Governor Carter refused to limit emigration because the remittances sent back to Barbados from the Panama workers had markedly improved the economy, especially for poorer tenant farmers. In a country that had recently been on the brink of collapse, he was not going to tinker with that.
The direct impact of the remittances was not that large. In 1906, when Carter declared their importance, they came to 73¢ (U.S.) per inhabitant per year; call it three days wages. That is not nothing, but it is also not an economic revolution. Over time remittances grew, peaking at $2.39 per person in 1913 — a bit more than a week’s labor for a male worker at 1910 wage rates. Not nothing, but not the millenium, either.
But the indirect impact was huge. First, it bolstered the growth of smallholders. In 1897, an estimated 8,500 small proprietors held a bit less than 10,000 acres. By 1912, 13,152 smallholders owned plots. Assuming that the average size of holding remained constant, this represented an increase in smallholder ownership of 5500 acres, or over 22 square kilometers, five percent of the land area of Barbados. By 1929, the number of smallholding households had further increased to 17,731. Land ownership on the island remained astoundingly concentrated, but the percentage of Barbadians who owned property rose from 18% in 1897 to 40% by 1929.*
Second, it supercharged the Barbadian banking system. Barbadians opened 16,094 new accounts in government savings banks between 1906 and 1913, and deposits increased 88%. In 1920, deposits per person surpassed $11. That was a level of financial penetration about half of contemporary Spain and two-thirds of Italy; very high for a country as poor as Barbados. It prefigured the island’s emergence as a regional banking center a half-century later.
Third, it prompted the emergence of a Barbadian social insurance state. The “friendly society” served as a form of insurance pool. For a weekly fee of 10 to 12 pence, the societies provided their members with sickness insurance, unemployment insurance, death benefits, free scholarships to household members, and an annual “bonus.” In 1901, there were 101 societies; between 1907 and 1910 a further 110 were founded, peaking at 260 in 1920. Their membership grew from 13,933 in 1904 to 46,207 in 1920. The 1921 census found that 156,312 people lived in households belonging to a friendly society. That was 94 percent of the population. Alongside the friendlies were the “landships,” which provided similar services along with ceremonial drills and uniforms modeled on the Royal Navy. Infant mortality continued to lag the rest of the Caribbean until the 1950s, but the societies aided a huge increase in literacy, to 93 percent by 1946.
In short, remittances financed the creation of a smallholding class, a relatively large banking system, a social insurance scheme, and a big increase in educational attainment. Eventually the government took over the latter two functions, but in a context of fairly high expectations.
Now, none of this is proof that remittances revolutionized Barbados. There are two counterhypotheses. The first is straight out of Acemoglu, Johnson, and Robinson: there were a lot of British settlers on the island, and so they had a vested interest in insuring that the British institutions that maintained law and order would survive and function. So they did, and it was that underlying level of law what gave Barbados its later advantages. (Some have argued that it helped that Barbados was small, flat, and overpopulated.) The second is that the country beaches are really really nice, providing a great source of foreign exchange that is less volatile than other commodities and less likely to run out.
But still. Add the above to the more direct effects of the remittances, and there seems to be a strong case that the Panama Canal was responsible for making Barbados into the very nice place that it is today.
* Assuming four people per household and a constant household size.