Principles of Business

Topic: The global Business

environment

Sub topic: Major economic

problems in the Caribbean
 Introduction
The Caribbean is made up mainly of
middle-income countries. Although the
region has many successes , economically
and in human development, there are also
economic problems, some of which stem
from small size and relative poverty.
Economic problems of the Caribbean include :
Unemployment
Population density
Migration
Debt burden
Sourcing capital and raw materials
Economic dualism
 Unemployment

Globalization has contributed significantly to

unemployment in the Caribbean. With the removal of
trade barriers, some industries have not been able to
compete globally. The lack of adequate skills that are
required for the new industrial paradigm for example,
information technology skills have also contributed to the
problem of unemployment.

A high level of unemployment among the young people of

the Caribbean may   results in various social problems, as
survival may depend on illegal activities.
 Reasons for unemployment:

-firmse.g. multinationals closing down

-lack of investment to create new
businesses
-lack of skills training
 Population density

Population density refers to the average

number of people living on every square kilo
meter in a country.
Very high population densities can indicate
overpopulation.  This occurs when the facilities
in a location, are not able to serve the number
of persons in that location. This will cause
heavy competition for jobs, schools, health
facilities etc.
 Population density
cont.

The formula used for calculating

population density is:
Density of population=  Total population
Area (sq. km.)
 Migration

Caribbean people migrate to first world countries

in search of opportunities such as employment
and education.  When skilled and professional
workers migrate, Caribbean countries may
experience shortages in critical areas such as
health care.
 Migration

Loss of skilled workers from industry will

also retard growth and development. Social
problems may arise when children are left in
the care of grandparents and other relatives
who have challenges to discipline them.
 Debt burden

Many Caribbean countries have high debt- to-GDP

ratios.  This ratio is the   amount of national debt
of a country as a percentage of its Gross Domestic
Product.  High debt-to-GDP can stifle an economy
as a large portion of its GDP is consumed in debt
payment and very little is left for investment in the
economy. A very low debt- to- GDP ratio is
desirable for economic growth and development.
Sourcing

Capital and raw materials
While the Caribbean might be rich in certain natural
resources such as bauxite, oil and gold the region lacks
other very important resources such as capital and
entrepreneurial skills.
Capital is important as it increases production through
the use of machinery, equipment and money invested.
The spirit of entrepreneurship is necessary for the creation
of new business ideas and entrepreneurship skills are
important for the successful running of the businesses
Economic dualism in the region

Economic dualism occurs in countries where

there exist two opposite economic sectors.
One sector is characterized by development,
capital intensive industries, large scale farming
and technological advancement, and the other
sector is characterized by subsistence farming,
labour intensive industries, handicraft
industries and simple trading means of
survival.
Economic dualism
Another form economic dualism is a split between the
formal and informal sectors of the economy. Formal
sector businesses are officially registered and pay tax.
Informal sector businesses do not usually appear on
official records or pay tax. They usually deal in cash
instead of using bank accounts. Most of their activities
are within the law, such as small-scale farming,
construction or trading.
Possible solutions to economic problems:
(a) Access to Foreign Direct Investment (FDI);
 
(b) Development of human resources;
 
(c) Development of manufacturing sector
Questions.
 1. Economic dualism is a problem of the Caribbean;
identify two parishes in Jamaica where there are two
distinct sectors.
2.Describe what form it takes with the use of an
example/s.
3.Does dualism create any problems for the country ?
4.Explain your answer to #3 above.