Monday, January 4, 2016

The Upside of the Downturn

The Prime Minister’s shocking address to the nation last Tuesday night left many people asking one question; who still uses DVDs to record? Seriously, did the PM’s office run out of Betamax tapes? It was not surprising however, that Dr. Rowley chose to record his address to citizens. After all, when you’re delivering really bad news, it sometimes helps not to be there in person. If it were me I would have just sent a text to everyone saying, "Hey, guess what, we’re dead broke. Off 2 Miami for a wedding. TTYL."

 The not so shocking part of the PM’s address of course is the news that T&T is facing dire economic times ahead. Plunging oil prices have created an economic slowdown that few could have predicted. Well, apart from every major economist in the world who were saying so for the last 2 years.

However, before we all start bracing ourselves for life in a Mad Max wasteland, we should take note that there is good that can come out of our impeding economic hard times. As the Nobel Prize winning economist Milton Friedman said, “Only a crisis produces real change”. And for those of us who truly want positive change in T&T, we should not let this crisis go to waste.

Firstly, there are only two instances where politicians resort to using rational analysis to make decisions, one being during a period of recession. The other of course is while they are in opposition. Recessions are great at exposing inefficient, unproductive state programs, of which we can all agree there is no shortage off in T&T.

In economic boom times there is little political will to reform government spending, but in an economic bust, everyone suddenly realizes that doing things like funding beauty pageants in La Brea or having expensive staff parties at the Hyatt or building a rapid rail or giving away millions to religious or race oriented groups is either really stupid or might be wasteful.

The PM is already talking about the need to curb wasteful government spending and has ordered all Ministries to implement a 7 % cut to their expenditure. Hopefully, the economic downturn will force Ministries and state companies into becoming more efficient entities, as well as eradicate those state enterprises and programs, which are simply failing to deliver.
The second thing recessions are great at is getting policy makers to think more creatively or at least to try and think at all. The Minister of Finance Colm Imbert for example has recently announced an idea of a part government part private sector initiative to boost home construction.

The Minister has yet to say how exactly his plan will work, but given how successive governments during the past ten years have exerted their influence on home construction, the idea of merely proposing that the private sector take the lead seems almost revolutionary.

If the Government can make a joint private sector arrangement work in the home construction sector, why not the health sector, or the education sector or the security sector or virtually in all areas of government? Thus the economic downturn is providing the opportunity for us to truly innovate the structure of both the state and the economy. That’s providing the Minister doesn’t start taking economic advice from David Abdullah.

The third thing recessions help us do is to think long term. Most Trinbagonains of course usually think in the short term, from band launching to Ash Wednesday. But in a recession people tend to start seeing the big picture. We usually talk about diversifying our economy after an economic bust, but this time we might actually have to do it.

Moving away from oil and gas economy shouldn’t be a seen as a tragedy. High oil prices may have helped fill state coffers but it has also helped facilitate tons of corruption, ridiculous state projects and even criminal activity. There is more than enough evidence to suggest that our fuel subsidy has in fact hurt the poor more than helped them, as well as being a scourge on our environment and source for congestion on the roadways.

The world is moving into a future where renewable energy looks set to play a bigger role and where oil producers, of which there are more now, may start feeling like the dinosaur remains they are selling. What kind of future do we want for our country? Where will the jobs of the 21st century be found? What kind of skills would our workforce need to have? These are all serious questions, but they are also potentially exciting ones. The dinosaurs didn’t have many options when their world changed; we do.

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