Diversification, recession and elections | Columnist – Trinidad & Tobago Express Newspapers

The current Government, though it has claimed victory in the recent local government election (as has the opposition, United National Congress), admitted that it has lost control of Sangre Grande and some seats in other councils, even though it has won the majority of seats throughout the island. If we were to also consider these elections as a statistical exercise to gauge the change of confidence in the PNM based on the sample of the population that votedsome 360,000 it is clear that the view held by the population of the Peoples National Movement has shifted away from that of 2016 and immediately after the last general elections it won. There is less confidence in the PNM given the reduction in the percentage of votes cast for the PNM and the extremely low error of the sample. Indeed, compared with the local elections of 2016 the PNM dropped statistically (48.3 per cent in 2016 and 43.38 per cent in 2019) considering that for both elections the sampling error was some 0.18 per cent. Of course the sample could be biased; as some say that the PNM voters stayed at home.

However, the setback could be laid at the doorstep of the difficult economic circumstances of our plantation in which this Government has found itself during the past four years; it suffered a loss of income (rents) of some $20 billion and even though it resorted to borrowings and drawdown from the Heritage and Stabilisation Fund (HSF), it had to reduce its spendingspending that stimulates the on-shore economy. These, coupled with the employment disaster it incurred at Petrotrin, could have damaged its reputation as a caring government in certain quarters. Hence the budgets attempted to offset these by increases in the minimum wage and further the wages of URP, CEPEP and OJT, a reduction in VAT, and other grants were givenall to alleviate some of the hardships of the economic downturn.

However, Governments decreased financial circumstances were not by choice, nor an independent input to the economy, with the resulting woes to the public. As a plantation the economic performance of the on-shore economy is a function of the rents, the US$, left in the country- taxes, local expenses of the petroleum sectorsin the exploitation of the resource. We have found ourselves in the position of exploiting a depleting high cost resource in a world market of cheaper oil and gas and production shortfalls of gas, forcing some of the petrochemical plants to be shut down; one of them an ancient and inefficient plant. Still, the up-streamers have recently found some high-price gas in the deep.

If we were to take a wider view; all of our governments are to blame, given our low risk private sector, for not taking the initiative to effectively diversify the economy and create new global competitive export companies. What was attempted were abject failures, useless incentives and industrial parks. If instead one were to look at the restricted economic circumstances of this recession, then one may blame the government for not levelling with the population about the dire economic situation in which we have found ourselves. Instead, the government insisted that (they were getting it done) by their effort the economy was turned around, we had avoided the International Monetary Fund (IMF) and are now on a growth path, given our allegedly low inflation and unemployment rates- we can see clearly now!

Whatever the actions taken by Government with an extended period of low retained rents from the petroleum sector, the on-shore economy that employs some 96 per cent of the workforce will contract, though the rate of doing so may be slowed by the use of our foreign reserves and such borrowings, and drawdown from the HSF in an attempt to maintain import levels. Any such reduction in rents restricts the quantity of imports upon which the bulk of the on-shore activity depends. This forced project slowdown, downsizing and/or closure of some businesses, unemployment, reduced income particularly of the low and middle income groups- this is the natural response of our economic system. The reduced capacity of the population to spend TT$s automatically reduced aggregate demand (much of which is for imports) in synch with the reduced capacity to earn rents.

Some are calling for the devaluation of the TT$, which would more quickly force the contraction of the economy, the speed of our race to the bottom of the economy and, of importance, establish the volatility of the TT$ and the risk it and wealth so denominated, holds. Though government actions may have slowed the rate of the economic contraction, its message to the population was, unfortunately, that we are again moving upwards towards the good times, a situation not reflected by circumstances on the ground- precipitating a loss of confidence in the government.

Similar to what Singapore did many years ago, the immediate response of this government should have been to set about with the R&D institutions to create a diversified economy via the process of the Triple Helix and create a new class of entrepreneurs, something which even the Vision 2020 promised. Surely the building of highways and a Toco port, infrastructure, on their own will not encourage exports even if, unfortunately, the government claims that this will open up economically the North and East of the country.

It was an error of major proportions that the EADB was disbanded since it showed the promise of becoming an entity that understood the economic development process. Something has to be put in its place to take us along that path.

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Diversification, recession and elections | Columnist - Trinidad & Tobago Express Newspapers