THE POST-WAR POLITICAL ECONOMY OF TRINIDAD AND TOBAGO- I

PERIOD II: 1946-’50-Adult Franchise

THE MOYNE COMMISSION

The return to peace in 1946 marked for Trinidad and Tobago the absence of turmoil for the first time since 1937. As mentioned previously, the priorities of World War II placed in abeyance the investigation into the causes of the widespread disturbances in Britain’s Caribbean colonies in 1937. The West India Royal Commission (Moyne Commission) set up in 1938 started its investigations in the summer of 1939 but its Report, due to the war, was not published until 1945.

In essence, the Report stated that “serious discontent was often wide-spread in W.I. colonies during the 19th century as is indicated by the occasional uprisings that occurred leading sometimes to considerable loss of life. But the discontent that underlies the disturbance of recent years is a phenomenon of a different character representing no longer a mere blind protest against a worsening of conditions, but a positive demand for the creation of new conditions that will make possible a better and less restricted life. It is the existence of this new demand for better conditions with the unfavourable economic trend that is the cause of the West Indian problem of the present day”.

This was the authoritative statement with which the Imperial Government and the colonies were confronted when the war was ended. This was a categorical statement that the economic deprivation of the population was the cause of the widespread unrest. In this situation both colonial and imperial governments had their tasks cut out for them- improvement in the economic and social conditions of the colonial peoples.

Since it is one of the essential hypotheses of this study that “there has been no significant change in the pattern of economic performance and relationships within the post-war economy of Trinidad and Tobago” a look at the state of the economy in 1946 is in order.[1]

THE STATE OF THE ECONOMY IN 1946

The 1946 Census of Population credited Trinidad and Tobago with a population of just over half a million (537,970). The racial mix was approximately 47% of African descent, 35% of East Indian descent, 14% ‘mixed and coloured’, 3% white, and 1 % Chinese. The age structure of the population was such that just about 50 per cent was under 21 years and the distribution showed some 23 per cent in the urban areas. The crude birth-rate was about 38.5 per 1000. The death rate was about 14 per 1000. The population therefore was growing at approximately 2.4% – a high rate – which it has since increased still further.

It is generally true that a country’s exports reflect its underlying structure of production and income generation. This is particularly so of small underdeveloped economies, as these usually have a narrow resource base and very little inter-industry relationships.

Given this hypothesis, it is clear that oil, which dominated Trinidad’s exports, also dominated the economy in respect of output and investment, although not necessarily employment. In 1946 oil accounted for 75% of total export-earnings. Characteristically, due to its highly capital-intensive technology, it employed only 3 per cent of the employed labour-force. Its contribution to the total wage bill however was considerably greater because oil-sector wages were the highest in the economy.

Despite the overriding importance of oil, it is instructive to note that the industry contributed only 10% of the government’s total revenue in 1946 – no doubt the result of the government taxation policy then prevailing.

Agriculture, on the other hand, employed over 25% of the employed labour-force. The dominant activity within this sector was then, as it is now, sugar. It employed over 30% of the agricultural labour-force, contributed about 70% of agricultural exports or approximately 10% of total exports. Already, we see a phenomenon which pervades the entire period; oil and sugar earnings constitute the bulk of the country’s foreign exchange, even if they did not employ most of its labour. The dependence on oil, which the economy exhibited in 1946, will be shown to have, if anything, increased over the period despite declared policy statements by successive governments concerning the desirability of economic diversification.

Not only were our exports concentrated in a few products dominated by oil, but our markets were dominated by a small number of metropolitan countries, principally the U.K. Indeed, all of our sugar was purchased by the U.K. at a price, yearly negotiated as it had been since 1939. This was a short-term precursor of the Commonwealth Sugar Agreement which was to come into effect in 1949 and which persists even up to this day. Today’s producers may look with envy at the 1946 price – £19. 10s. 0d per ton – at 1946 prices.

The degree of concentration of export markets however was not as narrow in 1946 as it was to become later, if the metropolitan countries are to be seen as one bloc. Brazil and the Netherland Antilles, i.e. non-metropolitan countries, were at that time relatively important markets.

Sources of imports were also strikingly continued to the metropolitan countries, specifically the U.K., Canada and the U.S., with the U.K. supplying the lion’s share, and the other two alternating their relative position. Again, one Latin American country – Venezuela – was important as the chief source of crude-oil imports.

As in subsequent post-war years, Commodity Imports exceeded Commodity Exports and thus the economy’s trading position showed an unfavourable balance of visible trade of 14.2 million dollars.

The structure of government revenues in 1946 showed that Customs and Excise duties represented some 30% of government total revenues (recurrent and capital) and direct taxation 18%. As we have already noticed, oil, the dominant economic and trading activity, contributed approximately l0%. By 1964 Customs and Excise Duties were reduced to 22.5% of revenue, while Direct Taxation increased to 30% and oil contributed some 35%.

In the field of planning, the government in 1938, accepted the report of a committee it had set up to draw up a programme of development works to be carried out during the five-year period 1939-43. This report, which recommended expenditures of some $14 million mainly on infrastructure investment, was a forerunner of the plethora of Economic Programmes and Development Plans of the next thirty years. Finally, up until 1946, infrastructure expenditures were met entirely from general revenues. The year 1946 marked the beginning of an attempt by government to raise loan funds for its development expenditures.

An assessment of the degree of foreign ownership in the economy is particularly interesting, especially in a country with one very valuable mineral resource. In the case of Trinidad and Tobago, all important companies employed in oil production in 1946 were foreign. This situation allowed decision-making in the most important sector of the economy to be determined ultimately by non-residents – a situation which essentially still exists today. The recent decision by BP to retrench 1,850 workers is a case in point. That the profits of this economic activity accrue to foreigners is probably not as much of a sore point today as it was in 1946, insofar as government taxation policy now pre-empts a sizeable percentage of declared profits in the form of tax revenues and royalties. Despite this, one cannot help but observe that nationals of a country do sometimes feel pique at the fact that they do not own even one share in their most valuable economic asset. It’s likely that that can do a lot for national pride. One thus wonders whether Professor Joan Robinson’s suggestion that aid to some of the developing countries might best take the form of restoration of some, if not all, of the equity of their more valuable national assets may not have some relevance here. So long as oil dominates the economy and oil is foreign owned, the danger exists that the economy will be subject on this ground alone to inordinate external control in decision-making both in the private and the public sectors.

Nor is this all. The sugar sector, in 1946, was also predominantly foreign-owned. Thus the 1953 Economic Survey of the Colonial Territories (Vol. IV) published by the Colonial Office, referring to the year 1951, stated that “approximately two-thirds of the cane is produced on the estates owned by nine companies, and the remainder by peasant farmers, nearly half of whom produce under 10 tons of cane per year. The companies purchase the farmers’ canes at a price based on a statutory formula and process it in their factories together with cane from their own estates. Refining, except on a limited scale for local consumption, is not carried out in Trinidad ….. The two largest companies, both of which are registered in the United Kingdom, manufacture 80% of the Island’s sugar end own some 60% of the total land owned by all sugar estates….”

Thus, in the two strategic industries in the colony’s economy foreign ownership, control and decision-making were overwhelming.

In the field of currency and banking, there was at the end of 1946 $23 million official Trinidad-and-Tobago notes in circulation, backed by at least 23 million 4s. 2d. of sterling reserves. In this period Trinidad notes were also used in the Windwards and Leewards. There were four commercial banks operating in Trinidad – Barclays, Royal Bank of Canada, Canadian Bank of Commerce and Gordon Grant & Co. – three of them foreign owned. Today there are seven commercial banks – all foreign owned.

These commercial banks held total assets of $66.3 million of which at least 75% was invested in foreign countries. This excluded cash holdings, which in effect are really a foreign asset, for every local dollar note held constitutes a loan to the U.K. of at least 4s. 2d. so that any increase in the local currency supply in effect constituted a capital outflow. The system was thus one in which foreign institutions collected the local savings; made them available mainly to foreigners; and saw to it that before any increase in the local money supply could be made, a commensurate increase in local loans to foreigners was effected. All this after foreigners had controlled and had run the other major areas of the local economy – oil and sugar.

At this time the public debt averaged $47 per head and 49% was foreign held. On this basis the average citizen owed the Rest of the World $23. Of course, when the assets which the country held abroad such as foreign reserves, sinking funds, etc. are taken into consideration, the net indebtedness may have been of foreigners to locals. Finally, to service the debt about 4.7 percent of government expenditure was appropriated.

One of the most intractable problems of this economy in the post-war era has been unemployment. In 1946, out of a labour force of 218,000, some 7% was considered unemployed. Considering the underemployed together with the unemployed as some measure of underutilisation of labour, some 10.5% of the labour force was under-utilised – a much happier position than one can claim exists today. Whether the existence of Trade Unions has contributed to this problem is debatable.

In the field of economic institutions, Trade Unions have been central to the post-war economic developments in Trinidad and Tobago. The modern history of labour relations in the territory started in 1937 with the riots touched off in the oilfields by T. U. Butler. The earlier attempts at labour-union formation which started in 1890 with the formation of the Trinidad Working Men’s Association ended with the collapse of the Association in 1933.

By 1938 there were some 16 registered unions, the OWTU, the FWU, the SWWTU and the All Trinidad and Tobago Trade Unions Council being the most important ones. The formation of a Trinidad and Tobago Union Council in 1938 completed the labour union structure as it existed in 1946.

In this year one important development took place. The TUC, at the suggestion of the British Trade Union Congress and the Trinidad Government, joined the newly formed World Federation of Trade Unions. The Trinidad government in a show of good will, financed the trips of union leaders to the first convention of the Word Federation of Trade Unions. We shall see some important developments, especially the extent of external influences on union development, in later periods and the nature of the relationship between government and unions.

CONSTITUTIONAL POSITION

In 1946 the election took place for the first time under “universal adult suffrage without any property or language limitations”. The constitution in force allowed for nine elected seats in a legislature of 18, exclusive of the Governor, who still retained his veto power. Under this system, the elected representatives could not determine, nor effectively oppose, government policies.

The most significant change brought about by the elections was the increased representation of the East Indian element in the legislature, filling four of the nine elected seats. This section of the community has thus from the introduction of universal adult suffrage sought to ensure its fair share of political representation.

The Executive Council which was the policy executing body, though including elected members nominated by the Governor, was still dominated by the Governor and Civil Service officials. So much was this so that it was the cause of much bitter controversy between the legislature and the Executive Council, and also between elected and non-elected members. This was to lead to constitutional reforms which became operative in 1950.

STATE OF THE ECONOMY – 1950

Over the four-year period 1946- 1950 the total population grew at an unprecedented rate. It increased by some 15 per cent in four years, a growth of 35% in the fifteen years between 1931 and 1946. The high rate of growth of the population was due to a combination of a falling death-rate, rising birth-rate and net immigration.

Though there are no official estimates of national income for this period, a very simple technique suggests a guestimate of an average national income of $150 million per annum for the period. Given the population, average national income per head based on these guestimates was of the order of $240.

As in 1946, or probably even more so, oil continued to dominate the economy. Its share in total exports continued throughout the period to be of the order of 75% of total exports – $97 million being exported in 1949 and of oil or of total? $126 million in 1950, an increase of 23% in one year. Even if the increasing share of imported crude oil is deducted, the net export earnings of petroleum products were of the order of 70% of total export earnings and about 73% of net export earnings. Government dependence on oil for revenue increased and in 1949 “over one third of total government revenue was derived from direct taxes paid by the industry”. It must be remembered that in 1946 “roughly 10 per cent (of government revenue) was paid by the oil industry”. This tendency for oil revenues to increase faster than total revenues arose from the fact that the oil industry grew faster than other sectors contributing to government revenue. In addition, there were increases in the tax rate on oil.

By contrast, over this period the oil industry absorbed only 3,226 of the new entrants to the labour force, a mere 12%. This major economic activity of the territory employs very little labour, thus placing the burden of providing employment on the weaker sectors of the economy. This is a major structural weakness of the Trinidad economy – indeed, of any economy overwhelmingly dependent on a mineral resource.

Sugar continued its dominance of the agricultural sector, increasing its exports significantly from $6.6 million to $7.8 million. All of it was sold in a protected market and contributed just over 10% of total exports. So sugar and oil earned over 85% of the foreign exchange.

As for the other agricultural crops, only grapefruit among the citrus showed any significant increase, in export value. The value of cocoa exports increased by nearly 700% over the period and ranked next to sugar by 1950. This improvement was due to improved world prices and the use of rehabilitation measures.

Following the increased production of’ local foodstuffs during the war, the return to peace and the resumption of normal trading conditions led to a falling off in the production of domestic foods, in favour of the traditional export crops e.g. cocoa. The problem of shortage of domestic. production of local foodstuffs was therefore not permanently solved during the war period and in fact has worsened since. Today it is one of the crucial bottlenecks which much be broken now if structural transformation of the Trinidad and Tobago economy is to be achieved. In the meantime food continues to be imported in increasing quantities. Thus per capita food imports increased from $43 in 1946 to $57 in 1950 (current prices).

The territory’s trading position changed very little over the period. It continued to show its usual unfavourable balance save for 1948 and 1950, which recorded small favourable balances.

The most important development on the international trading scene during this period was the devaluation of the pound sterling in September 1949 from $4.03 (U.S.) to the pound sterling, to $2.80 (U.S.). Because the Trinidad dollar was tied, in exchange value, to the pound sterling, its value in relation to the dollar and other non-devalued currency fell in the same proportion as the pound sterling. A Trinidad dollar which exchanged for roughly 84 U.S. cents, came to be worth only 58.3 U.S. cents.

The most immediate impact was to increase the price of imports from the non-sterling area, which were then quite substantial. For example, in 1939 and 1949 30%, and 28% of the territory’s imports came from North America i.e. U.S. and Canada. In 1950, the first full year after the devaluation, only 16.5% came from these countries. These currencies were not devalued of course.

Further, the share of the U.K. in our imports which was 36% and 37% for 1939 and 1949 respectively, increased in the year after the devaluation to 40.5 percent. It was clear that even in so short a time as one year, when adjustments are most difficult to come by, the devaluation of the pound, and by extension the Trinidad dollar, served to increase the territory’s reliance on the mother country.

Finally, it is significant that our exports which became cheaper in terms of U.S. dollars did not increase as one would have expected from the devaluation. The reason for this appears two-fold. Firstly, oil, the chief export, was produced and marketed by foreign oligopolistic concerns for whom a devaluation of the local currency had little significance, as their earnings were in foreign currency and their local costs relatively small. In the face of a devaluation therefore they were not compelled to make any changes in the quoted U.S. dollar price of oil as all this was likely to do was replace their supplies from other sources, without affecting their net income. Secondly, the primary product component of exports was sold almost completely on the U.K. market and therefore their position was not affected by the devaluation. Moreover, they do not display any great sensitivity to price changes.

As it was, the devaluation served only to reinforce our dependence on the U.K. market.

Meanwhile, government revenue over this period increased by roughly 20%, while its expenditure increased by 56%. Nevertheless, owing to the very heavy surplus positions at the start of the period, the government account was still a surplus by 1950.

The pattern of government revenues remained unchanged. Customs duties and payments by the oil industry together contributed roughly 34%. Increasing contributions to an enlarged bill for development expenditure were the main causes of the rapid growth in government spending. In 1948 the government increased its loan requirements from the $7 million authorised in 1945 to $15 million. And to further cap the similarities which will emerge with later years as part of the developmental programme a policy of slum clearance was instituted – ‘What a long time Shanty Town take to move eh.’

Over the period the four banks had increased their total assets by $10.7 million or by approximately 16%. There was a tendency to reduce holdings of foreign assets over the period. Balances due from other banks abroad fell drastically between 1946 and 1948, rising to slightly over the 1946 total in 1950. Bank holdings of foreign assets fell from $4.8 million to $2.4 million in 1950. The share of local assets in the total assets increased from approximately 25% to 36%. In net terms, the $10.7 million increase in assets can be seen as being totally invested in local assets, which increased from $17 to $28 million.

It may be that this increase in local assets was in part the result of the Government’s floating of the two loans referred to earlier for financing development expenditures in November 1948. One of these loans of $15 million was offered on the London Market and the other for $2 million on the local market. As is to be expected from the raising of loans of nearly $17 million the public debt increased considerably. From $26.6 million in 1946 it rose to $42.1 million in 1950 i.e. by 96%. The public debt per head of the population rose from $46 to $66 i.e. by 43% population increase accounting for the latter percentage increase being smaller.

Again, as was to be expected from the fact that $15 million of the $17 million was raised in London, the foreign-held share of the debt increased relative to the local share. From 49% in 1946 the foreign share of the debt rose to just under 75% in 1950. The rising share of foreign held debt is one sign of a philosophy of development which will be shown to have more invidious forms in later years. In fact, it fits easily into the landscape of foreign dependence evidenced by the functioning and orientation of the local economy and its accommodation to decision-making by foreign ownership.

In terms of the structure of the economy it is necessary at this point to assess the extent to which any significant change was recorded over the period. As we have seen, oil and sugar still dominated economic activity, export earnings and employment. The concentration of foreign markets did not diminish – perhaps increased. The devaluation did not seem to have done much good and the unfavourable trade-balance persisted. Foreign banks still dominated the mobilisation of voluntary savings, much of which they continued to send abroad and much of that little bit of savings which went into the Post Office Savings Bank was channelled out of the economy to meet statutory requirements governing the form in which this institution could hold its funds. The public debt increased, the part foreigners held almost doubling. Government revenues were greatly supplemented by those borrowings and its total expenditures due to ‘development’ outlays greatly increased. Overall, no change.

Before the curtain can be drawn on this period however, certain trends in post-war economic policy which can be found to have had their beginnings in the period must be singled out. In the field of industrial development John Shaw, then Governor of the Colony, appointed a Committee in 1947 to survey the field of finance, economics, production and development. This Committee, both in its interim and final reports in 1948 and 1949 respectively, recommended incentives including income-tax relief to industries other than hotel development, the latter having been granted these incentives since 1946. It also recommended the establishment of an Economic Advisory Board to explore possibilities of establishing new industries, including the development and improving of agricultural enterprise; to examine applications from private enterprises wishing to expand or establish new industries; and to advise the government. It was from this Report that the Aid to Pioneer Industries Ordinance and the Income Tax (In Aid of Industry) Ordinance were enacted on 16th March 1950. Here we see the inception of Puerto Rican policy, or “Industrialisation by invitation” or “Plantation Model Further Modified” or which of its many names one chooses to calf it. This model which tends to lead to a high degree of integration between the local and metropolitan markets both for goods and factors, and which tends to place the attraction of foreign capital above the mobilisation of domestic resources, and the levelling out of focal social inequalities, was to be given a big boost in 1957 when the Hobson’s Committee was established. The establishment of the IDC and the increased incentives which were to characterise the last decade indicated little more than a furtherance of this policy of industrialisation.

The tourist industry which is considered among the new dynamic sectors in present attempts to transform the economy, was in this period also considered a very important dollar earner. The government in 1948 established a Committee “to consider ways and means of stimulating the Colony’s tourist trade.” The recommendations including the development of Maracas Bay and the expansion and modernisation of hotel accommodation can be seen today in the Maracas Bay – Las Cuevas and the proposed Tyrico Bay developments and the Hilton Hotel.

In 1947 it was Oil and Fats, in 1967 it is attempts at establishing Caribbean Economic Community. The view of closer economic co-operation with the other Caribbean territories has not died. If anything, the thinking has become more grandiose than that symbolised by the Oils and Fats Agreement in 1947. The policy of closer economic co-operation was not at all absent in this period. Finally, in 1947 the Trinidad Broadcasting Co. Ltd., a foreign-controlled enterprise, established a broadcasting station. The grant of this franchise placed in the hands of a foreign concern, control of one of the most potent media of communications in the territory. In the general landscape it fitted neatly indeed. So Trinidad and Tobago ended the first half of the twentieth century. We shall now turn to Period III to see what changes if any we can detect as they began the second half of the century.