POLITICS AND ECONOMICS: RESTRUCTURING THE TRINIDAD ECONOMY

To say that political expediency governed his behaviour then is to misunderstand the man’s essential prudence. Rationalization of the economy was to stop short of large scale state ownership or any similar action that would disturb too radically the existing balance of class or ethnic forces or indeed get Trinidad involved in cold war disputation. In so far as Williams and his colleagues have an ideology, it is an ideology of pragmatism rather than of total ends.

Given the inelasticity of the context in which it must operate, the P.N.M. is perhaps essentially correct in viewing its role as a “welcoming agent” for private entrepreneurs while preserving the country’s limited financial and technical resources for agriculture and other tasks can only be properly undertaken by the public sector. The basic economic strategy of the Party is the only one that seems to be permitted whatever the theoretical advantages of the Cuban model might be. It makes no economic sense to talk about socialism in the Caribbean, whatever declarative value the proclamation of a socialist ideology might have in terms of providing ethical guidelines for the community.

RECENT TRENDS

Since 1965 the P.N.M. has been showing a bit more boldness (even if not unequivocally) in devising instruments to slow down the decline of the economy, strategies that have alienated labour, capital, and other vested interests like the Catholic Church. The Party has gradually begun to leave behind the era of economic innocence. The major policy departures have been an Industrial Stabilization Act, new Finance, Insurance and Banking Acts, and a modest birth control programme.

Faced by growing labour militancy (between 1960 and 1964, there were 230 strikes involving 74,574 workers and the loss of 803,899 man days, mainly in the oil and sugar industries), the Government embarked on a policy of disciplining the labour movement which it had vowed never to do, but which in the circumstances it felt compelled to. Acting under a pretext that there was a communist inspired plot to create chaos in the country, the Government declared a state of emergency in the sugar belt in March 1965 under cover of which it steam-rollered a bill that has rigidly circumscribed the freedom to strike. The “crisis” was clearly a manipulated one and no hard evidence has been adduced to document the charge.

The Bill, which had obviously been in preparation for some time, was pushed through the Legislature in one day with vested interests being given almost no time to study it. The Trades Union Congress which had marched in support of the P.N.M. in 1961, was not consulted at all, though Party connected trade unionists might have been. The W.F.P. with some justification claims that the timing of the Bill reflected the determination of the P.N.M. to prevent the “freedom fighters” in the sugar industry from seizing the leadership of the All Trinidad Sugar Workers Union from the accommodationist executive and then linking up with the radical Oilfield Workers Trade Union. The P.N.M. is said to fear that a junction of these forces would have upset the political and ethnic balance and paved the way for a new genuinely radical multi-racial regime.

The hypothesis is a plausible one, but the evidence suggests that Indian sugar workers are not yet ready to follow Negro political leaders whatever they might do in the field of industrial relations. Negro workers have also consistently refused to return labour leaders to the Legislature.

The conditions under which strikes, go slows and lock outs can be initiated have now been so circumscribed as to make them unlikely. Penalties for breaches are quite severe. The Bill also provides a formula for the recognition of trade unions by employers – 51% vote by the workers – for price controls on basic goods and for an Industrial Court, the adjudications of which are binding on all parties subject only to appeals on points of law. The Court has been enjoined to ensure the workers a fair share of increases in productivity, to keep in mind the need to maintain and expand the level of employment, domestic capital formation, economic growth and the competitiveness of Trinidad’s industries in export markets. The Court has also been charged with the responsibility for ensuring the continued ability of the public sector to finance development projects and for maintaining a favourable balance of trade and payments. It is indeed a heavy responsibility to impose on a quasi-judical body.

The P.N.M. has taken the position that free and unrestrained collective bargaining is dysfunctional in the light of Trinidad’s dire economic circumstances. The Party feels that consumption has been out-stripping productivity. It notes that real national income increased by almost 41 % between 1956 and 1960 and that real per capita income increased by 35% between 1956 and 1961. While wages increased by 22% between 1960 and 1964, retail prices increased by only 9.7% during the same period compared to 12% in Jamaica, 14% in Nigeria and 40% in Ghana, mainly due to the fact that no inhibitions have been placed on imported supplies as was the case in Ghana.

The P.N.M. stoutly denies that it has sacrificed labour to capital. Rather, its aim is to change the “old fashioned loud-mouthed” style of industrial bargaining by reducing the number of trade unions (there are now 165) through amalgamation and centralization (the Act is already having this effect), and by helping to upgrade the bargaining skills of unionists through its newly created Labour College and the research facilities of the Court. It also feels that the Court will allow labour leaders to accept settlements in the national interest without running the risk of alienating their following. “The days of agitation are over” declared Dr. Williams. The P.N.M. feels that labour is now part of the establishment, and as such has a responsibility to respect the needs of the national interest. It is worth noting that the “people” speaking through the Attorney General may be a third party to proceedings of the Industrial Court it is felt that the national interest is involved. The P.N.M. has admitted that the distribution of income in Trinidad is not as satisfactory as it might be, but blames organised labour as much, if not more than business. The Minister of Finance in fact claims that “the increases in the proportion of income accruing to persons was at the expense of Government income and company savings”.. – 87.2% in 1956 compared to 88.4% in 1962). This incidentally has been denied by the Liberal Party (a small conservative splinter group from the D.L.P.), which feels that the Treasury has been the net beneficiary of changes in income distribution.

The I.S.A. has been accepted in principle by the general population including business end a majority of the labour movement though there have been strong demands for amendments. Both the Court and the P.N.M. have conceded that amendments are needed and some have been introduced without changing the essence of the Act. Radicals associated with the W.F.P. and O.W.T.U., ( “a recalcitrant minority of communist persuasion playing on working class discontent”, in the view of the P.N.M.) have however bitterly condemned the Act, and have vowed to have it repealed by constitutional means, and failing that, “from below”. The Courts have rejected litigation claiming that the Act is un-constitutional and have ruled that there is no “right” to strike in British jurisprudence.

The W.F.P. sees the Act as a return to the pre 1937 situation, which it clearly is not, as a restraint on free collective bargaining, which it is, and as the P.N.M.’s main instrument for maintaining stability and restraining the “just” demands of labour for internationally comparable wages in the interest of encouraging capital from outside. The W.F.P. feels that it and not the P.N.M. is the true guardian of the dignity of the worker and the national interest since it is fighting the battle against mechanization and for the retention of profits in the country via increased wages for workers. Its argument is that workers must share directly in increased productivity, and that only a militant and corrupt trade union movement can’ guarantee these goals, not a Court suborned by a ruling clique that has “sold out” to North American capital. The W.F.P. however, failed to convince the electorate of the validity of this claim during the 1966 Elections, by which time the Court had shown quite clearly that it was not partisan to employers. Of the 36 rulings or conciliations made in its first year, only three were decidedly in favour of employers, while another three were about evenly split. Even the VANGUARD, militant organ of the O.W.T.U. has grudgingly admitted that the “Court had done a fine job and has replaced the conference table as a place for negotiation”. The l.S.A. seems to have become a permanent feature of industrial relations system in Trinidad. There is no genuinely popular demand for its complete repeal.

The complementary aspect of the new economic policy involved a measure of fiscal reform. The reform programme, which began with the introduction of the P.A.Y.E. system of taxation in 1957, was expanded in 1963 when higher income and company taxes were levied. The tariff system was also modified to restrain (unsuccessfully) the consumption of unessential imports. In 1966, three additional measures were introduced. The least controversial of these was the Central Bank Act, the aim of which was to provide the nation with instruments to regulate its money supply. The Bank has been given wide powers to regulate the commercial banks, hire purchase credit and interest rates in general, but the Bank has made it clear that no devaluation is being planned, and has assured the financial community that its policies will be conservative. As the Governor of the Bank noted’ “the scope of monetary policy is limited by the fact that our interest rates cannot get far out of line with world interest rates.” The Central Bank has also been charged with the responsibility of assisting in the organization of a development bank and a domestic capital market, institutions that are sorely needed in the Caribbean if indigenous shareholding and public companies are to be stimulated. At present, capital market relationships are vertical (i.e. with metropolitan countries) rather than national or even regional. Of the 567 companies resident in Trinidad in 1966, only 20 were public companies.

More controversial than the new banking legislation was the Insurance Act passed in Dec-ember 1966. The main aim of the Act was to regulate the conditions under which firms were to be allowed to operate in Trinidad and above all to force them to invest more of the savings of the community domestically. It stipulates that 36% of the assets of registered companies must be locally invested, and provides for annual increases of 6% up to a maximum of 60%. Companies are also required to make guarantee deposits of $250,000 in government issues. Three Canadian insurance companies have found the terms of the long over-due act “terrifying” and have stopped selling new policies in the country. Service on old policies has however been provided for. The companies claim that they have to maintain liquid assets, and that without a domestic capital market they would have to sell at a loss.

By far the most controversial of the “Acts’ was the Finance Act of 1966. The details of the Act, adjudged “esoteric” and “administratively indigestible” by financial specialists cannot be discussed here, but the main purposes are clear, It was an ambitious attempt to plug loopholes against tax evasion by both domestic and foreign business· men, to discourage repatriation of profits or alternatively to cream off some of these when they were sent abroad. It was also felt that businessmen should pay some compensation for the “benefits of the I.S.A.” The then Minister of Finance Mr. A. N.R. Robinson, complained that 75% of the 640 companies operating in Trinidad only paid a total of $2 m in taxes.

The Act also introduced the concept of the corporate tax for the first time. The old company tax system was said to have permitted the mixing up of the personal affairs of the shareholders with the business side of the company to too great an extent, with the result that it was easy to obscure transactions that should have been subject to taxation. Corporate taxes have now been set at 44%, 1.5% higher than the Company tax rate set in 1963; the Act also disallows the old practice of claiming company paid taxes against personal income taxes. A wider range of transactions, previously entered as costs e.g. fees for patents, management services of foreign head office representatives, have also been brought within the tax net. The Government’s operating principle was that all income earned in Trinidad must be taxed in Trinidad. Otherwise, its forbearance results in a straight gift to a foreign Treasury. Among other things, the Act also provides incentives to domestic firms engaged in export creation.

Double taxation treaties have also been negotiated with the U.S., U.K., and Canadian Governments which in effect means that profits taxed in Trinidad will be exempt from taxation in these countries up to 5% in the case of the U.S.A., and 15% in the case of the U.K. and Canada. It is worth noting many of the tough provisions of the Act, such as a capital gains tax of 20% and withholding taxes of as much as 30% in addition to corporate tax were withdrawn because of strong pressure by business organisations, the Liberal Party, labour organisations and even P.N.M. elements. There was widespread fear that investment would dry up, and that the industrialization and job creation programmes would be affected even further than they have been by “normal” capital outflows and shrinking inflows. (The Finance Minister was subsequently offered as a sacrificial scape-goat to these elements. He has since been demoted to the External Affairs portfolio). The Government is however no happier with the dominance of foreign capital in Trinidad than is the opposition, though its necessity is recognised. As the Prime Minister complained:

“This dependence on foreign sources of finance, apart from being psychologically prejudicial, is practically dangerous. Many foreign interests behave as if they have a God-given right to be exempt from paying taxes to a national Government, as if private enterprise from overseas is entitled to any privileges which it demands.”

The P.N.M. insists that it is still a nationalist government and that it is determined to preserve the Nation’s sovereignty. Some balance has to be maintained between the needs of capital and the national needs of the community.

In April of 1967, the P.N.M. appointed a high powered tripartisan committee to explore new possibilities for coping with the existing economic slump, and among things to make suggestions concerning its tax incentive policies to industry. A Productivity Centre and a National Productivity Council have also been established to assist the small entrepreneur, and efforts are being made to establish a National Insurance Scheme, more for the funds it will make available for development than for anything else. The Government amidst some inner party opposition has also announced plans to sell some of its assets B.W.l.A., the Hilton Hotel and reportedly the Telephone Company), to find money to create jobs in the public sector including the construction of six factories for sale or lease to private investors.

The P.N.M. has also abandoned its unwilling-ness to run afoul of interests opposed to family planning, and is now giving serious attention to introducing it on a national scale. The Party has declared that while it will not impose family planning on any group that is morally opposed to it, no section of the community will be permitted to obstruct the desire of others to practice birth control. It is worth noting however, that there is a significant lag between the initiation of a birth control programme and the time when results begin to become significant in terms of decreased demands for jobs.

All these departures are being made to build public confidence, dispel some of the panic that is beginning to engulf the population and postpone the “revolution” of the unemployed which some confidently predict before the end of the decade. For the time being; however, no one has come up with economically and politically viable policy alternatives to the ones being pursued by the P.N.M. Roy Augier has pointedly observed that “the post-war generation of intellectuals have just begun to think about a replacement for the Puerto Rican model”. It remains to be seen whether the new committee or the University of the West Indies team of economic experts will come up with anything fresh and feasible. Meanwhile, strong hopes are being placed on a Caribbean Economic Community linked to the Alliance for Progress and the Latin American Free Trade Movement.

EDITOR’S NOTE:-

Since this article was written certain developments in the economic and social affairs of Trinidad and Tobago would appear to blunt some of the force of its appraisal and even reveal a certain lack of focus. Nevertheless the underlying inference that there seems no better alternative to the policies of the present government (at least up to 1967) is a view about which there would be disagreement. We hope to present other views on the subject in future issues of this Quarterly.