Next week, T&T heads to the polls to de­cide who forms the gov­ern­ment for the next five years.

Tis’ the sea­son for walk­a­bouts, mo­tor­cades, me­dia jin­gles and so­cial me­dia ads.

Promis­es are be­ing made every which way you turn.

I haven’t read a man­i­festo from any par­ty be­cause I was read­ing his ini­tial ad­dress to the na­tion by then prime min­is­ter Dr Row­ley as a start­ing point.

I didn’t both­er to move on from there.

In­stead, I am mind­ed to sug­gest that all the glit­ter of elec­tion promis­es thrown around like if it is Car­ni­val Tues­day will sparkle briefly and then wash down Fred­er­ick Street in a few months from now when the rains come and Port-of-Spain floods.

Up to to­day, the T&T econ­o­my re­mains an­chored to hy­dro­car­bons, state sub­si­dies and trans­fers and find­ing ways to fund a deficit bud­get.

I have been writ­ing about these three con­cerns at dif­fer­ent times, for twen­ty one years.

Noth­ing changes be­cause some­thing cru­cial is miss­ing, and un­til we ac­knowl­edge what it is, every elec­tion sea­son promise will re­main hol­low.

That miss­ing in­gre­di­ent is a more ro­bust, more liq­uid, and more dis­ci­plined cap­i­tal mar­ket en­vi­ron­ment.

So that you grasp the ter­mi­nol­o­gy, cap­i­tal mar­kets com­prise the stock and bond mar­kets along with oth­er means of pub­lic fi­nanc­ing such as ven­ture funds and se­cu­ri­ti­sa­tion plat­forms.

In a T&T con­text, I will al­so add a more open and trans­par­ent in­ter­est rate and for­eign ex­change regime to the mix.

In com­bi­na­tion, this is the plumb­ing of a pro­gres­sive non-en­er­gy econ­o­my.

It is the ve­hi­cle thor­ough which na­tion­al sav­ings, es­pe­cial­ly house­hold sav­ings, are chan­neled in­to pro­duc­tive en­ter­prise.

But more than that, it pro­vides feed­back sig­nals for risk, it re­wards ef­fi­cien­cy and pun­ish­es waste.

In gen­er­al, this is in­cred­i­bly im­por­tant.

In an ag­ing so­ci­ety that needs to ur­gent­ly ad­dress their own re­tire­ment needs, it’s an im­per­a­tive.

What I am dis­cussing here is not a mere badge of de­vel­op­ment; the cap­i­tal mar­kets are the mech­a­nism by which so­ci­eties dis­cov­er which ideas de­serve scarce re­sources and which fan­tasies must fade.

In their ab­sence, de­vel­op­ment and fi­nanc­ing de­ci­sions de­fault to min­is­ters, min­istries, state boards and com­mer­cial banks whose in­cen­tives are skewed to­ward short term per­spec­tives, po­lit­i­cal loy­al­ty and col­lat­er­al com­fort.

The re­sult is stunt­ed risk­tak­ing, un­der­cap­i­talised en­tre­pre­neurs and an econ­o­my wait­ing on the next gas field like a child wait­ing on an al­lowance.

The dis­cus­sion around the Drag­on gas field bears this out.

The irony is that we went for a risky bet in the en­er­gy sec­tor but for the on-shore econ­o­my the gen­er­al mantra is that “Trinida­di­ans are very risk averse.”

These nar­ra­tives are flawed.

Ex­ter­nal

Some­times it’s eas­i­er to look out­side for per­spec­tive.

To this end, I quote an ex­cerpt from a JP Mor­gan an­a­lyst pub­lished last month.

“Here’s the in­ter­est­ing thing about the stock mar­ket: it can­not be in­dict­ed, ar­rest­ed or de­port­ed; it can­not be in­tim­i­dat­ed, threat­ened or bul­lied; it has no gen­der, eth­nic­i­ty or re­li­gion; it can­not be fired, fur­loughed or de­fund­ed; it can­not be pri­maried be­fore the next midterm elec­tions; and it can­not be seized, na­tion­alised or in­vad­ed. It’s the ul­ti­mate vot­ing ma­chine, re­flect­ing prospects for earn­ings growth, sta­bil­i­ty, liq­uid­i­ty, in­fla­tion, tax­a­tion and pre­dictable rule of law.”

That sin­gle para­graph was made in re­la­tion to the cur­rent Trump era shenani­gans.

It crys­tallis­es what T&T has lacked for decades.

A na­tion­al vot­ing ma­chine be­yond the bal­lot box, one that tal­lies con­fi­dence, com­pe­tence and cred­i­bil­i­ty dur­ing the five year elec­tion cy­cle.

When a gov­ern­ment un­veils a pol­i­cy, in­vestors press the green or red but­ton and, in the process, sig­nal their ap­proval or dis­con­tent.

Prices ad­just, yields move, liq­uid­i­ty dries up or floods in, and the pol­i­cy­mak­er re­ceives a re­al­time grade.

No Cen­tral Bank bul­letin (months af­ter the fact), sta­tis­ti­cal of­fice da­ta, IMF re­port, call­in pro­gramme or par­lia­men­tary de­bate can dis­guise the ver­dict.

Be­cause if done right and there is broad pub­lic par­tic­i­pa­tion, the cap­i­tal mar­kets will ag­gre­gate the judge­ment of thou­sands of in­de­pen­dent ac­tors.

They will pierce through pro­pa­gan­da and com­pel ac­count­abil­i­ty.

Why?

Be­cause they have cap­i­tal at risk and that’s how you pro­tect your cap­i­tal.

We are see­ing this dis­ci­pline in full op­er­a­tion in the Unit­ed States right now.

The US mar­kets are ac­tu­al­ly be­hav­ing like an emerg­ing mar­ket.

That may be be­cause the poli­cies are what you would ex­pect from an emerg­ing mar­ket coun­try as op­posed to the lead­ing de­vel­oped coun­try in the world.

In the US, stocks are down, the US dol­lar is down and bond yields are high­er.

Usu­al­ly in a time of un­cer­tain­ty re­flect­ed in a de­clin­ing stock mar­ket, the US dol­lar is up and bond yields fall as more peo­ple rush to the safe­ty that the US rep­re­sents.

A pow­er­ful sig­nal is be­ing sent.

As a re­sult, pol­i­cy­mak­ers are com­pelled to ad­just.

This feed­back loop leads to bet­ter out­comes and this is cer­tain­ly an im­prove­ment on the echo cham­ber that is so per­va­sive across our lo­cal gov­er­nance.

The mar­ket dy­nam­ic in the US is not a par­ti­san con­spir­a­cy; it is how ma­ture democ­ra­cies keep ex­ec­u­tive pow­er teth­ered to re­al­world con­se­quences.

A gov­ern­ment can dis­miss jour­nal­ists at a press con­fer­ence, ig­nore think tanks or scold sea­soned pro­fes­sion­als as “naysay­ers,” as ours have done over the past years.

We have had eco­nom­ic de­vel­op­ment boards, road to re­cov­ery com­mit­tees and de­vel­oped coun­try vi­sions that turned out to be great for in­creased sales of fil­ing cab­i­nets.

How­ev­er, a gov­ern­ment can­not ig­nore move­ments of cap­i­tal.

What they can do and have done is try to re­strict and slow the move­ment of cap­i­tal, di­rect­ing it to where they want it to go.

This is sub­op­ti­mal.

We can ex­am­ine this is­sue in a US con­text.

If trea­sury yields spike, fund­ing the deficit be­comes prici­er; if the eq­ui­ty risk pre­mi­um widens, cor­po­rate in­vest­ment stalls; if the cur­ren­cy wob­bles, vot­ers feel im­port­ed in­fla­tion in their gro­cery carts.

Mar­kets there­fore, oblige ad­min­is­tra­tions to re­cal­i­brate, com­pro­mise and oc­ca­sion­al­ly re­verse course. The dis­ci­pline is re­lent­less, and it safe­guards pen­sions, mort­gages, jobs and pur­chas­ing pow­er.

In oth­er words, it acts as a safe­guard for the cit­i­zens. This check and bal­ance is prob­a­bly why lo­cal politi­cians do not fa­vor it.

Loops

In Port-of-Spain, the feed­back loop is faint to nonex­is­tent.

Gov­ern­ment re­lies heav­i­ly on the is­suance of pri­vate­ly placed debt in­stru­ments, that com­mer­cial banks soak up, leav­ing lit­tle in­cen­tive to is­sue long­dat­ed notes that would cre­ate a bench­mark curve for pri­vate is­suers. An­a­lyst cov­er­age is sparse, ac­tivist share­hold­ers are frowned up­on and en­gaged trans­paren­cy is a nice to have rather than a re­quire­ment of good gov­er­nance.

Con­se­quent­ly, when an ad­min­is­tra­tion floats an idea that would un­set­tle busi­ness and by ex­ten­sion the econ­o­my, there is no im­me­di­ate, quan­tifi­able mar­ket re­coil.

The shock is ab­sorbed in board­rooms and dis­cussed amongst fi­nanciers, which ei­ther lob­by qui­et­ly or shelve projects.

Vot­ers (cit­i­zens) feel the im­pact years lat­er, by which time the mis­aligned op­por­tu­ni­ties are blamed on an op­pos­ing politi­cian.

Why have we tol­er­at­ed this tom­fool­ery?

We are ig­no­rant of the fact that a flour­ish­ing cap­i­tal mar­ket di­lutes the pa­tron­age pow­er of the po­lit­i­cal class. Cap­i­tal mar­kets de­moc­ra­tise pow­er, and those who cur­rent­ly wield con­cen­trat­ed in­flu­ence in­stinc­tive­ly re­sist that dif­fu­sion.

Yet the ben­e­fits of em­brac­ing the vot­ing ma­chine are over­whelm­ing.

Deep­er mar­kets (in­clud­ing cur­ren­cy mar­kets) mo­bilise do­mes­tic sav­ings, at­tract for­eign port­fo­lio flows, di­ver­si­fy house­hold wealth be­yond prop­er­ty and bank de­posits, and should low­er the cost of cap­i­tal for ex­porters com­pet­ing on thin mar­gins.

Gov­ern­ment’s work­ing pre­dom­i­nant­ly with com­pa­nies that en­joy a pub­lic list­ing en­sures that there is a lev­el of con­tract trans­paren­cy that dis­cour­ages crony­ism.

Scep­tics will ar­gue that a more open flow of funds will lead to volatil­i­ty and desta­bil­i­sa­tion.

That think­ing should be a rel­ic of our colo­nial past be­cause it is sim­ply an ex­cuse for cen­tralised con­trol. Yes, mar­kets can be fick­le, but we un­der­es­ti­mate our peo­ple and then refuse to em­pow­er them.

We as a coun­try can­not con­tin­ue foot­ing the bill for opaque de­ci­sion­mak­ing hid­ing be­hind the veil of "con­fi­den­tial­i­ty claus­es."

A vi­brant mar­ket would shine sun­light in­to the ac­counts of both gov­ern­ment and en­ter­prise, em­pow­er­ing civ­il so­ci­ety far more ef­fec­tive­ly than any In­tegri­ty Com­mis­sion press re­lease.

The bot­tom line is this.

We need to broad­en our de­f­i­n­i­tion of democ­ra­cy and en­able the vot­ing ma­chine.

Cast­ing a bal­lot is nec­es­sary, but it is not suf­fi­cient. Cit­i­zens al­so need to ad­vo­cate for and then par­tic­i­pate in the cap­i­tal mar­kets.

When they do, we get the pe­ri­od­ic bal­lot of prices, rates, yields and vol­umes.

We need the roll­call of cap­i­tal that re­wards dis­ci­pline and pun­ish­es fol­ly.

Un­til we build that mech­a­nism, man­i­festos will keep re­cy­cling slo­gans and we will keep com­plain­ing about déjà vu af­ter every elec­tion cy­cle.

Ian Nar­ine is a fi­nan­cial con­sul­tant who is hop­ing to cel­e­brate next week, once Liv­er­pool FC wins the Eng­lish Pre­mier League.

Please send your com­ments to ian@ian­nar­ine.com