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How to grow the T&T economy
From reading the headline I am sure two thoughts immediately come to mind.
The first is for us to improve our oil and gas production which would ultimately lead to higher volumes sold and so long as prices remain stable there will be some uptick in revenues and with it will come economic growth.
The second is the multi-decade long conversation about diversifying the economy with the understanding that if we diversify away from oil and gas then we will have additional levers within our economic framework from which to grow our economy.
These two perspectives are not mutually exclusive but it seems that our discussion on economic growth tends to centre exclusively on these two perspectives.
This is unfortunate as it ignores the lowest hanging fruit in the equation. Desperate as we are for foreign exchange and accepting the views of many noted economists that we should be focusing on the things that can earn us foreign exchange we have missed the most obvious and glaring path to growing our economy.
In business when you focus on profits and ignore the drivers that lead to profitability, you ultimately fail to achieve the required profits, at least on a consistent basis.
Transpose the same analogy to generating foreign exchange revenues and I am suggesting that focusing on generating revenues at the expense of the factors that go into the valuation of our currency means that we are unlikely to achieve our objectives.
The missing piece to the puzzle that ultimately is our lowest hanging fruit there to be picked and entirely within our control and sphere of influence is improving our levels of productivity.
Set aside all the economic definitions and jargon for a moment and appreciate this simple truth. Increased levels of productivity is simply the ability to achieve more output with the same or even less inputs.
It is the relative levels of productivity between one country and another that goes a long way towards determining the exchange rate. If we are producing more at a better price then we can earn more for what we produce.
In an economy where there is so much spare capacity due to our living off the fat of our oil and gas boon improving our productive output is the most efficient way to achieve a turnaround in our economic fortunes. A properly executed plan and some degree of leadership is really all that is required. A plan so that you know where you are going and leadership so that people can be inspired to follow the path outlined.
In very simple terms there are really two aspects to improving productivity. The first is to become more efficient in what we do and the second is to remove obstacles that can slow down the process. It may be two sides of the same coin but the two are not the same.
Long ago you required ten people to dig a hole that can now be done with a backhoe in a few minutes. This is an example of doing things more efficiently.
One can argue that one challenge with this approach at this time is firstly it requires investments in capital and innovation which we may not be able to fund and, secondly, it can result in a loss of jobs that may make a bad situation worse. So becoming more efficient may not be the place you may want to start your drive for productivity.
Removing obstacles is clearly the first step and one which is entirely within our control, costs very little, and for all intents and purposes really comes down to having the will to drive towards achieving the required outcome.
It is said that necessity is the mother of invention and it is my view that we are well into the stage of necessity so what are we waiting on.
There are many examples in history to guide us and the most glaring is the US transition from the Great Depression era of the late 1930s to a prospering post war economy. The pathway in moving from an economic state of depression to one of prosperity started with the removal of obstacles to productivity.
For sure they had a catalyst that was World War II but for sure we can learn from their experience as opposed to waiting on a calamity of our own before we get our act together.
US productivity increased by approximately 100 per cent during the war effort compared to its depression era performance and much of it was down to a collective spirit that simply involved “we must get it done”. Absent an external catalyst it is for this reason that political will and leadership is so important in this equation.
By now we should have more than just talk of “we must get it done” but that culture should have already taken root. If we look around and realise we have not even started the process then ultimately we are failing. It is the simple things that matter here. During the war effort in the US women came into the work force. The contribution of minorities began to be embraced where previously they were shunned.
Eventually that lead to the civil rights movement and more barriers broken down. The point was the breakdown of social biases and barriers was one of the obstacles that was removed. Beyond that the relationship between management and labour guided by unions also changed as the focus was on getting it done because the consequences was disastrous for all.
We have a fairly still born attempt at forging a relationship between business, government and labour.
We urgently need to restructure our approach to wages to encourage productivity. If you pay based on hours worked then you get overtime. If you pay based on a completed job then you get a job done faster and with adequate supervision it gets done better.
Such a move creates a dynamic where, for example, we have to find solutions to being stuck in traffic. A 24-hour work day without a higher cost for night work comes to mind. Traffic gets spread out, more people out at night effectively makes the night safer but there is now a business incentive to curbing crime. It worked for New York City and it could work for us. A natural outcome of this would also be decentralisation.
Over the past few years we have used our tax regime in an almost punitive manner and where incentives have been provided it refers to businesses.
How have we incentivised productivity, especially amongst the workforce? If we incentivise productivity then meritocracy comes to the fore.
Appreciate that removing obstacles to productivity is the first step towards moving forward and out of where we have found ourselves. Have we actually stepped on this road as yet? If not there is much to be done because time is running out.
Ian Narine can be contacted at [email protected]
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