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Thursday, July 31, 2014
Trinidad & Tobago Guardian Online
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The anatomy of underachievement
A Review of Terrence Farrell’s
The Underachieving Society: Development Strategy and Policy in Trinidad & Tobago, 1958-2008.
The memories of the last few decades of Trinidadian economic history live on in the popular imagination, in the words “oil boom,” “squandermania,” “all ah we tief,” “white elephant,” “state enterprise,” “dependency syndrome” and so on.
And for many people more than 45, much of Terrence Farrell’s book, The Underachieving Society: Development Strategy and Policy in Trinidad & Tobago, 1958-2008, has given those hazy outlines solidity. He has provided a substantial, well-documented, economic history from the pre-independence period to the present, if not the moment.
If this sounds like faint praise, it’s not. The achievement is considerable. Dr Farrell brings a clinical eye from his years as a technocrat in the Central Bank to provide an insider’s knowledge of the phenomena (economic policy and planning). His private-sector knowledge provides a platform to assess the effectiveness of the policy. And it’s all backed up by data to lay out a coherent account of the period, which, to put it mildly, was chaotic.
(It’s worth noting, in passing, that another account of these events exists in former PNM minister Wendell Mottley’s 2008 book Trinidad & Tobago Industrial Policy: 1959-2008.)
The half-century of Farrell’s book is divided into four periods, not including the colonial era: the pre- and post-independence strategy of import substitution; the post-oil boom “resource-based” industrialisation; the “lost decade” post-oil-boom; and the present phase, which began in 1993—the “neoliberal phase,” where local economic imperatives are subordinate to the “Washington consensus” articulated through various multinational agencies, like the World Bank, IMF, and IDB.
The overall result is what every Trinidadian knows, and what Dr Farrell states diplomatically: we’ve underperformed, compared to comparator countries Barbados, Singapore and Norway.
The route to the underperformance is surprisingly inane. From the start of the independence period, economic planning seemed to be uninspired. Despite Eric Williams’ much-vaunted nationalist rejection of colonial era ideas and policies, “the PNM’s economic programme differed from those of its predecessors only in the extent and vigour of its intended industrialisation programme.”
Farrell traces the post-independence conception and configuration of the economy through the plans formulated and articulated through the government planning apparatus. Though the plans did change their conceptions of the economy at the end of each five-year period, planning was consistently ineffectual, and by 1973, “the economy was on the brink of collapse.”
It was from the oil price shock of 1973 that a new paradigm emerged: “resource-based industrialisation,” and planning was effectively abandoned. Another way of saying this is that economics was deserted for political economics—resources were deployed not for their economic benefit, but their political value.
This meant, post-1970, in response to Black Power and the widespread social unrest, that the government began acquiring foreign assets, like oil companies, banks, and other enterprises to take the “commanding heights of the economy.”
It was a complete reversal of its previous policy; instead of encouraging foreign investors, the government decided to enter into business in the national interest.
Between 1973 and 1983, writes Farrell: “Government injected $1.6 billion into equity participation in various enterprises…another $2.2 billion was injected as loans…a further $2.6 billion was injected as ‘advances’ and $858 million as subventions.”
Results of ‘wealth redistribution’ still haunt us
The main beneficiaries were Caroni Ltd, Iscott and BWIA. It is in this period as well that the national habit of “transfers and subsidies,” polite language for “welfare,” became entrenched into the national economic culture.
This included extravagant pay adjustments for the various arms of government thanks to union militancy.
The results were predictable, and live with us still. The “redistribution” of the wealth encouraged profligate consumption, discouraged productivity, and bred corruption in a bewildering variety of ways.
This led directly, in the mid-1980s, into the arms of the IMF, austerity, and much pain.
The NAR government was the main vehicle of this austerity, and was beset by extraordinarily bad luck, capped off by the 1990 coup attempt, from which it never really recovered.
From this “lost decade” (1982-1993) of economic stagnation came the emergence of a “golden age” when the country experienced 15 years of uninterrupted economic growth.
This was not so much result of planning as of following the diktat of the Washington consensus, which was true of all governments after the NAR. The only evolution in economic planning between 1995 and the present, writes Farrell, was the PNM’s Vision 2020, in which he was involved.
Vision 2020 was, in Farrell’s estimation, an admirable initiative.
But it was hamstrung from the start by a lack of reliable data, especially from the government sources like the CSO, the general lack of capable personnel, in the withdrawal of the participation of key government planning figures (like Calder Hart and Ken Julien), and sabotage by the public service.
He writes: “The public service was never quite comfortable with the intimate involvement of private-sector and university personnel…and worked to recapture control.”
And this intangible causative factor—the culture of the public service and its role in stymying national development—leads to an intriguing motif in the work: intangible capital’s relation to conventional economics.
From the outset the orientation of the work is orthodox—relying on theory, data, and academic analysis. Yet intangibles obtrude regularly.
It seems clear that behind the data lie significant cultural and social connections to economics—Farrell closes the book acknowledging ethnic strife, the Carnival mentality, and other cultural factors as important.
He mentions the social chaos of the 60s and 70s, the militancy of trade unions, and the national attitudes and culture which seemed to be developing as direct foils to the development agenda.
These (social and cultural) issues have a place in contemporary orthodox economics, which has conceded that Gary Becker’s conception of “homo economicus” is inadequate to describe and analyse economic phenomena.
The science has drifted to accommodate economists like Amartya Sen and George Akerloff’s conception of “identity economics,” which factors in the intangible element in the equations.
The World Bank, the bastion of orthodoxy, has acknowledged the formulations of social capital and intangible wealth. Indeed, Arthur Lewis, another ghost haunting the book, explicitly stated this in 1961—the necessity of developing an appropriate attitude to enable economic transformation.
In his own recommendations for enabling development, Farrell virtually echoes Lewis as he writes: “Development and transformation require hard work from a disciplined and focused people.” This is from his final chapter, which bears the title of the book, where these issues are addressed directly.
By any measure, The Underachieving Society is a valuable work. It surveys a half-century, and achieves its aim of providing a substantial, accessible outline.
It also provides much potential for tributary works, which explicate the unlit corners of the past, the opacity of which is perhaps the greatest block to national development.