Wednesday, November 2, 2016

A T&T Halloween story

It’s that time of year for tales of ghosts, zombies and blood suckers. Yes, local government elections are upon us, and political candidates have started canvassing. Of course it’s also Diwali and Halloween time. I love Diwali but I find Halloween more intellectually stimulating; as it allows me to go to parties where women dress as sleazy versions of superhero characters. T&T is also home to a great Halloween horror story, worthy of Stephen King. It’s a tale of a twisted curse that has been revisited upon successive generations of Trinbagonians since independence. Inflicting pain, misery and mediocre politicians. I am talking about; ‘the resource curse’.

The resource curse is a term coined by British economist Richard Auty in 1993. After studying the economies of resource rich nations like T&T, Auty found that, far from being a blessing, natural resources distorted a country’s economy, stifling innovation, destroying non resource sectors of the economy and providing a powerful incentive for corruption. Imagine inheriting a luxurious mansion from your dead grandfather, only to realize as part of the deal you have to share it with a hellish demon. Or worse, Anil Roberts-That’s the resource curse.

Oil and gas accounts for almost 50% of T&T’s GDP, and about 80 % of our exports. In boom times when prices of these commodities are high, Trinbagonians celebrate like giddy teenagers sneaking off at night to make out in the woods. Unaware that lurking up on them is a ghoulish specter called currency appreciation.  This is when a nation’s currency becomes stronger due to increased revenue inflows, resulting in imports becoming cheaper, and conversely making exports from other sectors in the economy more expensive and less competitive.  Ironically it is during oil and gas boom times when the resource curse affects us the most. But we only notice and start screaming when prices fall, and suddenly there is a lunatic in a ski mask wielding a chainsaw, threatening to tax our online purchases.

Of course successive generations of Trinbagonians have stressed the need to cure the resource curse by diversifying the economy. And successive governments have pretended to listen to them. In his recent Budget Presentation Minister of Finance Colm Imbert gave no tangible initiatives that would wean our economy off oil and gas. In fact he appears to be desperately hoping that OPEC raises oil and gas prices late next year. He’s probably standing outside OPEC’s offices right now shouting “the power of Christ compels you”! - Over and over again.

The dark truth is that T&T’s politicians have little incentive in diversifying our economy, because it’s not in their interests. As authors Bruce Bueno de Mesquita and Alastair Smith point out in their book “The Dictator’s Handbook-why bad behavior is almost always good politics”- oil is a politician’s dream.  “The problem with raising revenue through taxation is that it requires people to work. Tax too aggressively or fail to provide an environment conducive to economic activity and people simply don’t produce. Actually extracting revenue from the land itself provides a convenient alternative, cutting the people out of the equation altogether”, write the authors. Thus making it possible for politicians to reward their supporters and enrich themselves.  

When matched against these powerful incentives for corruption, country’s democratic institutions stand as much chance as a black guy in a Freddy Krueger movie. It should not be surprising then that studies show that resource rich countries are more undemocratic, more prone to civil wars and actually have less economic growth than resource poor nations. None of which matters to anyone at the National day of prayer held last month, in which religious leaders prayed for high oil prices. Sounding just like the kinds of people who say “I’ll be right back” after walking into a dark room with a Chucky doll.

Of course T&T’s story line didn’t have to unfold this way. Just look at the world’s other small island ex British colony, with a large Indian and African population-called Mauritius. At the time of our Independence, Mauritius was a far poorer nation than us, with no natural resources. Today, Mauritius can boast of having a rich, stable, and diversified economy. They outspend us on research, (0.37% to 0.12 % of GDP). Outranks us on “ease of doing business (17 to our 81) and have more registered businesses than us.

But who wants to hear a story about boring responsible economic policy as opposed to one where everyone blames their problems on the boggymen of racial conspiracies, capitalism and colonialism.  Happy Halloween. 

No comments: