POLITICAL ECONOMY OF TOURISM
INTRODUCTION
Tourism is frequently referred to as the world’s largest industry. International tourism alone is seen to generate over US$ 450 billion while total global tourism activity (international and domestic) has been estimated to be worth some US$ 3.5 trillion. Tourism has been recognized as a growth industry and it is expected that by 2020 international tourism will be generating up to US$ 2 trillion a year. Tourism came to be seen as an integral part of social and economic development and for this reason, many countries have adopted tourism development policies to promote themselves as promising tourist destinations. In this unit, we would discuss the political economy approach and how it became important for tourism studies.
THE NEED TO STUDY THE POLITICAL ECONOMY APPROACH
The benefits of tourism including foreign exchange earnings, employment creation, and diversification of the economy have been widely discussed in tourism literature and thus, tourism is seen as a vehicle of development. The economic benefits that follow the development of tourism have been discussed both in development literature and in applied studies done on tourism. Similarly, the research and discussion on the negative environmental and socio-cultural consequences have portrayed the need for sustainable tourism development.
During the Nineties, there was an overall change in attitude towards policies related to tourism. The goal was to optimize the benefits of tourism for the host communities and tourists alike while keeping in mind the social impact on the host community, especially to minimize the environmental impacts of tourism. For example, even activities like trekking on the mountains and climbing peaks like Everest had shown that such activities can be disastrous for the local environment. Tourists tend to bring in large quantities of plastic waste and overuse water and food resources.
For many developing countries tourism is often a principal source of foreign exchange earnings while for developed countries the earnings from international tourism make a significant contribution to the balance of payments. The measurable economic benefits that are widely cited in support of the tourism industry might see tourism as a successful model for development in simplistic terms. In other words, if one perceives only the monetary benefits, there is a great danger of overlooking the social, cultural, and environmental impacts that are mostly negative.
Tourism as an industry depicts healthy growth and is considered a safe development option. But scholars like Stephen Britton (1981,1982) and Mosedale (2011, 2016) have reasoned alternate thinking according to which the literature on tourism’s contribution to development has been narrowly defined by just focussing on the cost-benefit analyses and imprecise comments on the socio-cultural effects of tourism. Such debates on the advantages and disadvantages of tourism are divorced from the political and historical situations of a country thus providing a myopic view.
For a more comprehensive and holistic view, there is a need to engage in theories on political economy, to examine the power hierarchies and unequal exchanges that take place in the tourism scenario. Scholars like Bianchi (2015), Clancy (1999), Hazbun (2008), Mosedale (2011), Steiner (2006), and Williams (2004); have contributed to the development of subdisciplines of the political economy of tourism. The scholarship has reasoned for a need to discuss the issues of poverty and inequalities between and within nations and also investigate tourism within the dialogue of underdevelopment. In other words, it is asked why tourism which is seen to bring numerous benefits to many poor countries, also is seen to perpetuate already existing inequalities and economic and social problems.
Therefore, it is required to understand the underlying mechanisms of inequality and marginalization inherent in the tourism industry, especially in the Third world economies which promote tourism as a development strategy. The political economy approach, especially with regard to tourism is based on the premise that tourism has evolved in a way that it is in sync with the colonial historical patterns of economic dependency. It is seen that wealthy nations develop at the expense of those less fortunate, duplicating the hierarchy between the previously colonized and colonized countries.
POLITICAL ECONOMY APPROACH
According to Bianchi, ‘Political economy comprises the study of the socio-economic forces and power relations that are constituted in the process of the production of commodities for the market and the divisions, conflicts, and inequalities that arise from this. The roots of this approach emanate from the changes that occurred during the Industrial revolution and the development of capitalism in Western Europe during the 18th and 19th centuries.
The study of political economy in its early stages as discussed by its founding thinkers like Adam Smith (1723-1790), David Ricardo (1772-1823), and J. S. Mill (1806-1873) highlighted the impact of capitalism on the social organization of the industrial societies. They were concerned with the production and accumulation of wealth (i.e., economy) and distribution (the political dimension). Later Marx (1818-1883) and Engels (1820-1895) reconfigured the focus on political economy by focussing on the distribution (or lack of distribution) of wealth across social classes.
Political economists study the complex and variable economic, political, social, technological, and cultural forces that shape the organization and dynamics of domestic and international economies (Gilpin 2001: 40). About tourism development the studies that were done on various domains of tourism did not take into account the political economy approach. It is to be noted here that the original studies on tourism focused on the cultural, aesthetic, and economic dimensions, without paying any heed to the power equations that are inherent in all human situations.
It was much later during1960’s and early 1970s, that the focus on uneven development across the world led to critical research on development theory with a major focus on the reduction of inequalities and other social problems. Simultaneously a critical analysis of the tourism studies during the 1970s was highlighted with the work of Young’s, Tourism: Blessing or Blight (1973) and de Kadt’s Tourism: Passport to Development (1979). Both these works critically analyzed the advantages and disadvantages of tourism by focussing on tourism from the perspective of development and dependency theory and also from a political economy perspective.
The key theme of dependency theory is the relationship between development and under development. Dependency theorists argue that developing countries have an external and internal political, institutional, and economic structure that keeps them in a dependent position relative to developed countries.
When developing and developed countries come together in the global economic scene it is seen that the developing nations (periphery) are feeding the developed nations (core) economy. Thus, as per dependency theorists, incorporating the peripheral economies into the global capitalist economies, results not only in influencing production to align at the demands at the center, but also on siphoning the economic surplus to the dominant countries.
As the dominant countries at the center continue to develop based on that surplus, the countries at the periphery struggle with underdevelopment. The political economy that stems from dependency and underdevelopment theory has received little attention in tourism studies research. It was Britton (1982) who realized the importance of this approach and tried to understand the capitalist structures that not only drive tourism development but also inequalities that are visible in the uneven pattern of development.
The dependency paradigm on the other hand also argues that in a society it is not the internal factors that lead to underdevelopment, but it is the external political, institutional and socio-economic structures that keep the developing countries in a dependent position relative to developed countries. A. Frank (1967) in his work Capitalism and Underdevelopment in Latin America described the global economic system as having two poles- a developed ‘metropolitan center’ and an underdeveloped ‘periphery’.
Raw materials that are taken from the periphery are converted into manufactured goods at the center and then are exported back to the periphery. The periphery then becomes dependent on the center to purchase its raw materials and also buy manufactured goods in return, resulting in a flow of capital from the periphery to the centre. This is known as leakage. Dependency theorists discuss this interdependence between the core and the periphery.
Tourism and Core -periphery Dynamics
The dependency theory has been used to describe the relationship between the tourist generating center (mostly Western) i.e. core and the periphery destinations in the developing world. Theorists have argued that the ‘centers’ are not only home to world tourists but also to the economic, political, and commercial interests that control the industry.
Dependency theory which has been one of the leading arguments in tourism research is of the view that developing countries promote tourism with the hope of generating economic benefits, creating jobs and businesses, and improving their quality of life. They enter the international tourism market and become dependent on external forces. Britton’s work on Fiji (1981, 1982) is one of the prominent works that highlight this interdependence between the tourist generating center and the destination (periphery) and its consequences.
He elaborated that how the Third world destinations are exploited by the metropolitans that organize and control tourism development in the periphery. His ‘Enclave Model’ of tourism in a periphery economy suggests that the metropolitan enterprises dictate the form and characteristics of the tourist experience that is offered in the destination. The products and services are also owned and provided by metropolitan firms. Britton in his paper, ‘Tourism, Dependency, and Development: A mode of Analysis’ (1996:156) says that, ‘When Third World countries participate in international tourism, they have to accept various commercial practices that typically accompany any activity that has its historical origins in the developed or metropolitan countries.
The reason for this is simply that being first in the field gives considerable commercial advantages to pioneering firms, since they define, create, and supply the new industry.’ He further asserted that tourism industry because of the predominance of foreign ownership, imposed a development mode on the peripheral destinations which reinforces structural dependency on the developed metropolitan countries. This structural dependency has been equated with the colonialism of the peripheral regions as occurred in history where the dominant First World used power to keep the colonial regions in subordinate positions.This theory also provides a framework to understand the inequalities in power and development levels between and within countries and regions. For example, if we see the tourism facilities provided in a tourist destination in India, say, in Rajasthan; it is to be seen that it is all oriented towards the tourists from the West.
The serving of continental breakfast, the staff trained in Western mannerisms, the fusion cuisine that tries to combine Indian flavors with a western palate; all indicate that the entire show is oriented towards pleasing Western, and especially American tourists. The decors, the music and the shops within the hotels, are all oriented toward the Euro-American tourist. This is more so in places where foreign tourists go most often, like Jaipur and Agra. At the same time, the core-periphery studies have mainly focussed on the international contexts and have neglected to consider the internally induced, domestic core-periphery dynamics.
Weaver (1998) in his paper ‘Peripheries of the Periphery: Tourism in Tobago and Barbuda’ studied the ‘dominant’ islands of Trinidad and Tobago and the ‘subordinate’ islands of Antigua and Barbuda and suggested that in the domestic context tourism acts as a centrifugal force, which both reflects and magnifies existing core-periphery relationships. The ‘dominant’ islands have the power to facilitate or restrict tourist arrivals and foreign investment and have effective control over tourism policy and development for the ‘subordinate’ island.
In India we see that the people from the metropolitan cities are the dominant tourists as they visit smaller and relatively less prosperous destinations. At times they tend to exploit the local people, who are awed by the city dwellers and make all efforts to please them. However, the local people also keep an eye on the money purses of the visiting tourists so the efforts that they make are not altogether altruistic. The dependency theory has been criticized for being overly deterministic (Chaperon and Bramwell, 2013) and highly abstract and pessimistic. It is seen to suggest that tourism development entails exploitation of the periphery by the core.
It also claims that most or all tourism accommodations in developing countries are owned by countries in developed countries. There are instances where the accommodations are in the hands of the local companies. Moreover, even if there is an attempt to please the tourists, it is done with a pragmatic goal. But one cannot deny that most facilities are oriented towards pleasing tourists coming from more prosperous countries of the World.
TOURISM, GLOBALISATION, AND A ‘NEW’ POLITICAL ECONOMY
By the 1980’s the dependency and underdevelopment theories that influenced tourism studies reached a consensus that development studies had reached a deadlock. The Third World countries attempted to pursue strategies of economic self-reliance through state-led tourism development. The idea that the Third World regions were passive and dependent peripheries was no more a reliable paradigm.
By the 1990’s liberalization and free market economic policies led to structural adjustments focussing on micro-level interventions aimed at poverty alleviation and sustainable development. Simultaneously the studies on tourism development moved away from generalized abstractions to small-scale alternatives. The pro-poor schemes were devised with the aim to channel the tourism revenues to impoverished rural communities that had seen little benefits of tourism development. For example, if one goes to the Himalayan foothills, many local villages are now providing tent accommodation and other facilities to the tourists, acting as local guides, sometimes in collaboration with outside agencies. It is clear that outside tourism enterprises would find it nearly impossible to operate in these difficult terrains without cooperation from local people.
With more tourists coming in, many local persons have entered into the trade and are even building small hotels and guest houses of their own. In pilgrim places in India, local tourism is almost always controlled by the Pandas or hereditary temple functionaries. Therefore, there are local hierarchies that also come into play in tourism.
However, at the end of the day, local participation and cooperation is essential for tourism activities to function properly. One must recognize the partnerships between the local communities and private enterprises as essential for successful tourism. Towards this end, large tourist organizations, often rope in local partners and involve them in the exploitation of local resources. Such targeted interventions at the community level/micro level raised concern among scholars and activists for the rise of transnationals that came to dominate different sectors of the tourism industry (Harrison 2001: 33). The growth of transnational firms led to the corporate globalization of tourism and international tourism which further integrated societies into the international system.
A large body of applied empirical work was done to map the distinctive market penetration strategies of transnational tourism and the effects of foreign direct investment in tourism on economic development in developing countries. But studies by Brohman (1996) and Mowforth and Munt (2009) were critical of neoliberal globalization and corporate concentration in the tourism sector which inhibited tourism’s potential to contribute to the development of developing countries. For example, it is seen that three main branches of the tourism industry i.e. hotels, airlines and tour companies have become increasingly transnational and these large enterprises dominate.
The transnational hotels seldom invest large amounts of their capital in the Third World but seek funds from private and government sources. In other words, they keep their profits to themselves and while exploiting local resources, rarely invest anything in their development or renewal. Even the associated infrastructure like the roads and power supplies are funded through local sources or via foreign loans. For example, while the government uses the taxpayers money to build roads in the Himalayas, the maximum advantage will go to those corporates who will then make Five-star hotels in these now accessible places.
While they have made no contribution, they reap maximum benefits. At the international level, the Third World countries that wish to attract international hotels are locked in an unequal trading relationship (Lea 1988:10). They must provide the infrastructure, such as roads, sanitation facilities, and water at their own expense, but the hotels are unlikely to make any contribution to these. The exorbitant hotel rates may discourage local people to stay in them. At the most, they provide some employment at the local level and attract foreigners to these destinations.
Therefore, an inequality between transnational companies and destination persists. A related instance is of transnational tour operators who have revolutionized international tourism through the marketing of tourist packages for which they bargain with the suppliers in the industry. The net effect of such an arrangement has important consequences in the Third World. It is here that the political economy approach is able to show clearly how international tourism flourishes in the world economic system characterized by severe distortions and imbalances. The neoliberal policies that dismantled the barriers to the cross-border mobility of capital and services have further stimulated investment and increased financial flows to destination regions in the Third World.
Also, the destination regions are no more passive tourist recipient regions but are aggressively involved in attracting maximum tourists to their regions with a focus on public-private partnerships. The local community participation is encouraged and environment protection and sustainability is advocated though may not be adhered to in practice. The destination regions want to attract maximum tourists and use the full potential of their geographical and cultural attractions to gain maximum from foreign tourists.
For instance, India with its geographical and cultural diversity with thirty world heritage sites and twenty-five bio-geographic zones attracts domestic and International tourists every year. International tourist arrivals are expected to rise to 30.5 million by 2028 and the government is focused on providing the necessary infrastructure and other facilities to the tourists. The Ministry of Tourism report 2018-19 mentions two major schemes i.e. Swadesh Darshan -Integrated Development of Theme-Based Tourist Circuits and PRASHAD Pilgrimage Rejuvenation and Spiritual Augmentation Drive for the development of tourism infrastructure in the country.
The total contribution by the travel and tourism sector to India’s GDP is expected to increase from Rs. 15.24 trillion (US$ 234.03 billion) in 2017 to Rs 32.05 trillion (US$ 492.21 billion) in 2028. Travel and tourism are the third largest foreign exchange earner for India and nearly 81.1 million people are employed in the tourism sector as of 2017-18. The Government of India has set a target of 20 million foreign tourists arrival by 2020 and double the foreign exchange as well, (Report on Tourism and Hospitality by India Brand Equity Foundation, May 2019). However, while considering the center-periphery relationship, one must take into account the changing nature of this relationship. In the past few decades, there has been a considerable transformation in the global power equations.
While the earlier First World countries continue to dominate, some other regions of the world are emerging as key players in the world of neo-liberal economy. China is emerging as a global economic giant and so is South Korea. One sees many Chinese tourists in various Western destinations. Indian tourists to European countries are also becoming more visible. In East Europe, persons in the tourism industry will fold hands and do a namaste to an Indian tourist. Vegetarian food is also served in many places, quite prominently to accommodate the vegetarian Indians. Theoretically then, the political-economic approach should encompass these movements between the center and peripheries of power, not assuming that they remain static.
CONSTRAINTS OF POLITICAL ECONOMY
Tourism has traditionally been seen mainly from an economic perspective. Like many other areas of economic activity tourism too is shaped by the overall socio-economic order. Most of the tourism that is currently organized by a few large trans-national companies (e.g. Thomas Cook) exerts great influence at the local, regional and national levels. This is true for developing Third World countries that desire and strive for better economic development and are using their available natural resource base to promote sustainable tourism.
The opening of economies across the world, that enhanced movement of people across national borders has led to increased international tourism. With the use of communication technologies, the tours today are planned either by the consumers or the representatives from the tourism industry with great speed. The remotest destinations on the globe are now visited and with advanced means of transportation, no region or destination is inaccessible. The earlier notion that continued liberalization of trade, with reduced restrictions and regulations, especially in the tourism business would bring worldwide economic growth and would eventually eradicate poverty and increase incomes persisted.
This hypothesis, however, has not been proven and there is increasing evidence that globalization did not have positive effects on many countries as it promised particularly in developing countries. Scholars on globalization and its effect on the tourism industry have pointed out that if people (those working in the tourism industry as semi-skilled or unskilled workers) are to participate fully in the global economy then the wages and social conditions must be so created to allow their full participation. The transnational companies, those wholly or partly involved in tourism, take the major share of the profits and often do not participate in the environmental concerns of the destinations. There is a possibility that when the destinations are stressed/overused their infrastructure might crumble with the increased influx of tourists than it can hold/ entertain and gradually might fail to attract any tourists. The possibility is like mining, the tourist industry will suck dry the local natural resources, such as water and forests, and then move on.
For the global industries, there is no emotional or economic attachment to the local people or places. To them, every location is only a profit-making commodity. Tourism, for example, has destroyed coastal regions, like in Kerala where large tracts of Mangroves were cut down to make hotels and Malls. In the consequence of a natural disaster like the Tsunami, such depletion of the natural cover has been shown to have frightening consequences. There are chances that the particular location may be destroyed forever. While it might mean the end of the road for the local inhabitants who lose their livelihood and ecological balance, for the Five-star hotel chains it may just mean that they shift their location to another lucrative destination.
The neglect of social infrastructure and disintegration of the built environment would gradually fail to create the wealth that it was supposed to. Tourism which is seen as a major player in the ‘new economy’ might not create the required development and growth which was intended. This is the major question that confronts the tourism industry and communities all over the world today and the issue of creating a sustainable tourism business and increased concern for the environment would be necessary if international tourism is to survive.
Butler (1980) provided a ‘product life-cycle model for the development and management of tourist destinations. This model traces the trajectory of the tourism product from the initial exploration of development possibilities to its eventual decline. The model is contingent on the overexploitation of the product without due concern being given to social and environmental concerns (Reid 2003: 39). The market economy may be beneficial to the tourism industry and its development but social and environmental concerns should be taken care of and government policies should be put in place.
Also, the political discourse on ecological sustainability should be crystallized. The tourism industry should not be the creator of the problem but should be part of the solution and issues of ecological sustainability, reduced energy consumption, and reduced pollution at the destinations should be encouraged. The communities at the destinations should be organized and encouraged to participate in tourism development projects as is being done in certain destination sites in India like the Northeastern region.
The aim is to develop a satisfying community tourism project where the local communities participate and are benefited from the industry. Adequate income when generated at the local level would not only help in the growth of the tourism industry but would also lessen the polarisation between the haves and have-nots and allow each section to benefit from the new economy and not allow the exclusive authority of capital to just one section of society.