In Beckett’s famous play, “Waiting for Godot”, the two protagonists wait beside a tree for a mysterious man, Godot. However, Godot constantly sends word that he will arrive “tomorrow”, but that never happens. Beckett illustrated the futility of those who rely on illusions in their lives. The Keith Rowley government of Trinidad has recently criticised VP Bharat Jagdeo for mentioning – in an informal context – that Trinidad was “falling apart” for not diversifying its oil-based economy during its entire independent years. Jagdeo said Trinidad was suffering from “Dutch disease”, which should serve as a cautionary tale for Guyana not to repeat that mistake.
But was Jagdeo’s point a biased opinion meant to denigrate the Trinidad Government or its people? Absolutely not. After the present Trinidad administration first acceded to office, the Inter-American Development Bank (IADB) issued a policy paper on Trinidad in 2016, “Diversification in Trinidad and Tobago: waiting for Godot?” This was a direct assessment of the PNM’s handling of its oil-based economy, and the paper’s title alone was much more devastatingly judgmental than anything VP Jagdeo has said. We quote extensively and directly from the paper as much to support the PPP Government’s decision to focus on diversifying our economy as to remind PM Rowley that it is “better late than never”.
“An incessant theme threading policy discussion in Trinidad and Tobago (TT), although with an ebb and flow over time, is the diversification of the economy away from oil and gas towards non-oil tradables. This topic is once again in the forefront of policy discussions following the recent oil price decline and subsequent to a new administration that took office in September 2015. Facing the new administration is the task of dealing with low oil prices in the context of high public expenditure and continued expectations of direct public provision of jobs and income transfers, either directly or through tax expenditures to consumers and businesses. Whether oil prices remain low or not in the near future, the task is not only macroeconomic stabilization–fiscal adjustment, but to boost economic growth, hence employment over the medium term. Diversification needs to play a critical role in that endeavour.”
While the paper focused on “the potential role that the exchange rate plays in diversification, fiscal adjustment and economic growth”, it took pains to cite advice given to Trinidad almost a decade before: “…we argue that the standard policy advice – implementing structural reforms, improving institutions and the business environment, creating infrastructure and reducing regulations – though necessary, will not be sufficient, because of fundamental market failure stemming from Dutch disease.”
The paper pointed out that the T&T Government had been informed that “Diversification has been a policy imperative going back to the country’s first Five Year Plan and in subsequent ones. From these, the following can be discerned: i) Oil & gas will run out. At current rates of resource extraction, it is estimated that by 2025-2030, Trinidad and Tobago’s gas and oil fields will be fully depleted. (ii) Generate more employment meanwhile. Energy accounts for 44 percent of gross domestic product (GDP) but it only employed 3.1 percent of the labour force over the last decade. (iii) Reduce vulnerability to the vagaries of international prices of oil and gas. (iv) To increase overall economic growth, as countries with a high percentage of natural resource exports grew systematically slower than do those with few resources.”
The authors concluded that a 1995 paper was “prescient”. “In the early phase of the oil boom, foreign earnings were hived off into ‘Special Funds’, reflecting a conscious decision to conserve this resource. Once oil prices began to fall, however, there was a reluctance to put the brake on spending, and these reserves were quickly used up. With the buffer gone, and with the major foreign exchange sector in difficulty, the need for quick and strong corrective action became inevitable.”
And they noted, “…perhaps Santayana’s caution that ‘those who cannot learn from the lessons of history are doomed to repeat them’ is also relevant today.”
Both in Trinidad and Guyana.
