Local
contractors upset over Chinese labour
The
Trinidad Guardian
Port
Spain
Petroleumworldtt.com
07 16 07
UWI Professor of Economics Dennis Pantin has argued
that IMF medicine has been an “overwhelming
failure” in the hemisphere and that T&T’s
recovery was “squarely a result of the hydrocarbon
boom.”
Business
Guardian editor Anthony Wilson contends, on the
other hand, that the T&T economy went
from negative growth to six full years of economic
recovery without the benefit of a hydrocarbon boom
and that the IMF policies were successful here.
On
Friday, former professor at the Institute of
International Relations, Dr Anthony Peter Gonzales,
sent the following letter to the Business Guardian
as part of the widening debate on the role of the
International Monetary Fund in T&T’s
economic recovery in the early 1990s.
Policymakers
and others from the period—such
as Selby Wilson, Winston Dookeran, Wendell Mottley
and Patrick Manning—are invited to join the
debate.
I appreciated your reply to Professor Pantin on
the role of the IMF during the period under discussion
(1986-1994). I agree that the policies allowed
the non-oil sector to expand and laid the foundation
for future growth. The energy boom came after the
correct macroeconomic and structural framework
was put in place. I also support your call for
a full debate and enquiry into this experience
since it is important to get the lessons correct.
My
concern with Professor Pantin’s article
is that, quite apart from whether IMF policies
work, there is the issue of getting the IMF seal
of approval to ensure policy credibility with the
international community and especially with our
creditors.
The main rationale behind going to the IMF was
to secure a restructuring of the debt and provide
our creditors with some measure of security that
we had a credible path to recovery.
Had we not done that, the consequences in terms
of international credit worthiness could have been
far reaching.
It should be recalled that some local professionals
and observers were calling for non-payment of debt
and some were totally antagonistic towards foreign
investment.
Some other stakeholders were even saying that
fiscal deficits larger than those proposed by the
IMF and others can be supported once they are spent
on local goods and services as if it is possible
to make such a distinction in the real world in
terms of the consequences of spending.
It should also be mentioned that it is an open
question as to whether this country had the discipline
to implement such a needed austerity programme.
Pantin argues for going it alone with a sacrifice
model that would incorporate some key IMF policies.
But the question is whether without the presence
of the IMF (and by extension the wider international
community) it was possible to accomplish the austerity
targets in a context where there is an ethnic political
divide and opposition opposes even on the most
trivial matters.
The country is further riddled with eternal labour/management
strife that allows for no meaningful political
consensus even in the most dire economic circumstances.
Timing, conditions affect IMF policies
The
initial reaction of labour was to call for general
strikes (“days when the earth would
stand still” to recall their expression)
and along with other stakeholders they were bent
on frustrating any structural adjustment programme
in which they felt that they would be called upon
to make disproportionate sacrifices.
T&T
is not Barbados where an IMF programme can be
rejected but even more bitter pills can
be swallowed in the form of sizeable civil service
retrenchment and a labour/management wages and
prices restraint agreement.
What
was remarkable in T&T, however, was that
in the end labour tacitly conceded and allowed
wage restraint to take place that facilitated the
gains from the devaluation. My view is that this
was only possible under an IMF programme where
the country had a commitment to the international
community and the consequences were better appreciated.
Reference
to the Jamaican experience is not helpful since
Jamaica unlike T&T took too long to go
to the IMF. The country got bogged down in an arid
ideological debate while the economy disintegrated.
The majority of IMF success stories are based on
early recognition and action to stop the downward
spiral.
Even worse in the case of Jamaica in the 1970s
was that after going to the IMF, they sought just
to use the IMF seal of approval to get new money
and ignore the targets. Subsequent governments
were hardly any better as they would never stick
to the package allowing inflation, high interest
rates and foreign exchange instability to govern
the economy.
In the early turbulent days of the 1970s, quite
a few intellectuals that were part of Manley`s
adventurism spoke about these mistakes. Some even
said that even the Cubans had advised Manley to
go early to the IMF.
T&T
learned from his experience and I remember many
Jamaican colleagues saying that we avoided
their sterile debate and made the right decision.
Lloyd Best when asked about the decision to go
to the IMF used to dismiss it as a sideshow. I
suspect that as someone who was straddling the
roles of academician and politician, deep down
he recognised the importance of going to the IMF
in the circumstances but was cautious about avoiding
possible political suicide. His colleague, Professor
Kari Levit, did openly support the decision.
I should state that IMF policies do not work in
all countries and a lot depends on the timing and
initial conditions especially questions of governance
and social and political stability.
Our Venezuelan neighbour can testify to this as
the programme was implemented in a context of social
instability and extreme inequality, producing even
further chaos.
In Africa, where there are about 40 failed states,
it is impossible for IMF or any other policies
for that matter to work in most of these circumstances.
Asia no longer needs the IMF as many of them have
risen to emerging economies and independently can
find their own funding.
In
Latin America, the experience is mixed. It is
difficult to get most countries—especially
the large ones—to properly adopt IMF programmes
in a context of corruption and a legacy of policy
irresponsibility.
The idea that Latin America is a case of IMF rejection
because many governments have now swung to the
left is not indicative of IMF failure. Democracies
came to Latin America as a result of the Washington
Consensus whose main objective was to curb unbearable
rates of inflation which it achieved.
The deeper structural problems require a more
long-term solution that will naturally cause swings
to the right and left. What, however, is most noticeable
is that apart from the exceptional case of Venezuela
where money is no problem, most if not all of the
new left have been staying close to IMF-type policies.
Lula in Brazil is good case of how he has managed
the economy to keep international competitiveness
and international creditworthiness while trying
to introduce more distributive social policies.
In conclusion, let me add that it is a myth to
belief that energy companies invest under any policy
or political conditions.
The very cases that Pantin mentions supports this
argument.
In Angola, the oil companies operated in an enclave
during the civil war that was respected by the
warring parties at that time.
Today,
Nigeria is concerned that oil investment in the
Delta region is dropping. As a sign of their
concern, witness their recent reaction to the CNN
correspondent that went there some months ago.
Nearer to home, it is clear that T&T benefited
from the situation in Venezuela in terms of attracting
foreign investment in energy.
It is not my intention at this point to deal specifically
with the IMF policies per se since Professor Pantin
is still elaborating on his distinction between
sacrifice and IMF suffering policies and the lines
are still quite blurred. I will get back to this
when he has completed his exercise.
Anthony Peter Gonzales
The
Trinidad Guardian
Sunday 15th July, 2007
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