Earlier the findings on the effects of governance on the incidence of poverty in a state were examined. Now, the effects of economic factors, resources and history on economic outcomes will be addressed, leading into the new poverty reduction model being proposed as an enduring solution to this age-old human condition.

The combined findings on economic growth are decisive. In all six countries, the analysis has clearly shown that strong economic growth is a necessary condition for sustained development and poverty reduction. The extent to which this causality plays out is, however, dependent on the nature and pattern of growth, the extent to which existing human capital is able to capitalise on it, the extent and persistence of social inequality, and the strength of State institutions.

The findings on economic openness are also quite clear as for all countries in the sample: increased openness in an environment of sound governance has translated into notable positive effects on welfare creation and to elevating people out of poverty. This is especially true of the Cayman Islands, Botswana and the Dominican Republic since the 1990s. Increased openness has also been shown to have adverse effects in some countries, which have demonstrated weak resilience in economic and social governance. Jamaica, Zimbabwe and Haiti appeared to have failed in realising the potential benefits of increased economic openness, largely as a result of weak economic, social and political resilience. This finding strongly suggests that economic openness needs to be an essential part of developing a sustainable poverty alleviation model but resilient institutions of governance are crucial to maximising the benefits.

The results on import dependence also provide vital insights into the incidence of poverty. The findings strongly suggest that heavy dependence on energy and food has the worst impact on the poor, particularly through the redistributive effects of exogenous price shocks. This result was seen in the two countries which were most heavily energy import-dependent (Jamaica and the Cayman Islands) as well as in Haiti in terms of food after the collapse of its agricultural economy in the 1950s, and Zimbabwe whose importing capacity was impaired by acute foreign currency shortages and whose strong agricultural sector largely collapsed after 1990. The availability of more diverse energy sources in the Dominican Republic and Botswana was shown as a hedge against the effects of an acute dependence on imported petroleum. Because these countries had partial self-sufficiency in energy production and consumption, increased imports would more likely be associated with the need for increased production rather than consumption. An equally profound finding on import dependence is that if a comparative disadvantage exists in producing a commodity locally, even if it is a strategic product such as oil or food, then it is better to import the product at that particular point in time. It was highlighted earlier that Haiti has the lowest per capita consumption rate of oil-based energy in the world, relying heavily on traditional energy sources and so did not appear to be acutely impacted by dependence on imports. Overall, these findings reveal that efficient energy diversification, a viable domestic agricultural policy, and the attendant reduced strategic import dependence can be important facets of the poverty alleviation process. This argument is not universal, however, as shown by the Cayman Islands, which is the most import-dependent in the sample; it managed to virtually eradicate poverty, largely by focusing on high-value activities (financial services and upmarket tourism). Advantages of small size have played a role in Cayman’s success, but this finding also suggests that good social and economic governance is the most crucial factor in poverty alleviation.

Although it has been demonstrated that good governance is much more important than historical experience in explaining the modern outcomes, it has been noted that the countries with more stable colonial histories have had more stable and prosperous modern societies. The Cayman Islands and Botswana, which have had greatest successes in increasing welfare and economic prosperity, have had more stable and less divisive histories than Zimbabwe, Haiti, the Dominican Republic and Jamaica. Incidentally, Botswana and Cayman have also historically been the most natural resource deficient countries in the sample, which made them less attractive to colonial powers. This finding suggests that there might be some association between historical resource paucities, the attendant historical social stabilities, and modern social stability and prosperity. It may be argued that the good governance which has characterised the Cayman Islands and Botswana in the modern era may have been made easier by its mostly socially stable historical experiences. This might suggest that good, modern governance could in part be traced to historical experiences; however, as shown in the case of Jamaica, a relatively stable post-Independence society can be destroyed by poor governance. This point reaffirms that the quality of post-independent governance is more crucial than history in explaining the modern outcomes of many developing states.

A crucial and one of the clearest overall findings concerns human capital. Despite the statistically insignificant association between human capital and per capita incomes in some countries, the overall analysis has shown that targeted investment in health and education is among the most important facets of the poverty alleviation process. Of equal importance is the finding on technology, as in all countries sampled, except the Cayman Islands, technological progress bore a statistically insignificant association with per capita incomes. The evidence suggests that the Cayman Islands, in particular, was so different because it managed to grow technology, its economy and human capital at steady rates and to some extent in synergy, which the other states mostly failed to achieve. In fact, the Cayman Islands is the only country in the sample where both human capital and technological progression appeared to have demonstrated a large degree of de facto coordination in their progress, especially over the latter part of the time series. One likely reason that the effects of both human capital and technology in most of the countries in the sample was sub-optimal is because of the insufficiency of technological advances to exploit human capital progress, as well as social dislocation and isolation caused by the failure of human capital to sufficiently advance and take advantage of technological progression.

The poverty alleviation model

The above findings led to the proposal of a theoretical model called the Resource Induced Poverty Reducing Economic Condition (RIPREC), which suggests that the rates of progress between human capital and technology should not be markedly different in order to achieve sustainable development, otherwise the society could be made worse off, either through social displacement in the case where technology progresses far more rapidly than human capital, mass migration of skills in the case where human capital progress markedly exceeds technological progress or both in the case where neither is progressing at a sufficiently robust level.

The Cayman Islands appears to best fit the idea of approximate parity between the two rates and has therefore been able to eradicate poverty, though small population size and other factors have also been to their advantage. Jamaica best fits the case of a country where human capital has progressed ahead of technology in the modern era and so large numbers of the country’s best trained talents leave the country to work in developed jurisdictions. Zimbabwe also falls in the same trap as Jamaica, at least for a part of the time series. Here human capital has historically made comparatively good progress in the country, but due to the lack of sufficient advances in technology — which is a symptom of governance failures — large proportions of its highly trained talent has been lost to neighbouring South Africa and Botswana, amongst other countries.

The Cayman Islands appears to best fit the idea of approximate parity between the two rates and has therefore been able to eradicate poverty, though small population size and other factors have also been to their advantage. Jamaica best fits the case of a country where human capital has progressed ahead of technology in the modern era and so large numbers of the country’s best trained talents leave the country to work in developed jurisdictions. Zimbabwe also falls in the same trap as Jamaica, at least for a part of the time series. Here human capital has historically made comparatively good progress in the country, but due to the lack of sufficient advances in technology — which is a symptom of governance failures — large proportions of its highly trained talent has been lost to neighbouring South Africa and Botswana, amongst other countries.

The Dominican Republic and Botswana appear to fit the case of technology progressing at a more rapid rate than human capital and so social displacement and poverty has continued to persist at relatively high levels, despite their strong modern growth performances. In Haiti and Zimbabwe, in part, there has been both social isolation and mass migration which is a result of the fact that neither technology nor human capital have made sufficient advances, thus adding to the model that at least one of the two variables must be at sufficient levels to drive short-run development and poverty reduction. Yet, both must be sufficiently robust to foster long-run, steady state poverty reducing equilibrium.

Part three will detail the beatitudes needed to transform any nation from ‘rags to riches’ based on the findings of the RIPREC.

Denarto Dennis is a lecturer in the Department of Economics at the University of the West Indies, Mona. Comments to denarto.dennis02@uwimona.edu.jm.