In the 1930s, the United States went through what became known as the “Great Depression”.
Over 70 years later in 2009, the American economy went through another deep economic downturn now described as the “Great Recession.”
The Americans differentiate between the terms “recession” and “depression” in comparing the two periods which according to economists are two different technical terms.
In the 1980s, T&T experienced a deep economic decline the results of which led the country into the hands of the International Monetary Fund (IMF).
A sharp decline in energy prices at that time precipitated this course of action.
30 years later, T&T is in the grip of another devastating recession.
Is it an academic debate to raise the question about which economic period is “worse”? Is it a “Great Depression vs Great Recession debate?
Business and labour leaders who remember the 1980s recounted some of their experiences and compared it to the economic turmoil of the present times.
DECLINING COMPETITIVENESS
Wilfred Espinet, Chairman of Petrotrin, who served as President of the Trinidad and Tobago Manufacturers’ Association (TTMA) in 1987, told Sunday Business one of the major differences between the 1980s and the present economic downturn is that T&T’s industries have become less competitive.
He said during the 1970s the manufacturing sector was much stronger than now.
“Manufacturers had incentives and these included the protection of the market where they banned some imported products. We had cars being assembled, television sets being assembled, and the manufacturing of a number of different things.”
He attributed the successes of that time to the closed economy of the 1970s and 1980s which is different from this era.
He also said manufacturing also did better during the 1980s despite the recession.
“When the currency was devalued the owners did not have to go buy plants at the higher price so it gave them an enormous amount of capacity available at lower prices because you had a lower TT dollar rate and they became more competitive. During this time the manufacturing sector grew dramatically from 1985 to 1989.”
He said by the early 1980s, there was the crash in oil prices which wreaked havoc on T&T’s unprepared economy.
“I hope people see the similarities and same patterns going on here with this period. In 1984 we had our first devaluation because we continued to spend money up until 1984 without taking a breath. We started to run out of foreign exchange.”
The major difference now is that T&T’s economy operates in a global environment.
“We cannot think of T&T in an exclusive way. If T&T is producing a product and its currency is too high to other currencies or the labour costs are too high, owners would not be able to sell the product they are making. We killed out manufacturing as part of globalisation in the 1990s, what we did is make people choose between manufacturing competitively or closing down and importing. A lot of manufacturing closed down.”
He spoke about different values for people who were around before 1976 compared to the low productivity of the contemporary era.
“Most of us worked hard. We took the train to Port-of-Spain and worked for a full day’s wage. We could not come to work late or get 50 days leave. We did not have all those things that created a substantial cost to doing business. The people working today were not around in 1976.”
SEVERE 80’S RECESSION
Dr Anthony Gonsalves, Honorary Senior Fellow, Institute of International Relations, University of the West Indies (UWI) told Sunday Business that “there is no comparison” between the 1980s recession and the present economic decline.
Gonsalves said he was active on the UWI Campus during the 1980s with other notable economists like Terrence Farrell and Ronald Ramkissoon in shaping debates on what course of action the country should take at that time.
“The recession was much worse then. At that time we had no foreign reserves, we were in huge debt and it is not like today where there is at least $7 billion in foreign reserves and the Heritage and Stabilisation Fund (HSF). The situation is fundamentally different compared to that time.”
He said at the time the country had to go to the IMF, T&T could not pay its debts and needed IMF cover to source financing to keep the economy afloat.
“Today, we haven’t reached there as yet. Yes, we are in a difficult situation and we have to look for solutions. We do not want to reach where we were in 1983.”
LABOUR VIEW
Gerry Kangalee, Education Officer, National Workers’ Union (NWU) told Sunday Business when comparing the recession of the 1980’s to the situation today, one must bear in mind that the former began in the early 1980s and dragged on for almost two decades.
He said the economic crisis today, has only just begun and from all indications seems set to continue for the foreseeable future, particularly as the much-touted economic diversification thrust is more word than deed.
“What is clear is that at this stage there is no evidence that the impact of the ongoing collapse is anything but catastrophic. There are similarities, between the two periods as well as significant differences. While the austerity measures (structural adjustment) are basically the same, designed to shift income away from the working people and into the pockets of the transnational corporations and the local merchant class posing as entrepreneurs, the social situation is vastly different.”
Kangalee said in the 1980s and today the mantra is “reduced local consumption, increased taxes, government subsidies to the private sector, decreased public spending on the provision of public goods, frontal assault on collective agreements’ provisions, increased utility rates, privatisation of state enterprises, reduction of the number of government employees; predatory bankers foreclosing on mortgaged homes, retrenchment of workers across the public and private sectors, lower wages and devaluation.”
He said: “The social situation today though, is much different. In the eighties there was organised resistance from the trade union movement. One just has to recall the tremendous strike struggles that swept the east west corridor: Lever Brothers, Metal Box, Sylvania, Printing and Packaging and the energy sector: Fedchem (five month strike and six month lockout), Petrotrin, East Coast Contractor workers, Dunlop and many more. This succeeded in delaying and mitigating the structural adjustment programme.”
He lamented that today, the trade union movement has lost much of its strength in numbers and in its credibility among working people and seems quite incapable of mounting the kind of organised campaign of resistance that is needed and many labour leaders are seen as pawns of the political parties.
STATISTICAL COMPARISON
Former Central Bank Governor Jwala Rambarran announced T&T had suffered its fourth quarter of negative growth and was now officially in a recession at the end of 2015.
In 2015, GDP declined by 0.6 per cent, whereas in 2016 the decline was -6.0 per cent and in 2017 it was -2.3 percent, according to the Economic Commission for Latin America and the Caribbean (ECLAC).
In 1985, T&T’s GDP declined by -4.1 per cent, in 1986, it declined by -3.3 per cent, by -4.4 per cent in 1987, -3.9 per cent in 1988, in 1989 it declined by -0.82 percent and finally returned to growth in 1990 with a small 1.5 percent growth.
Unemployment, which stood at 7 percent in 1981, reached 17 percent by 1986.
According to the Central Statistical Office (CSO) the unemployment rate in 2017 was under 5 percent.
In December 1985, the government devalued its currency by 50 per cent to TT$3.60 per U.S. dollar.
In 2018, devaluation is still at the debate stage.
Then Prime Minister ANR Robinson said: “There was and is no realistic alternative to an accommodation with the Fund. And there is no escape from the pain of adjustment, whether this adjustment takes place with a Fund programme or without an IMF programme.”
The conditionalities were periodic reviews of the exchange rate, reduction of the budget deficit and reduction in imports and price controls.
In January 1987, the government suspended cost of living allowances (COLA) for workers in the public sector and in early 1988 the Government announced its intention to go to the IMF.
In early 1989, the government slashed public sector workers’ wages, cutting them by 10 per cent.
In 1989 and 1990, T&T was given two loans for its austerity measures.
While there have been cuts to subsidies under the present Keith Rowley administration, there has been no official IMF austerity programme—at least not as yet.