments after independence adopted economic policies that they thought best for accelerating the growth and development of their economies, but they encountered much external opposition in metropolitan capitals, and subsequent governments reversed the policies. Thus, just as external elements have had tremendous influence on the development of the leading sectors of CARICOM economies, external elements have had tremendous influence on the economic policies that regional governments can adopt. And often, many of the economic policies that CARICOM governments were advised to adopt, such as contractionary monetary and fiscal policies when unemployment was rising, were counterproductive and at variance with achieving the economic transformation of their economies.

Scope of Economic Activities of Colonial Governments

The writings of the mercantilists—referred to as mercantilism—believed that a state, by regulating economic activity, could promote economic growth and development.