Trinidad and Tobago: Lessons From, and For, a Caribbean Model of Economic Growth. | by Dr. Zophia Edwards

Methanex Corporation, Trinidad and Tobego
Methanex Corporation, Methanol Plant in Trinidad and Tobago

When we think of spectacular economic growth, we often think of the economic stories of countries such as Hong Kong, Singapore, South Korea, and Taiwan. However, Asia, with its ‘tigers’, is not the only region in the developing world with a profitable model of economic success. We can find equally teachable examples in such environments as the Caribbean.

The twin island Republic of Trinidad and Tobago is unlike almost any other Caribbean island. Despite the overall picture given of ‘the Caribbean’ by a quick glance through the holiday brochures at your average dentist’s office, you rarely encounter flocks of sunburned tourists roaming aimlessly around Trinidad and Tobago. Hotel strips that line the prime beach fronts, and hordes of petty traders pestering you to buy cheap “No problem, mon” T-shirts are also not common to the island republic.

Instead, what you find are vibrant cities with people bustling to and from work; industrial zones with petrochemical, fertilizer, and steel plants; miles of unspoiled beaches, rivers and waterfalls; shopping malls, restaurants and bars that run the gamut from uber swanky lounges to the traditional ‘rum-shops’, all filled with local patrons.

The reason for these differences between Trinidad and Tobago and the rest of the Caribbean? First, Trinidad and Tobago’s economy does not depend on tourism— as do so many of the other neighbouring island nations. Second, its rapid economic and social advancement has been fueled by the country’s oil and gas industries. The level of development the country has witnessed over the last two and a half decades has made it a veritable Caribbean exemplar of economic growth.

Unlike many other oil-rich countries around the world that are dependent on revenues from this particular (and often solitary) natural resource, Trinidad and Tobago used its oil wealth to climb the development ladder. With the revenues garnered from the spike in oil prices that occurred in the 1970s, this country of just over 1 million inhabitants shifted from the crude oil extraction and refinement that dominated its pre-1970s economic programme to becoming the world’s largest exporter of ammonia, the world’s second-largest exporter of methanol, and the largest exporter of liquefied natural gas to the United States.

A great deal of currency is currently flowing into the country, with the bulk going into the oil and gas sector. Annual economic growth for the past two decades has largely stayed high and positive. Unemployment, which stood around 20% in the 1980s, had dropped drastically to 5.8% by 2013. The government is busy building infrastructure, schools, and health care facilities. These investments have brought significant and measurable returns as the adult literacy rate soars at 99%, and the infant mortality rate was cut in half between 1990 and 2012.

Furthermore, by World Bank estimations, Trinidad and Tobago no longer ranks among the world’s lower-income countries. It is now a high-income economy. Such a strong economic and social performance is attractive to economic migrants and foreign workers, from doctors to day labourers; all of who continue to flow steadily into the country from all corners of the world – from as close as Venezuela, to as far as Bangladesh and China.

To call these gains ‘accomplishments’ would almost be to diminish the significance of what this Caribbean nation has achieved. Most Trinbagonians are of either East Indian or African descent, and the rest have ethnic roots in Europe, China, the Middle East, and the Mediterranean. Typically, academics and political commentators alike predict that countries with such high levels of ethnic diversity are doomed to suffer ethnically charged conflicts and violence, which we know stifles economic growth. Oil-rich countries are also often generically analysed to suffer from the so-called ‘resource curse’, where wealth accrued from natural resources is held to paradoxically lead to slow, if not retarded, economic growth. This is due to the fact that revenues from natural resources can, by their nature, be prone to economic mismanagement, and wasteful (and often corrupt) spending by governments.

Indeed, and as is often enough the case, oil wealth is often linked to the weakening of democratic institutions, whereby oil-rich states are turned into authoritarian regimes that suppress civil freedoms and human capabilities. What is interesting about Trinidad and Tobago, however, is that contrary to the general understanding of ethnically diverse countries and national economies that rely on revenues from natural resources, the country managed to catapult itself into, and sustain itself as, a high-income country in just a couple decades whilst maintaining parliamentary democracy and high political and civil freedoms for its population.

So far had Trinidad and Tobago’s economic development been progressing that, until recently, the country seemed to be making rapid headway towards gaining ‘developed country’ status by 2020. There may now be signs, however, that the country’s advancement is stalling. Public perception of corruption is at an all-time high. Citizens are convinced that, economic and social gains aside, government officials have been raiding the state’s coffers. The list of state officials forced to resign over the inappropriate award of state contracts to friends and family is growing, which raises concerns about the extent of the rot, given the number of those who have not yet been caught.

The recent 2015 Moody’s Investors Service’s downgrading of the government’s bond rating and its reported negative economic outlook for the country has increased public discontent with the government’s recent handling of the nation’s finances. Furthermore, nepotism in both the public and private sectors is rampant. Newspaper reports of unqualified officials occupying important posts and receiving lucrative salaries are increasingly abundant. Meanwhile, many qualified university graduates are forced to sit at home jobless or accept work for which they are overqualified simply because they have no friends or family in the ‘right’ places. Padding bureaucracies with inefficient personnel will only continue to retard the country’s, until recently, steady economic progress.

Despite what had been Trinidad and Tobago’s overwhelming success in properly utilizing its natural resources, the country has recognised the need to diversify the economy. But various attempts at doing so have so far not been as successful and the country still remains heavily dependent on the oil and gas sector. Growth, therefore, continues to hinge on the rate of oil and gas production and export. None of which is helped by the fact that oil and gas prices have plummeted in recent months, forcing the country to re-evaluate its annual budget commitments.

The expansion of shale gas production in the United States is likely to continue to diminish the demand for liquefied natural gas from Trinidad; a scenario for which the government is not yet fully prepared. The Heritage and Stabilization Fund, established in 2000 as a cushion against unexpected drops in oil prices may not be sufficient to deal with the potentially drastic falls in revenues, which appear to be strong on the horizon. While some expansion has occurred in the manufacturing and services industries, much more is needed.

The country’s economic cause is further undermined by high crime rates that have exposed the state’s impotence in promoting law and order. The global drug trade has wreaked havoc in the most vulnerable communities. Drug-related shootings continue to claim the lives of too many youths; and in this regard, the state appears completely powerless, even complicit, and at times as an enabler of rising crime. This has not only chipped away at the quality of life for many Trinbagonians, but it is also a serious impediment to those foreign investors and tourists being aggressively courted by the government.

It is clear from Trinidad and Tobago’s past (and still present) economic experience that the balance of social and economic gains is well within its capacities and abilities. Of any other Caribbean nation, and possibly of other natural resource rich countries in other continents, Trinidad and Tobago has shown the possibility that such naturally endowed countries as itself are not deterministically doomed to economic failure and political decrepitude. But this is only if it continues to follow the example it has already set for itself and other countries like it, which is to utilise its resource revenues as a means of expanding and diversifying the economy. This requires an astute national economic planning, weeding out all bureaucratic corruption, and cementing the rule of law. For Trinidad and Tobago, and countries like it, there may be no need for a reverse anthropomorphism; what is needed is to get on with the job of learning from their own examples.

 

Dr. Zophia Edwards is a Trinidadian national. Her Ph.D. in Sociology focuses on economic and social development in oil and mineral rich developing countries. She takes up her position as Assistant Professor of Sociology at Providence College, Rhode Island, in August 2015.

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One thought on “Trinidad and Tobago: Lessons From, and For, a Caribbean Model of Economic Growth. | by Dr. Zophia Edwards

  1. Dear Zophia,

    You seem to have taken quite an optimistic view on developments in the T&T economy, which contradicts notions from economists like Terrence Farrell. It also seems that you adopt the theoretical postulates of North American political theory by Daron Acemoglu and James Robinson, which in my view are restricted in explaining at a granular level, what is happening with respect to how institutions have contributed to growth in this small economy. It might be useful to consider other political economy perspectives from the New World Group, including Caribbean economists Lloyd Best, Kari Levitt, William Demas and Norman Girvan and others (though their theory’s explanatory capacity is good, its predictive power needs redressing), and combining other heterodox perspectives to demonstrate how institutional mechanisms might change and how power influences those possible changes. It is a good piece, and would relish chatting with you soon about your work.

    Cheers,
    Keston

    Like

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