Ian Nar­ine

The Ur­ban Dic­tio­nary de­fines the phrase as "to do some­thing ir­re­spon­si­ble in or­der to avoid do­ing some­thing more ir­re­spon­si­ble" and gives the fol­low­ing ex­am­ple to am­pli­fy the point, "I didn't want to dri­ve home, so I got so drunk that I couldn't find my car."

This sums up life in T&T and the ex­am­ples are too nu­mer­ous to men­tion. The ir­re­spon­si­ble ac­tion to avoid some­thing seem­ing­ly more ir­re­spon­si­ble gives us the il­lu­sion of progress, it sug­gests at a su­per­fi­cial lev­el that some­thing is be­ing done about a prob­lem and the al­ter­na­tive to the cur­rent path is much worse.

Yet, we should be mind­ful of the words of the British Econ­o­mist Josi­ah Charles Stamp, who said, "It is easy to dodge our re­spon­si­bil­i­ties, but we can­not dodge the con­se­quences of dodg­ing our re­spon­si­bil­i­ties." We can wax po­et­ic with lo­cal par­lance and point out that "time is longer than twine."

The re­al­i­ty is that at the end of the "twine" comes a place best de­fined by Win­ston Churchill in the fol­low­ing state­ment made in 1936 on the cusp of World War II: "The era of pro­cras­ti­na­tion, of half-mea­sures, of sooth­ing and baf­fling ex­pe­di­ents, of de­lays, is com­ing to its close. In its place, we are en­ter­ing a pe­ri­od of con­se­quences."

In the con­text of T&T's econ­o­my, that pe­ri­od of con­se­quences will soon be ap­par­ent, if it is not al­ready here, and can best be ob­served through the lens of what is known as the "Mid­dle In­come Trap."

In lay­man's terms, the Mid­dle In­come Trap ref­er­ences a sce­nario where a coun­try grows, in most in­stances, fair­ly rapid­ly and then the coun­try reach­es a cer­tain in­come lev­el de­fined as "mid­dle in­come", af­ter which it stag­nates and finds it ex­treme­ly dif­fi­cult to push ahead to­wards any sem­blance of de­vel­oped sta­tus.

It is es­sen­tial­ly a case of be­ing stuck in the mid­dle as in­creas­ing wage lev­els, cou­pled with de­clin­ing com­pet­i­tive­ness, means the coun­try can­not com­pete with the in­no­va­tion and val­ue added that comes from goods in the de­vel­oped coun­tries.

By the same to­ken, the wage and cost struc­ture is high enough that they can­not com­pete with low-in­come economies that are able to pro­duce cheap­er man­u­fac­tured goods.

T&T's gray­ing pop­u­la­tion

One would be hard-pressed to ar­gue that this sce­nario does not de­scribe T&T. Delv­ing fur­ther ref­er­ence a Jan­u­ary 2013 pa­per by Uni­ver­si­ty of Cal­i­for­nia eco­nom­ics pro­fes­sor, Bar­ry Eichen­green, et al, where he point­ed out that eco­nom­ic slow­downs aris­ing from the mid­dle-in­come trap "were pos­i­tive­ly as­so­ci­at­ed with high growth in the ear­li­er pe­ri­od (sug­ges­tive of mean re­ver­sion), with un­favourable de­mo­graph­ics (high old-age de­pen­den­cy ra­tios in par­tic­u­lar), with very high in­vest­ment ra­tios (as if growth, fu­elled by brute-force cap­i­tal for­ma­tion, even­tu­al­ly be­comes un­sus­tain­able), and with an un­der­val­ued ex­change rate (as if coun­tries with un­der­val­ued cur­ren­cies have less in­cen­tive to move up the tech­no­log­i­cal lad­der out of un­skilled, labour-in­ten­sive, low-val­ue-added sec­tors and thus find it more dif­fi­cult to sus­tain rapid growth)".

On every mea­sure there would be a check box that iden­ti­fies with the sit­u­a­tion in T&T.

From 1994 to 2008 we ex­pe­ri­enced year on year growth in gross do­mes­tic prod­uct (GDP) every sin­gle year. In fact, the two low­est per­form­ing years were in 1994 and 1995, which were foun­da­tion years for our eco­nom­ic growth. That foun­da­tion was built up­on at a steady pace seem­ing­ly up un­til 2003, af­ter which we were spik­ing up­wards to record six, sev­en and 12 per cent GDP growth in suc­ces­sive years.

On the ques­tion of de­mo­graph­ics, I high­light­ed the is­sue re­lat­ing to our gray­ing pop­u­la­tion ear­li­er in the year, but the ad­di­tion­al twist is the mat­ter of youth un­em­ploy­ment. It would be in­ter­est­ing to know what the lev­el of youth un­em­ploy­ment would be, ex­clud­ing CEPEP and URP pro­grammes. We would do well to note that youth that re­main un­em­ployed soon be­come un­em­ploy­able and no amount of make-work pro­grammes are go­ing to change that re­al­i­ty.

The in­tro­duc­tion of these mea­sures is just but one ex­am­ple of be­ing ir­re­spon­si­bly re­spon­si­ble.

Shrink­ing labour force

When you fac­tor in a shrink­ing labour force be­cause of de­mo­graph­ic shifts and the is­sue of youth un­em­ploy­a­bil­i­ty be­cause of var­i­ous so­cial fac­tors, there is a re­al risk of skills short­ages, even with a fo­cus on ter­tiary ed­u­ca­tion.

The high in­vest­ment ra­tios al­lud­ed to by Eichen­green above is par­tic­u­lar­ly telling for T&T. It should be clear that the last decade was one of growth fu­elled by "brute force". We sim­ply spent our way to growth, build­ing any­thing and every­thing in sight with­out a plan or pur­pose.

The pay­back from such tom­fool­ery cul­mi­nat­ed in Sep­tem­ber 2010 when in­fla­tion in T&T reached its high­est lev­el in 27 years. The re­sult of a per­sis­tent pe­ri­od of high in­fla­tion dur­ing the last decade was not just high­er prices, but the knock-on ef­fect of high­er wages with­out an at­ten­dant in­crease in pro­duc­tiv­i­ty. These are the two fac­tors which com­bine to make us un­com­pet­i­tive and there­fore cre­ate the syn­drome of be­ing "stuck in the mid­dle".

Fi­nal­ly, there was a point in time when our US dol­lar re­serves were rapid­ly in­creas­ing that one could have ar­gued that our cur­ren­cy was over­val­ued.

Cer­tain­ly, a case could have been made for high­er in­ter­est rates to com­bat in­fla­tion­ary pres­sures, less gov­ern­ment spend­ing to re­duce the sup­ply of TT dol­lars and an ap­pre­ci­a­tion of the TT dol­lar, which would al­so have damp­ened the ef­fect of im­port­ed in­fla­tion.

To be suc­cess­ful here, we had to shift our fo­cus from be­ing a low-cost man­u­fac­tur­er to one where our val­ue-added com­po­nent was greater so that we could com­mand a price on the in­ter­na­tion­al mar­kets, re­gard­less of our ex­change rate sit­u­a­tion.

Of course, the il­lu­sion of a so­lu­tion was the "cre­ation" of con­struc­tion jobs and low-skilled make-work-type em­ploy­ment which are fleet­ing, at best.

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