Having listened to Prime Minister Rowley’s address last Wednesday, one had to wonder whether the perilous nature of the finances of Petrotrin described by him were an expression of the failure of the Williams model that I highlighted in my column last Sunday when I quoted Eric Williams’ November 1970 speech to the PNM convention that adopted a new development paradigm for the country.
At that time Williams said:
“The PNM perspectives reject both liberal capitalism (with its concomitant of penetration and takeover of the economy by multinational corporations) and the communist organisation of the economy and the society. Instead, we follow the pattern that is being increasingly developed in developing countries of state participation in the economy, to the extent of up to 51 per cent in particular enterprises, to ensure that decision-making remains in local hands.”
The Williams concept of state capitalism stood in stark contrast to the policies of democratic socialism that were pursued by Michael Manley in Jamaica between 1972 and 1980 and those of co-operative socialism that were pursued by Forbes Burnham in Guyana between 1968 and 1985.
The Williams model can only work if the State has high levels of revenues. Prime Minister Rowley curiously, yet honestly, outlined two major loans taken by Petrotrin in 2007 and 2009 which have had an adverse impact on the fortunes of the company. He went further to suggest that the offer of 0-0-0 that was made in 2013 for the period 2011-2014/15 was done at a time when the price of oil on the world market was over US$100 per barrel and that the 0-0-0 offer today is based on lower oil revenues.
The reality is that the company had compromised finances well before 2013 and its financial future was insecure at that time, just as it is today. The political effect of 0-0-0 is highly unpopular, but mismanagement of the company would leave it in a position where it cannot make any offer above zero.
To say that 0-0-0 in 2013 was irresponsible and that 0-0-0 today is highly responsible does not fly. In both instances, the company was not in a healthy financial condition regardless of the price of oil. The comparison with 14 per cent in other sectors of the economy is made on the basis that somehow that was irresponsible, while at an earlier time in 2011 there were protests about the then government seeking to apply a five-per-cent cap (which was deemed to be wicked).
The bare essentials are that the State can no longer afford to maintain the Williams model of majority state participation in the economy. We had to turn to neo-conservative structural adjustment policies to bail out the economy when we got into trouble in the 1980s. There is a case for privatisation of Petrotrin that is emerging because the Prime Minister has stated that the company is a ward of the State.
The harsh reality is that the State can no longer afford to maintain all of the state enterprises that are losing money in these hard times. The fiscal discipline that emerged out of the structural adjustment period between 1988 and 1991 may have been politically devastating for the NAR government at the time, but it saved the country.
We are at that exact point once again. The only difference is that we have not entered into a structural adjustment programme as yet. Before we do so, the government has to make the bold political decision that it will make that policy shift.
What is holding that back is the MOU that was signed between the Joint Trade Union Movement and the PNM in August 2015. Instead of moving forward with what needs to be done, the argument from the Labour minister is that we need to reduce our expectations from the national pie and take less than had been taken before.
The Government is at an ideological crossroads whereby some would prefer privatisation and divestment now rather than the slower process of dialogue with the unions to wean the state off the heavy burden that it currently faces and that it cannot honour.
Which one will it be? Privatisation to reduce the burden on the taxpayer and reorganise the economy or deferred gratification by reduced wage agreements for the state to honour down the road in the hope of better fortunes.
The country can no longer afford to mind Petrotrin and other loss-making state enterprises that are a burden to the taxpayer who must now face increased taxes to pay for all of this. The expenditure side of the budget will be greatly reduced and the temptation to dip into the Heritage and Stabilization Fund can be averted.
The political fallout of making such a move will be the greatest suppressant for such government action as the JTUM and other unions will not take kindly to the alteration of the Williams model. That is where the political difficulty will come for the PNM because it will mean having to admit that the Williams model has failed which will come with a price.