I have argued in my last two columns that all our prime ministers, including Kamla Persad-Bissessar and Dr Keih Rowley, were granted losing economic and political hands, and that Persad-Bissessar has been granted the same kinds of hand in the parliamentary elections of April 28.
I have posited, following Lloyd Best (who I regard as being still relevant as a scholar of economics), that the country is still running an almost pure plantation economy that features excessive dependence on a highly capitalised oil and gas industry operated by international corporations.
It offers up a primary or intermediate product for mainly intermediate consumption and the prices are subject to the vagaries of a volatile marketplace that often gives us a false hope of high prices.
I have shown that, from Dr Eric Williams to Rowley, it is falling prices (more than any other factor) that have been responsible for the fall of their governments.
Compounding matters is that, in the rest of the economy, there have long been large pools of undereducated and, more generally, undercapitalised workers in activities such as agriculture, retail, and “make work” government programmes, like CEPEP, URP and others. These conditions make economic transformation away from oil and gas difficult but necessary.
Indeed, Arthur Lewis and Best have left us with three basic principles of economic transformation and development that we would do well to embrace.
The first principle is that we must find a way to grow activities that produce capital faster than the activities that produce consumer supplies.
The second principle is that we must increasingly rationalise our international trade towards exploitation of the country’s structure of comparative advantage.
And the third principle is the need for sound and well-informed facilitating public policies.
Let me develop the second and third principles a bit.
How can we rationalise our international trade towards exploitation of the country’s structure of comparative advantage?
Leaving aside oil and gas as inheritance, we need to shift to capital services, since we can produce them much more efficiently than we can produce consumer supplies.
In fact, there is an ordering of efficiency of the products which is informed by the intensity of use of high levels of knowledge, skills, and self-confidence used to produce them, the high rate at which value is added, and the regularity of innovation and creativity during production.
If we were to order the capital services vertically downwards, we would start with tertiary education, then move down through healthcare, financial services, the creative industries, associated plant and accommodation facilities, tourism to manufactured consumer supplies.
The ordering is reinforced by the fact that as local and global incomes grow, an increasing share of it is spent on the highly ranked products.
Innovation and creativity cause some industries to jump the queue; in our case, the creative industries would upset the order from time to time.
In practice, we have cornered ourselves close to, or at the bottom of, this list, but there is room at the top.
Lewis pointed out that capital production by Caribbean countries makes commonsense as well as economic sense. It is not smart for a people to spend scarce foreign exchange on importing stuff it can produce efficiently (even if with international help), and it makes sense to export some of what is produced as a source of foreign exchange.
The gains from restructuring output and trade are rising wages and rising profits and profit rates. Rising profits and profit rates can attract international profit-seeking risk finance and foreign direct investment, so we need not think of doing this alone. No country has made the transformation without international collaboration, mainly achieved through capital and skill inflows.
By and large, this is the agenda of economic transformation that Persad-Bissessar must now consider pursuing—apart from oil and gas.
The third principle is the need for sound and well-informed public policies to facilitate the transformation.
Since we are running an undercapitalised economy, we cannot afford to leave it up to the markets to produce the restructuring of output and trade needed to solve existing problems. The existence of many barriers and bottlenecks, rooted in capital supply shortages, strongly suggests that we should not be thinking of allowing the markets alone to do the job of moving resources around.
Sound policies and interventions of active government are needed to motivate and facilitate the movement of local and international capital with knowledgeable and skilled workers into the right industries. They would require an adequate flow of data, information, and knowledge to decision-makers and lawmakers, alongside rapid learning on the job. Data, information, knowledge, and fast learning are like the fuels on which an economy and society run.
Which brings us to the observation that we need constitutional reform to enable the necessary flows.
To fix these problems, PM Persad-Bissessar must buy new cards.
Winford James is a retired UWI lecturer who has been analysing issues in education, language, development, and politics in T&T and the wider Caribbean on radio and TV since the 1970s. He has also written thousands of columns for all the major newspapers in the country
