http://www.trinidadexpress.com/commentaries/-HOW-things-go-from-stable-to-negative-302319721.html?m=y&smobile=yUnless we prefer to keep our heads in the sand of state-sponsored spin, we will admit that Moody’s has told us nothing that we shouldn’t have already known about the government’s management of the economy. In downgrading T&T’s Government bond rating and issuer rating to Baa2 from Baa1, and changing the outlook from stable to negative, Moody’s has merely confirmed the logical consequences of electioneering economics. Having floated into office on a platform of change, the People’s Partnership Government (PPG) wasted no time in breaking faith with the electorate by choosing the soft option of appeasement over the more demanding imperative of transformation. The signal was clear from the very first budget delivered by Winston Dookeran in September 2010 and thereafter underscored in successive budgets as well as the Prime Minister’s political appointments to State enterprises. It was clear that this was to be no Government of change. What it intended was to milk the oil and gas economy for all it was worth in order to buy the next vote. This is the real story behind the drivers identified by Moody’s in delivering the downgrade: persistent fiscal deficits, limited economic diversification, lack of a medium-term fiscal strategy, and inadequate provision of vital macroeconomic data. As indicting as these would appear, they represent not failures of PPG economic policy but the key elements of a Government strategy that prioritises the political agenda over T&T’s economic well-being. While there is nothing inherently wrong with choosing to run a fiscal deficit, governments should present reasoned arguments for doing so. The onus is on the Minister of Finance to explain precisely how a temporary deficit over a defined period will achieve an objective that is crucial to the permanent economic and/or social viability of the country. It is therefore not enough simply to hand out laptops, baby grants, CEPEP jobs and so on but to explain, in precise terms, what problems are being addressed by such expenditure, and how solving the problems will accrue to the national interest in some quantifiable measure. Nothing of the sort has occurred. Devoid of any social investment strategy, the Government’s social support programme is digging us deeper into an expanding welfare pit with scary consequences when national income runs low. In recent history, this is what happened throughout the first half of the 1970s and the 1980s into 1990 when the society’s competing claims for the economy’s limited resources spilled blood onto the streets. The Government’s obsession with vote-getting has transformed even its economic diversification strategy into welfare because of inadequate linkages to the rest of the economy and the failure to reform a financial system that rewards foreign exchange-dependent merchants and traders instead of domestic producers and entrepreneurs who have export potential. One example of the Government’s misguided approach to economic diversification involves the Creative sector which was singled out for its high diversification potential. The sectoral management plan is now in virtual free-fall. Having disbanded and scrapped the T&T Film Company and T&T Entertainment Company, the Government established an entirely new State enterprise, CreativeTT (Trinidad and Tobago Creative Industries Co Ltd) to oversee several new sub-entities including FilmTT, MusicTT and FashionTT, each with its own board. Today, with precious little to show for money already spent, CreativeTT is without a board following resignations and dismissals. In its short life, FilmTT has also been through about three incarnations of its board. And so it goes: unnecessary, unproductive and destructive upheaval due to inadequate consultation, limited understanding of the creative sector and community, a preference for political appointees over experts, poor planning and ineffective management. The Government’s political priorities also explain the lack of a medium-term fiscal strategy, identified by Moody’s as one of the drivers of its decision to downgrade. When politics trumps economics, the needs of the short-term over-ride those of the medium and long term, making vaps and voops the order of the day. A Government operating in vote-getting mode has little place for public sector planners and other professionals trained to be guided by data and working for the national interest. Everything and everyone is required to submit to the service of the almighty political interest. As long as T&T is flush with petro-money, nobody has a problem. Not even the highly-quoted Moody’s. It is only when money begins to run scarce that alarm bells go off. In a back-handed way, when it comes to the Heritage and Stabilisation Fund, the political agenda is now working against the public interest. Moody’s has taken the financially logical position that the fund should be used to compensate for the fall in energy income. The Government, however, understands the serious political implications of dipping into a Fund that has become an important public symbol of protection against the Government’s wanton spending. To go there now is to cross the last line of resistance and admit to crisis. Without a dramatic increase in the price of oil to plaster over our cracks, we should all be worried about the economic outlook. The Central Bank’s repeated comment about the economy approaching full capacity is really a statement about the failure to grow the economy beyond the limits of oil and gas. In a context where even the non-energy sector depends on the energy economy, no one can afford to feel insulated. With the US federal funds interest rate expected to increase to around one per cent later this year, domestic demand for US dollars is likely to intensify well beyond current high demand levels. When that happens, the implications of Moody’s comment about T&T’s low level of economic resilience will become starkly clear to all.
