First, Let me start this post with a little housekeeping. I know it's been a while since I last posted and I do apologise for that but it's due to me getting a job and not having as much time to write as I did in the past. Nevertheless, I will continue posting when I can its just that my posts would be less frequent and take longer than usual. I do thank you all for your continued patronage. So with that out of the way, let's get on with it.
The economy of Trinidad and Tobago is not a healthy one. It suffers from inefficiency, a lack of diversification, wealth polarisation and quite a few other maladies. These factors have contributed to the economy presently being in a deep recession which we are unlikely to get out of in the near future. Poor decision making and a lack of productivity place the bulk of the blame squarely on the population. However there are external factors which contribute to the current state of the economy as well. In this post, I will examine the economy in detail and identify some of the problems facing it.
Economic Structure
In order to understand why the economy of Trinidad and Tobago is in the state it is, we must first understand how an economy works. The figure below (Fig. 1) is my personal model of how an economy is structured. Essentially, an economy is how we distribute the planet's finite natural resources for use by humans. The resources may be directly used in their raw state or manufactured further and have value added to them. Each activity relies on some combination of natural resources (derived from the environment) and labour (derived from people). The further along the value chain we get, the more labour and resources are required, thus increasing costs.
 |
| Figure 1:- Barindra's Model of the Economy |
The Environment
Without the environment to provide the raw materials like air, water, metallic ores, hydrocarbons and so much more, we as humans cannot live and our economy cannot function. This is a fact that is often ignored in conventional economic models, but it is why environmental protection should be prioritized over economic development.Without the environment, there cannot be any people and no economy. This is why it is a focal point in my model.
Primary Economic Activity
Primary economic activities are extractive industries which mainly rely on the direct removal of natural resources from the earth as their main source of revenue. Examples of these include industries such as mining, fishing, farming and hydrocarbon exploration. They can be considered the first stage in the economic chain as there is little value addition at this stage. People may consume the products of these industries directly such as buying fish directly from the fishermen or they may be sold to secondary industries to be processed further.
Secondary Economic Activity
Secondary economic activities are manufacturing industries which process the raw materials extracted by primary industries, adding value to them. They produce refined goods for consumption by people and include industries such as food processing, car manufacturing or oil refining. Again, their products may be consumed directly by the people such as buying furniture from a factory outlet or they may be sold onto tertiary industries for further value addition.
Secondary industries are the so called, "sweet-spot," in the economic chain, it is where there is the best balance between cost of doing business (in terms of acquiring raw materials) and the selling price of finished goods. Therefore this is the stage of the process where you'd get the highest relative profitability in comparison to the others and usually where salaries tend to be the highest.
Tertiary Economic Activity
Tertiary economic activities refer to service industries which use products from both primary and secondary industries to provide a service to the consumer . These include retailers, hotels or airlines. They are often the final stage of the value addition process and where most consumers interact with the economy. Typically they are the most costly in terms of doing business and add the least value to the goods in the economic chain.
Quaternary Economic Activity
Quaternary economic activities refer to knowledge-based industries like IT and education which use technology to transfer knowledge and provide training to other industries. . Quaternary industries can be considered the ultimate stage in the economic process because it typically cannot occur until the other three have been carried out. Skills and knowledge cannot be attained without first doing the work that needs to be done to learn them in the first place.
People
People refer to the producers and consumers in the economy who conduct trade and provide the labour that drives it. Without people, there would be no economy. It's our demand for goods and services that keeps the economy going.It's our willingness to trade our labour in the form of work for these goods and services that drives the economy.
In order for the economy to work, people need to contribute to it through labour and the economy needs to provide people with the resources they need through salaries in exchange for that labour. Contrary to beliefs of your typical psuedo-marxist, work is not slavery, it is a means of helping your fellow man to live by doing your part to ensure that we can all get what we need to survive. I am not saying the system is perfect and I will admit that capitalism, originally designed to give the common man power through his spending, has instead become corrupted as a means to keep a few wealthy people in power at the expense of the many. But the core purpose of work was and still is to provide yourself and your community with the means of survival. It was true in early nomadic hunter-gather tribes and is true in today's modern economy of specialisation. Humans have to work to survive, plain and simple, life is not going to give you anything without effort.
The economy is a natural result of our desire to survive. So long as humans require and extract resources from the earth to live, we will have an economy of some kind, be it a socialist, communist, capitalist, resource-based, feudal or some other kind of model, we will always have an economy.
Value Addition
Value addition is the process by which the economic value of a good is increased through a particular process. This process could mean manufacturing such as using raw peanuts to make peanut butter, which will fetch a higher price or it could mean providing a service such as a high end restaurant using the resources to provide an exquisite dining experience. Value addition is whatever in the mind of the customer, increases the perceived value of the goods, and therefore the price they are willing to pay. Typically there is an inverse relationship between value addition and labour intensity and costs but the cost of doing business also tends to increase at each stage of economic activity because the cost of raw materials acquisition tends to be higher due to value addition along the chain.
For example, farmer Joe grows cassava which he then harvests himself with the aid of his family, this is a primary activity. He then sells the cassava to Maurice who owns a factory which makes cassava chips (a secondary activity). Maurice's factory cuts, cooks and packages the cassava adding value to it. The finished chips are then sold to Brent's supermarket where customers purchase it for consumption, this is tertiary activity. Brent, Maurice and Joe as well as their employees all required some degree of education and skills to do their jobs and thus had to attend school to learn these skills which were developed over decades of experience in the industry. This is quarternary activity.
Regulatory Forces in the Economy
Taxation and Regulation
Contrary to the beliefs of many conservatives and libertarians, taxation is not theft and regulations do not exist to stifle innovation. In principle, they are means of ensuring that order is maintained in society through the manipulation of wealth distribution and setting reasonable limits on human behavior. Taxation is not supposed to be about taking from the rich and giving to the poor in some misguided attempt to achieve social justice and it is not about punishing people for making money. It is simply the state doing what it is supposed to and keeping order in society. Regulations are not about placing limits on people or slowing innovation, they exist to make sure individuals do not do things which are detrimental to the collective.
We humans have proven time and time again that if we do not have some sort of regulatory force be it the law, religion or some other form of regulation to keep us in line we tend to destroy each other. This is why taxation and legislation exists, to make sure too much resources do not end up in the hands of too few people and lead to society collapsing or to make sure that individuals behave in an acceptable manner
.
Now granted, the system of taxes and regulations need to be administered properly and by competent individuals who understand the ramifications of the decisions they make. So not Trini politicians in other words. Certainly in Trinidad and Tobago, the taxation and regulatory systems are woefully inadequate and are in dire need of updates. But the principle of taxation and regulation is to help keep order in society and to help fight the innate human tendency to act selfishly and to the detriment of his fellow man.
Economic Growth, the Environment and Resource Constraints
In most economic textbooks, you will see this notion that capital is what drives an economy, with it being considered a separate concept for natural resources (referred to as land in conventional economic thought). Land, labour and capital are the three ingredients of economic activity in conventional economics. However, the reality is that capital and land are essentially the same. Capital is simply representative of natural resources, which are finite, making capital also finite.
While your economy can grow, it cannot grow infinitely because we have finite natural resources to feed that growth. If you hit your resource limit and still continue to expand, then you get what I would like to call, "false growth." Essentially, this means that if looked at from a pure capital standpoint, the economy is growing BUT the amount of resources available are not so the individual value of each dollar drops, leading to inflation. Infinite growth cannot take place in a finite system, something which is not really understood by contemporary economists.
The Market (People)
The final regulating force in the economy is the market. The market is another regulating force in the economy and the only one often actually considered in contemporary economic models. The market dictates how the resources extracted from the environment are manufactured and used by society. If the market demands a good, then the economy would provide that good within the limits of technological and resource constraints. For example, current technology can produce cars, cleaning products and televisions to satisfy demand, but it cannot produce faster than light space travel or reverse aging because even though there is a demand for this, technology cannot produce it yet. So while it certainly is a determining factor, it is not the only one as conventional economics would suggest.
Trends in the Trinidad and Tobago Economy
GDP
Take a look at this graph from the world bank of the GDP of Trinidad and Tobago from 1960-2016. You could see that there was slow but steady growth post-independence in the 1960's towards the 1980's. Then there was an economic recession in the 1980's which the country recovered from in the 1990's. Since then, there was high growth which all came to a peak of US$27.87 billion in 2008, and then declined sharply the following year most likely due to the global economic recession at that time. Since 2009, the economy recovered slightly with steady GDP growth up until 2013, following which GDP began to decline again all the way up to last year (2016) where it stood at US$20.989 billion. This recent decline is due to a drop in global oil prices which Trinidad and Tobago's economy is heavily dependent on. It shows how a lack of economic diversity and dependence on one particular activity can hurt a country. Our economic health is heavily tied to the global oil price, a precarious position to be in especially given the long-term decline of the fossil fuel industry with the advent of substitutes like renewable energy technology.
GDP per Capita
Look at this graph of GDP per capita growth from the world bank for Trinidad and Tobago. Notice that after an all time high in 2003 (when oil prices were skyrocketing) there has been a general downward trend in GDP per capita growth, with negative growth being experienced in the past several years. This shows that economic growth has been unsteady and erratic at best and is indicative a very unhealthy and poorly managed economy. We have not been able to achieve steady growth for any significant period of time.
Specific Economic Issues
Small Size
In both a demographic and geographic context, Trinidad and Tobago is a small country. This means that it has a small market with limited demand to drive its economy. This makes it difficult for firms to establish themselves here and grow because the market's small size means that there is limited demand for products, meaning that it would only support a limited level of economic activity to satisfy this demand.
This translates into less jobs for the population because our economy simply doesn't have enough demand to support it. Factor in competition from trans-national corporations for the few services that our economy can actually profitably support, and the lack of natural resources and high labour costs making it harder for the local firms to compete in international markets to expand and generate jobs for the local populous, and the economy is further disadvantaged.
Lack of Natural Resources and A High Dependence on Imported Goods
This lack of natural resources means that in order to grow its economy, the nation would have to import resources like raw materials for factories or food for its population because it either cannot produce them at all locally, or cannot produce enough to satisfy demand locally. The issue with this is that it significantly drives up the costs of production for any good produced in the country, and therefore the market price, making local firms less competitive in a global marketplace. Generally speaking, the closer a manufacturer is located to its raw materials, the lower its costs of production due to lower shipping costs.
Now we do have a significant amount of hydrocarbon resources and have certainly capitalized on these in the past. But recent market trends have led to reduced income for the country from this avenue and the production and extraction has not been the most efficient due to other factors. This has created an international trade deficit of sorts where the country exports less than it buys in imports leading to a crisis for foreign exchange. This forex shortage means that our manufacturers cannot buy raw materials to run their operations and thus have to scale back or stop production. Basically, our entire economy is either directly or indirectly dependent on one sector, and this has led to the current recession.
Globalisation and, "Free," Trade
Free trade is touted as an egalitarian concept which will drive the world forward in a spirit of economic co-operation. Proponents of free trade paint rosy pictures of trade leading to increased economic growth and improved consumer choice and options globally. While this is true in some cases, in small economies like ours, free trade can actually hamper economic growth.
How, you may ask? Well a small local economy means that you would naturally also have small local companies with limited economies of scale and higher costs than companies in larger economies. So when companies from those larger economies like the US, Canada, China and Europe come into our country to do business, they tend to out-compete local firms and may even drive them out of business. This can significantly lower the type, quantity and quality of jobs available on the local market and lead to capital flight, which means that there is less capital for investment in the local economy.
Now proponents of free trade will argue that these companies also create jobs in the local economy and pay taxes as well, but is this necessarily better for our economy than local firms? Because they typically don't do any sort of manufacturing or value addition here, rather importing finished products to the market from factories abroad, these companies tend to only create a small amount of low-paying, unskilled service jobs. They also will not pay as much taxes as a local firm with the bulk of its operations based here, proportional to their income as they simply pay taxes for the portion of their production process which operate in our economy i.e. import taxes and local sales taxes etc. A local firm with more of their production process based in the country would generate much more tax revenue per dollar earned and will create higher paying, skilled jobs leading to higher standards of living for their employees.
This is why free trade is actually a bad thing for Trinidad and Tobago, because we tend to have the trade gradient stacked against us with most of our partners. Their firms are larger, better capitalised and can destroy local competition with ease. They could also leverage their larger size and lower unit costs to, "dump," produce at lower prices onto the local market as well. This process known as dumping is illegal in many countries but we don't really have anti-dumping legislation in this country to prevent it.
International regulatory bodies such as the World Trade Organisation while claiming to be interested in open and fair trade, tend to rule in favour of larger countries and maintain this advantage. Protectionism is needed in the local market to help keep local firms from being overwhelmed by foreign competition and to help protect local jobs. But the WTO will vehemently oppose any protectionist measures we try to implement and it is likely to create an international incident if we make an effort to do so. Therefore they need to be very carefully implemented so as not to upset them.
Colonialism
Like most of the now independent countries in the Western Hemisphere, Trinidad and Tobago was once a colony of a European power. While both islands have changed hands between Spanish, French and British rule during their history, at the time of independence and for most of their history, the islands were under the control of Britain.
Like most of its other colonies, the British used Trinidad and Tobago to grow crops for export, mostly sugar. This has left the country with the economic legacy of colonialism where most of the economic activites were primary industries with little value-added production (and thus little wealth creation) taking place in the country. Most of the raw materials were shipped to the metropole to be manufactured with the finished products being re-imported into the country for sale. As discussed above, the crucial secondary economic activity is where most of the profit is made on the economic chain, so this process essentially sapped the wealth out of the country.
This was a concept Lloyd Best termed the, "Muscovado Complex," a reference to muscovado sugar, which followed the same concept with the sugar cane being grown in the islands and being exported for processing to the metropole and then the finished products being re-imported for sale in the local market.
Because of this mentality, post-colonialism many former colonies were left with a distinct lack of manufacturing industries, the stage of the model where there is the best balance between value addition and cost of purchasing raw materials. There have been various schemes to help grow these industries here, but they have had limited success.
Compared to its Caribbean neighbours though, Trinidad and Tobago does have a larger amount of manufacturing industries but they tend to not operate on a scale needed to be internationally competitive, or be crippled by high costs. Additionally, manufacturing has suffered somewhat given the local economic decline.
Hostile Environment for Start-ups
Start-up companies tend to revitalise the economy of many countries, leading to increased innovation and eventually economic diversification and growth. Corporate giants like Google, Amazon and Uber were once plucky little startups with innovative business concepts. They succeeded in the marketplace and brought us new business models which other's have tried to emulate.
Given these examples it should be noted that any country needing to diversify and grow it's economy (like T&T) should aim to encourage their citizens to start up businesses and innovate. However, the environment for start-ups in the country can be described as hostile.
The lack of infant industry protections and restrictions in the local market open the door to ruthless competition from large foreign and local firms which can quickly crush a small local start-up company. The government systems here are needlessly complicated and bureaucratic and corruption runs rampant. Our financial institutions also tend to be unscrupulous and draconian when it comes to lending so it becomes difficult for businesses to secure start up capital. These factors make starting a business here very difficult and risky thus many people are deterred from doing so.
The few businesses that do start up tend to be in the service industries and focus mainly on serving the local populous with no focus on innovation or manufacturing and are usually import orientated not export orientated so their net effect on the country's aggregate income is negative. Service industries tend to rely on imports which burn up foreign exchange reserves. This is another reason why we need to start encouraging manufacturing industries, which are more export orientated so they will bring in revenue for the country. This is because while they sometimes have to bring in imports for raw materials, they bring in more revenue from exports because their operations add value to those imports, increasing their export value.
But there hasn't been much of a push to develop these kinds of manufacturing industries and the ones we have are currently struggling due to a lack of foreign exchange or due to government mismanagement and other factors.
Poor national work ethic
Discipline, Tolerance and Production are the rather ironic watchwords of Trinidad and Tobago. The populous could be described as the exact opposite of them being highly undisciplined, intolerant and unproductive. The poor work national work ethic has contributed to the failure of many private and public institutions. Workers in this country, particularly in the public sector, exhibit a type of, "reverse capitalism," where they attempt to exploit the organisation for the most they can get out of it with the least amount of work possible.
The typical Trinidadian, "worker," will commute to their job, often arriving late, do the absolute minimum required of them, take their lunch break on schedule regardless of what task they have in progress, come back, again do the bare minimum amount of work required then promptly leave when their day is over. There is no extra effort expended, no drive to improve themselves. They will not give their employer anything more than the absolute minimum. If they see a problem, or anything that needs improving in the organisation the typical line of thought is, "not my job."
As you could imagine, this type of mentality does not bode well for the economy and is partially why we are falling behind economically. Our own laziness has worked against us and quite frankly this needs to change otherwise we won't be going anywhere.
Lack of Innovation
Closely related to poor national work ethic is a lack of innovation in the local populous. Trinidadians lack the ability to innovate, with the business landscape here being a reflection of that. As mentioned before, most of the privately owned businesses here are services which simply import and sell goods from foreign manufacturers. The few manufacturing industries we do have are either state-run and incredibly inefficient and thus are unprofitable or not revolutionary at all. There is a distinct lack of invention of new products for the global market.
This creates a problem as it means that Trinidad and Tobago doesn't have anything unique to offer the global marketplace, making us vulnerable to competition. There is no industry or service we can monopolise or lead to provide us with a competitive advantage because we don't innovate as much as other countries. We could easily be under-priced by firms from much larger nations and thus be rendered noncompetitive on the global marketplace. Our local market alone simply isn't enough to support our industries and does not bring in enough foreign exchange.
Inefficiency
As one could imagine given the poor work ethic and lack of innovation of the populous, Trinidad and Tobago is a very inefficient country. Inefficiency is evident in the public sector with needless bureaucracy, lack of technological adaptation and unwillingness to change archaic procedures. You see it when you have to submit mountains of paperwork to government institutions to access services which could easily be shifted on-line. You see it with over-staffing of public sector institutions which cost taxpayers millions of dollars every year. You see it when you have to wait for hours at the public hospitals to access simple services. You see it when poor infrastructure leads to traffic gridlocks every morning. I could go on, but you get the picture. Inefficiency is the norm in this country.
For example, a simple act of renewing a driver's permit took hours the last time I did it because of the inefficiency in the system. I had to show up early to the licensing office, fill out a paper renewal form, get in line to hand this form to one person, then join another line at the cashier to pay the application fee, then submit the form and wait for hours on end until they called my name so I could go into the single photo booth to have my picture taken and licence printed with the transaction being logged on paper. The entire process took about five hours.
Why can't the entire system be shifted to an electronic, integrated IT-based solution? Instead of going into the licence office, why can't I just submit an application online, have a software application check it against a database of driver's permits to ensure that it isn't fraudulent then be issued an appointment to come in.Why can't I pay the fee online using my credit or debit card or a direct deposit from my bank account? Why, instead of going to three different people to pay, submit and take photographs can't I just walk in to one person having paid and submitted my application online already, have my picture taken and licence printed within minutes and be in and out quickly? This isn't rocket science, it can easily be accomplished with existing technology. But we prefer to stick to archaic ways rather than innovate.
While they are certainly better than the public sector institutions, the private sector is also prone to inefficiency. However in their case, it is more due to a lack of investment in newer technologies and innovation than bureaucracy. Business owners are often unwilling to invest in technology to improve their business' efficiency either due to the high cost, technophobia, excessive greed or some combination of these factors. This makes private-sector firms in this country operate at higher costs than they need to, often to the detriment of consumers.
Don't believe me, well lets look at the banks here for example. Trinidad and Tobago banks are notorious for their fees. They see it as an easy means to increase their already substantial profits and their customers are the ones who suffer for it. Yet they have not taken simple steps which could reduce operating costs to improve efficiency. For example, why not give customers the option to go paperless, switching to online banking only? By doing this you reduce your costs substantially because you would not have to pay to print and mail out statements and bills to customers, would require less staff and less time to process transactions. It isn't that innovative, banks in foreign countries have done it. But no, we shall stick with the older system and let our customers pay the price for our inefficiency.
Inefficiency is a cancer to our economy, raising costs higher than they need to be and making us less competitive. It is tied to our poor work ethic and unwillingness to innovate. Unfortunately the situation seems to not be changing anytime soon.
Lack of Economic Diversity
When one mentions the Trinidad and Tobago economy to a foreigner, the first word that is likely to roll off their tongue is oil. Hydrocrabon exploration has been the main activity in our economy for decades. Many local companies depend directly on the hydrocarbon industry (oil extraction and manufacturing companies) and many others depend on the profits from the oil industry (service industries which cater to the needs of people and rely on the profits from oil to import goods and sell them to the population). Even the government relies heavily from the revenues they gain from taxation of oil exports to support government programs.
Heavy dependence on a particular economic activity is not a good thing. It leaves you vulnerable to external shocks in the industry and you run the risk that a single industry specific issue will cripple your entire economy. This actually happened to Trinidad and Tobago recently with the drop in oil prices. The low global oil prices triggered a recession, and led to a large number of job losses and a few companies shutting down. This is what happens when you depend too much on one economic activity.
Many academic experts in Trinidad and Tobago have been screaming their lungs out at the governments and population for the past few decades warning them of this exact scenario and a pressing need to diversify the economy. But despite paying it a lot of lip service, there was little done on the part of the government or private-sector to diversify the economy further. Rather than invest the profits from hydrocarbons into diversification efforts, we squandered them away on wasteful and needless social programs or shipped them abroad into foreign bank accounts held by the elites in society. There was no real effort to seriously invest in new industries and thus we are paying the price for it now.
High Dependency Ratio
The dependent portion of the population refers to those individuals who rely solely on the economic contributions of others for their survival. These include children, retirees, disabled and unemployed or institutionalised individuals. They may receive their support through formal programs run by the state such as disability grants, unemployment benefits or pension plans funded by taxpayers' contributions or through informal means such as parents giving their children allowances.
From an economic standpoint, dependent population members fit the definition of parasites in the field of biology. They take from the system without contributing to it in return and often cause harm to it. Now while this may not be their own faults, it is what it is. Dependent populations are a drain on the country's economy. Now while some segments of the dependent population, like children, could be viewed more as an investment as with education and a proper upbringing they can grown up to be contributors to the economy, the other sectors represent a tremendous opportunity cost. Money spent on social benefits like pensions and other grants is money not spent on economic growth, and further innovation.
Trinidad and Tobago has a high dependency ratio. This is no doubt related to our poor national work ethic and general laziness. We have a large sector of our population living off of welfare and it creates problems for us. Our governments have done a lot to provide for the population through social programs largely to secure votes and not because of altruism. While this is certainly acceptable and should be encouraged in rich states with healthy economies, we cannot support these programs here given our economic climate. Our economy does not generate enough money through taxation and economic activity to support all these wasteful programs.
The result? We have an inefficient, undiversified economy and a mountain of debt as we have had to borrow to keep the welfare programs going. Additionally, we have also sapped labour and stiffed innovation out of the economy by removing incentives for people to get out and work and innovate. Our social safety net is now more like a hammock. What these programs have essentially done is drain resources out of the economy and wasted it which should have instead been invested back into the economy to grow and diversify it, further slowing growth. Additionally, many of these social programs suffer from inefficiency and corruption which inflate their cost to the nation, further increasing their drain on the economy.
Now while I do personally believe that a government does have the duty to provide for it's citizens through social programs and indeed social safety nets are critical to any modern, developed nation, this has to be balanced with proper economic management. The economy provides the resources and capital to fund these programs and thus care needs to be taken not to extract too much capital from it to fund them. Moreover, if people become too dependent on social support systems and refuse to do their fair share of work to contribute to society, it can lead to the collapse of the entire system.
Because of our high level of dependency, Trinidad and Tobago has been forced to do exactly this and we are now suffering because of it. Future generations will be burdened by the debt we incurred to keep these programs running. We desperately need to reduce our dependency ratio and tighten up on these programs should we wish to prosper in the future. But again this is unlikely as politicians will lose votes if they do so.
Militant Trade Union Movement
So what do a poor national work ethic, high level of welfare dependency and lack of innovation lead to? Well they lead to a lazy, entitled, individualistic, small-minded, short-sighted population which tries to drain as much from the economy and give as little back as possible. Perhaps the ultimate expression of this in the local context has to be the militant trade union movements which operate in this country.
The trade union movements operate in a similar manner to terrorist organisations. They routinely hold the country hostage through strikes and slowdowns if their often ridiculous and unreasonable demands are not met. There have unconfirmed been reports of them harassing employees who break picket lines and generally they behave in a rowdy manner.
Politicians tend to leave them alone as they rely on union members to vote them into power so it is unlikely that any sort of legislation will be passed or any kind of action taken to bring the trade union movement under control. So we as the citizens of Trinidad and Tobago are at the mercy of these terrorists, and have no choice but to bend to their whims. We get commodities such as fuel and cement only if they are happy and we have to pay greatly inflated costs for these commodities either directly or indirectly through taxpayer funded subsidies or funding to state enterprises due to the unreasonably high salaries and benefits paid to union members. But at least the workers are happy.
Poor Investment Decisions by Local Entrepreneurs
This was touched on previously, but poor investment decisions are partially to blame for the state of our economy. Local entrepreneurs instead of investing in manufacturing industries which can earn foreign exchange through exports, they have mostly invested in service industries like restaurants and supermarket chains which actually burn foreign exchange because most of the goods they produce are manufactured outside of Trinidad and Tobago.
Importing finished goods is more costly than importing raw materials because most of the value addition activities would have taken place prior to that, thus driving up the comparative cost of finished products versus raw materials. Moreover, this would mean lower salaries for employees as in order to remain profitable given their high acquisition costs, employers would have to reduce their operating cost to a bare minimum. Lower salaries will mean less money circulating in the economy, and thus less consumption and economic growth.
What this trend of investment has done is create a severe polarity in the distribution of wealth in society with a few wealthy elites at the top and the majority of the population living paycheck to paycheck. The low salaries these entrepreneurs tend to pay their employees are seldom enough for them to do anything more than survive. Forget about investing in the economy though financial institutions, they typically do not have the disposable income to do so.
Most of the manufacturing industries locally which do provide high-paying, skilled jobs are controlled by the state but state-run enterprises typically do not generate a profit and their net effect on the economy is to drain it of capital and worsen the wealth polarisation by allowing their workers to become rich through inflated salaries at the expense of the taxpayers.
Conclusion
So these are some of the major problems plaguing the Trinidad and Tobago economy. As we can see, things are a bit dismal at the moment and the general mood of the populous is one of pessimism. It will take quite a lot of work to remedy these issues but it is vital that we make the sacrifices now and fix them as they will work to our detriment in the future. They are certainly no easy fixes and I do not pretend to have all the answers, but in my next post, I will give my proposed solutions to these problems.
Thanks for Reading,
Barindra
No comments:
Post a Comment