Dr Win­ford James

At the start of the new year, it is im­por­tant to con­tin­ue clar­i­fy­ing the ba­sic chal­lenges con­fronting the na­tion’s econ­o­my. I end­ed the last col­umn with a brief state­ment on di­ver­si­fi­ca­tion. The lat­ter must be fo­cused on ex­port­ing and re­lat­ed in­ter­na­tion­al com­pet­i­tive­ness.

In Trinidad and To­ba­go, eco­nom­ic di­ver­si­fi­ca­tion es­sen­tial­ly means pro­duc­tion and ex­port of pro­fes­sion­al ser­vices like ed­u­ca­tion and fi­nan­cial ser­vices, and, of course, the cre­ative ser­vices, all with cre­ativ­i­ty and con­tin­u­ous in­no­va­tion. That is what would grow pro­duc­tiv­i­ty, prof­its, wages, and gov­ern­ment rev­enues, and dis­pense with chron­ic for­eign ex­change prob­lems. That is how GDP per capi­ta would grow sus­tain­ably with­out us run­ning in­to for­eign ex­change short­ages – the re­al mean­ing of grow­ing in­ter­na­tion­al com­pet­i­tive­ness. Nei­ther Trinidad nor To­ba­go is con­tin­u­al­ly im­prov­ing its in­ter­na­tion­al com­pet­i­tive­ness. But we need to say more about this kind of di­ver­si­fi­ca­tion.

In­ter­na­tion­al com­pet­i­tive­ness is main­ly in­creased by faster learn­ing. We now have ev­i­dence from the CSO which shows that for every 1% in­crease in the share of work­ers with uni­ver­si­ty de­grees, em­ployed es­pe­cial­ly in the pro­fes­sion­al ser­vices, month­ly in­comes will grow by 1.5%, and this ef­fect will con­tin­ue un­til the share of such work­ers ap­prox­i­mates 38%, quite close to the 43% or so achieved by Sin­ga­pore. We are now near 16%, so we have a long way to go.

We al­so have ev­i­dence that this process must be ac­com­pa­nied by an in­crease in the share of oc­cu­pa­tions that are ei­ther cre­ative and in­no­v­a­tive or sup­port­ive of cre­ativ­i­ty and in­no­va­tion. Every 1% growth in the share of such oc­cu­pa­tions, es­pe­cial­ly in the pro­fes­sion­al ser­vices, will cause mean month­ly in­comes to grow by 1.6%, un­til the share ap­prox­i­mates 18%. Ex­cept for the cre­ative in­dus­tries, we are far from that turn­ing point now. Since our econ­o­my is small, much of the cre­ative and in­no­v­a­tive out­put of pro­fes­sion­al ser­vices must be ex­port­ed, which is just fine. Most of mod­ern trade is trade in dif­fer­en­ti­at­ed prod­ucts, which is called in­tra-in­dus­try trade.

The pro­fes­sion­al ser­vices rep­re­sent the best prospects for re­struc­tur­ing out­put and ex­ports be­cause their av­er­age month­ly in­comes are sub­stan­tial­ly high­er than those in the in­dus­tries that re­ly heav­i­ly on un­der­e­d­u­cat­ed work­ers. Af­ter ad­just­ing for the un­cer­tain­ty cre­at­ed by in­ter­na­tion­al prices and oth­er shocks, their av­er­age in­comes are al­so high­er than those of the en­er­gy-man­u­fac­tur­ing mix, even though about 24% of the work­ers in the en­er­gy sec­tor hold uni­ver­si­ty de­grees. His­tor­i­cal­ly, de­pen­dence on this sec­tor has been the main rea­son for the col­lapse of the im­port cov­er and gov­ern­ments along with it.

With­out a struc­tur­al shift of the kind we have de­scribed above, there will be no so­lu­tion to the de­vel­op­ment prob­lems of the coun­try: no place for the un­der­e­d­u­cat­ed to find jobs that ful­fil the promise of high­er liv­ing stan­dards with suit­able in­vest­ment in knowl­edge and skill ac­qui­si­tion; no ex­ploita­tion of the pos­si­bil­i­ties for in­dus­tri­alised tourism in To­ba­go; no sus­tain­able so­lu­tion to the prob­lems with our im­port cov­er. Pub­lic spend­ing will not de­liv­er in­creas­ing rev­enues from eco­nom­ic de­vel­op­ment.

Be­cause of the un­der­cap­i­tal­i­sa­tion iden­ti­fied up­front as char­ac­ter­is­tic of the base­line con­di­tions in the na­tion­al econ­o­my, mar­kets can­not en­gi­neer these changes by them­selves. Mar­ket process­es must be com­ple­ment­ed by sound in­dus­tri­al pol­i­cy, in­clud­ing those aimed at ad­dress­ing mar­ket fail­ure and ra­tio­nal­is­ing state en­tre­pre­neur­ship. Pub­lic pol­i­cy is the cul­prit we must con­front here. It is a ver­i­ta­ble dis­ease.

The his­tor­i­cal ori­en­ta­tion and con­tent of pol­i­cy have ef­fec­tive­ly blocked the de­vel­op­ment of pro­fes­sion­al ser­vices as ma­jor ex­ports. Let’s call it ‘the pub­lic pol­i­cy dis­ease’. This is not the Dutch dis­ease. There is no ev­i­dence that the bar­ri­ers to the de­vel­op­ment and ex­port of pro­fes­sion­al ser­vices are to be found in the ap­pre­ci­a­tion of the re­al val­ue of the na­tion­al cur­ren­cy. On the oth­er hand, the gov­ern­ment owns or con­trols most of the sup­ply­ing in­sti­tu­tions in ed­u­ca­tion, health­care, fi­nance, and even the cre­ative in­dus­tries. Gov­ern­ment pol­i­cy de­ter­mines their eco­nom­ic ori­en­ta­tion, in­vest­ment ini­tia­tives aimed at in­no­va­tion, and their des­tiny. Un­der-in­formed pol­i­cy has been block­ing the shift of the high-pro­duc­tiv­i­ty in­dus­tries to the de­vel­op­ment of their ca­pac­i­ty to ex­port. Gov­ern­ment pol­i­cy de­lib­er­ate­ly fo­cus­es its sup­ply ca­pac­i­ty on ser­vic­ing do­mes­tic de­mand.

Why? The fact of the mat­ter is that, from in­sti­tu­tion to in­sti­tu­tion, gov­ern­ment has been as au­thor­i­tar­i­an as ever, mak­ing de­ci­sions based on a tiny share of the in­for­ma­tion need­ed for pol­i­cy to be sound and so­lu­tion-ori­ent­ed. The ex­ec­u­tives and their branch­es in pub­lic ad­min­is­tra­tion de­cide what is to be spent and when, with min­i­mal ref­er­ence to leg­isla­tive over­sight and its full-in­for­ma­tion process­es. One piece of the CSO ev­i­dence is that pub­lic ad­min­is­tra­tion has one of the low­est shares of oc­cu­pa­tions that are cre­ative and in­no­v­a­tive or that pro­mote such. Its share is around 2% or 3% - piti­ful­ly in­ad­e­quate.

This is why it is im­por­tant to ob­serve that there is no well-de­signed leg­is­la­ture that could spe­cialise in gath­er­ing ap­pro­pri­ate in­for­ma­tion and then make ap­pro­pri­ate laws to ex­er­cise sig­nif­i­cant re­spon­si­bil­i­ty for, and con­trol over, ex­ec­u­tive agency ac­tiv­i­ties and their spend­ing de­ci­sions. There is no well-in­formed spe­cial­ist leg­is­la­ture de­signed to ef­fec­tive­ly de­fine the pur­pos­es for which mon­ey may be spent, ad­just fund­ing lev­els for spe­cif­ic pro­grammes, and pro­hib­it or pro­mote ex­pen­di­tures ac­cord­ing­ly. There is no leg­is­la­ture that could rou­tine­ly ex­am­ine past fail­ures, cur­rent poli­cies, and de­sign laws to im­prove the de­vel­op­ment process. The ex­ist­ing leg­is­la­tures, whether in To­ba­go or Trinidad, still can­not en­sure that the gov­ern­ment re­ceives the best val­ue for ex­pen­di­ture of pub­lic funds, es­pe­cial­ly in the form of eco­nom­ic di­ver­si­fi­ca­tion.

Op­er­at­ing un­der such arrange­ments, there can be no suc­cess­ful eco­nom­ic di­ver­si­fi­ca­tion and as­so­ci­at­ed sus­tained growth of in­ter­na­tion­al com­pet­i­tive­ness and the same CSO da­ta we are cit­ing proves that. Over the last 25 years, the in­dex of mo­men­tum in grow­ing the mean month­ly in­comes of the econ­o­my has av­er­aged about 41% of what it should be if the econ­o­my was di­ver­si­fy­ing.

We will con­tin­ue next Sun­day (Jan­u­ary 11, 2026) with a fo­cus on re­forms need­ed for the pol­i­cy and en­tre­pre­neur­ial in­fra­struc­ture.