The economy underwent a substantial transformation in the twentieth century as tourism replaced sugar as the principal earner of foreign exchange and the primary source of employment. Like the previously dominant sugar industry, tourism was controlled primarily by foreign capital. This control was in part the result of insufficient domestic capital, the local upper class having made more of its investments in commerce than in entrepreneurship.
In an attempt to fill the local void, the government established state enterprises. Their specific purpose was to develop areas where foreigners were hesitant to invest, such as infrastructure or the faltering sugar industry, or to create domestic competition with foreign-owned enterprises, such as those in the tourist industry. The other major sectors of the economy, especially agriculture, were not strong enough to support the tourist industry; as a consequence, many items had to be imported.
Although most economic activity was privately controlled and operated, state enterprises represented an important element in the economy in the late 1980s. Beginning with the electric power industry, the public sector expanded into agriculture, manufacturing, and tourism, as well as infrastructural services such as seaports, airports, roads, water supply, energy, and telecommunications. Productive enterprises included a cotton ginnery, an edible-oil plant, two large hotels, a commercial bank, an insurance company, the Antigua and Barbuda Development Bank, and most of the prime agricultural land.
The government's rationale for involvement in infrastructure and public utilities was that it contributed to firmer bases for further development. The purchase of failing enterprises, such as the sugar factory and the oil refinery, limited the anticipated increase in unemployment should the enterprises actually close. The government entered the tourist sector primarily to influence the employment practices of private investors.
By keeping the stateowned resort open year round, the government was able to persuade the privately owned resorts to stay open as well, which alleviated unemployment in what had been the slow season. In addition, operation of the resort allowed the country to keep some of the tourist industry profits. In the manufacturing sector, the government constructed factory shells to be rented at low cost in order to attract foreign investment.
Despite achievements in some areas, such as tourism, the government's entrepreneurial efforts were relatively ineffective. Lacking an adequately trained managerial work force, the government often contracted with foreign nationals to run the state enterprises. In many cases, mismanagement grew out of the political patronage system used to fill senior public sector positions.
Because the government also tended to act as the employer of last resort, it effectively gave a higher priority to reducing unemployment than to economically efficient use of labor. Despite its employment priority, the government was forced to shut down some operations, including the sugar factory and the oil refinery just mentioned, because they were serious financial liabilities.
Although Antigua and Barbuda was dependent on trade for its survival, it maintained large annual trade deficits throughout the 1980s. Manufactured goods, not including processed foods and beverages, comprised 59 percent of all exports in 1981. Food, beverages, and tobacco represented 20 percent, and other items accounted for the remaining 21 percent. Seventy percent of exports were destined for other Caricom countries, especially Trinidad and Tobago and Jamaica; the United States received 26 percent of Antiguan and Barbudan exports.
Imports mainly came from the United States and included food, beverages, and tobacco (33 percent in 1981) and manufactured goods (25 percent). Other items accounted for 43 percent. Other major trading partners were Britain and Canada. In 1986 exports were estimated to equal US$51.8 million, whereas imports were US$74.1 million, for a trade deficit of US$22.3 million. This gap, although still large, was reduced from the 1982 level, when the trade deficit was US$90 million.
Like the economy in general, the finance industry in the 1980s was controlled largely by foreigners. Predominant were a small number of British and Canadian banks and insurance companies. Loans, a source of commercial and consumer credit, constituted the main link between the financial elements and the rest of the economy.
The private financial institutions favored the tourist and construction industries to the detriment of other areas of the economy. Seeing this as unsatisfactory, the government established its own banks and insurance companies, including the Antigua and Barbuda Development Bank. Public institutions were a relatively insignificant part of the financial sector, however.
Antigua and Barbuda, as a member of the Organisation of Eastern Caribbean States (OECS--see Glossary), was a member of the Eastern Caribbean Central Bank. As such, it used the Eastern Caribbean dollar, which was created in July 1976 and pegged to the United States dollar at the rate of EC$2.70 equals US$1.00.