You are here

THE WEALTHY ONE PER CENT

Published: 
Friday, August 11, 2017
Mary King

The economy of T&T is in a precarious position, in a recession, caused by the drastic fall in prices of its petro­leum exports and the reductions in production of oil and gas. From the advice of many experts this re­cession will be long lasting, hence diversification and innovation are on the lips of many.

Coupled with this are rumblings from the trade unions that the economy is skewed to the benefit of the few who own the capital of the country and even from the government that taxpayers’ money should not have been used to bail out private companies that might have found themselves strapped for cash due to economic externalities. Hence the lockstep recommen­dations are that we boycott the trading entities owned by the few and that we liquidate the besieged conglomerate and reimburse the taxpayers.

Underlying all of this are the concepts of inequity in the coun­try’s economy; poverty is high and as such opportunities should be put in place so that the mass of consumers, workers, upon whose backs and struggles the few is said to have amassed their fortunes and control of the economy, can be­come a part of the nation’s wealthy. And, the fear exists that the few wealthy captains of industry have indeed captured the State which in turn does their bidding.

Though the cry is that in other democratic capitalist countries there are indeed small minorities that control most of the wealth even though opportunities and the finances exist to enable start-ups, it is important to understand what are the economic, social and historical inputs that enabled the present local economic structure.

Indeed, the traditional struc­ture of the economy was and is the plantation, which saw foreign in­vestment in the plantation and the labour was provided first by slaves, then indentured labour—the latter on contract when the slaves were freed. The products of the planta­tion then moved away from agri­culture to petroleum again driven by foreign investment, but now employing only four per cent of the workforce.

The on-shore economy then evolved to supply the needs of the general population via imports, their distribution and sale. The on-shore economy supplied very lit­tle, if any, exports and the foreign exchange needed to support these imports, the rents, were earned by off-shore foreign investment.

The on-shore could not prop­erly support the 96 per cent of the labour force, hence government intervened to hire labour, provided state enterprises, make work; gov­ernment spending became an im­portant part of on-shore economic activity—some say this encouraged a dependency syndrome where productivity was unimportant.

At the close of slavery and the termination of the indentured contracts, there were in general three sets of on-shore competitors. A small section of the indentured labourers were given land by the state while others bought their own (Prof Brereton). The freed slaves were, according to the literature (Brereton) discouraged by the State from owning land. The other “im­migrants” that consisted of many from Europe who chose to emigrate to avoid various hardships, engaged in trade and today, supported by the foreign banks on the island, emerge as the wealthy few.

Surely, there must have been entrepreneurs, innovators in the other groups, small in number they might have been because of the horrific history of slavery and indentureship, but they were not readily supported by the foreign owned banks—the ex-slaves and their progeny suffered most from this bias. At one time there were small black businesses and skilled shops but these died out with time. It is worth reminding our­selves that one of the contentious concerns during the 1970 political disturbances was the fact that the banks and financial houses were not employing people of colour!

These then were the drivers that shaped our economy. As a complex adaptive system the experiences of the various groups forced a certain rigidity in their actions which has resulted in their failure to adapt today to the need to diversify the economy—to move away from low risk activity, using the rents from the energy sector to provide on-shore consumer needs, to higher risk export activity so as to replace the foreign exchange earned by the depleting energy sector.

For example the traditional wealthy few, the conglomerates, expanded by acquisition as op­posed to creating new companies/ activities based on innovative entrepreneurship. The recent ac­quisition of ANSA McAL of Berger shares is a case in point—our con­glomerates have jumped directly to Prof Michael Porter’s wealth stage, ignoring the innovation driven stage. CLF is a startling example of a divergence from this model.

But some wonder why with our expanded education system (some 60 per cent are engaged in tertiary education) and the large number of courses on entrepreneurship and innovation, the population does not seem to be any smarter—still not engaging in higher risk activity as they have been taught in these courses and which is necessary for economic diversification.

There are two basic reasons for this. The first is that these are sim­ply courses which must be passed to obtain the degree. The graduates then go looking for a job in the sys­tem (or emigrate) that requires no innovation to perform well, as long as the rents from the energy sector flow into the economy. The second is that there is no support system for innovation—no integrated ac­tivity among the R&D institutions, the private sector and government. Particularly, there is no high-risk capital to support R&D institutions and the innovative start-ups.

Buying doubles, roti, shark and bake and pelau cannot change the structure of the on-shore economy.

Diversification based on innova­tive entrepreneurship needs higher risk investment which the private sector will not provide. Hence this finance has to come from govern­ment, from the taxpayer in the first instance.

Mary K King,

St Augustine