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GOOD POLITICS IS BAD ECONOMICS

The trinidad Guardian / Kevin Ramnarine

A few weeks ago, Emile Elias, while on a morning radio talkshow, said “Good economics is bad politics”. The statement was simple but profound. If good economics is bad politics then the converse must hold true. That is to say, good politics is bad economics. Can they be mutually inclusive or must they always be mutually exclusive? Have we in T&T been guilty of taking economic decisions for short term political gain at the expense of the wider national interest?

The subsidy on transportation fuel, for example, may have been good for politics but it was bad economics. In fact, subsidies on the whole cause inefficiency, inequality and breed corruption. Case in point was (is) the nefarious diesel racket. In fiscal 2010, this country recorded 649.8 million litres in sales of subsidized diesel. That was the highest ever sales volume of subsidised diesel. Six years later (fiscal 2016) that number collapsed to 496 million litres.

What caused a massive 24 per cent decline in demand for subsidized diesel over six years? Did we suddenly become more energy efficient? Did we drive less? Did commercial activity fall? Are we fishing less? The answers are all no. What accounted for that dramatic fall is co-ordinated action by agencies of the State from 2011 to the present against the illegal exportation of subsidised diesel.

I used the example of the illegal trade in diesel to give life to a discussion that must be had. We are entering a fragile phase of our economic life. What has gotten us here (natural gas) will not be the engine of growth in the future. In fact, if you examine the figures on the economy we really have not grown since 2007. In 2007 our real GDP was $89.9 billion and in 2016 it was $91.9 billion. This means that for almost a decade the economy has been on a sort of economic plateau. Its now in a decline pattern.

These are serious times and serious times call for serious people. This is a time to set aside the “rah rah” politics. The recently concluded local government elections campaign was a huge disappointment. Through the course of the campaign we heard not one proposal for navigating the economy through what is clear and present danger. We heard all that was wrong with the economy and who was to blame but we heard not one proposed solution. Instead we heard a lot about roti. No country can fix its economic system if its political system is broken. To get the economics right we must first get the politics right. This is the cause of the major voter apathy we saw yesterday. People are losing hope in the political system.

In the 1980’s when we found ourselves in an economic ditch, it was the NAR and IMF that pulled us out of the hole. The medicine was bitter. The patient didn’t like it but it worked and the patient recovered. The good economics of the NAR, however, turned out to be bad politics. ANR Robinson paid a heavy price.

The good economics of the NAR era laid the foundation for the recovery of the early to mid-1990s. In the mid 1990s the recovery of T&T’s economy was catalysed by the monetisation of natural gas via the expansion of Point Lisas and the establishment of an LNG industry. In our current economic scenario, it is not clear what will pull us out of the ditch. The BHP Billiton led deepwater campaign is in full swing and we can hope that it is as successful as has been the case with Exxon in Guyana. Betting on deepwater is like playing a game of economic roulette. Even if BHP were to make a big find, it won’t be until 2022 that we would see the first production.

We are, therefore, in a period that requires “good economics”. In applying the good economics the Government must be wary they don’t dislocate the economy and cause social deprivation. In T&T there is a social and economic equilibrium that can be easily put out of kilter. The Government in 2016 has a stronger economy than the economy that was inherited by Mr Robinson in 1986. Back then Mr Robinson had little choice but to approach the IMF. Thus far the Government has reined in expenditure without much social dislocation. The loose “riot” talk will, however, not serve them well when they want to make further adjustments.

As for the good economics, my own belief is that the people of T&T are collectively much smarter than the political elites think. People know times are hard and sacrifices need to be made. We are a maturing society with a growing educated middle class. This block of voters has been ignored by the “rah rah” politics. They yearn to hear politicians that can propose a policy agenda that marries good economics with policies that protect the most vulnerable while not creating and perpetuating welfarism and dependency. The electorate of 2016 is different to what obtained 20 years ago and our political elites are constantly missing that.

Kevin Ramnarine is a former Minister of Energy of Trinidad and Tobago

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