ON THE FACE OF IT, the airline industry should be one that attracts private sector investment. But the attempts at privatisation of airlines were not successful.
BWIA went private in the 1990s though the government retained a golden share and eventually retook control. Air Jamaica was run for a period by the legendary Butch Stewart who could not translate his tremendous success as a hotelier into success at running an airline.
Intra-regional air transport has seen private ventures – Carib Express, RedJet, and several others – come and go while the government-owned LIAT carries on.
Stiglitz, Mazzucato and others have sought in their writings to destroy (correctly in my view) the Washington Consensus which had argued for free rein to market forces, small government, and downplayed issues of inequality and income and wealth distribution.
By contrast, these economists promote the idea of more active government involved not only in macroeconomic stabilisation, but also in addressing externalities, correcting serious inequality, and in promoting industrial and trade policies.
What they do not take into account are: the capacity of governments to conceptualise and effectively manage these interventions, and the impact of politics on the formulation and implementation of these policies.
In respect of regulatory capacity, our central banks have been around for a long time and have acquired considerable experience in financial regulation. Other areas of regulation – telecommunications, environment, utilities, occupational safety and health – are newer and there is less capacity for effective regulation.
Areas such as industrial policy are even more problematic because they require an intimacy with business that public servants typically do not possess and cannot acquire by doing business degrees at a university.
In the ethnically plural societies of Trinidad and Tobago and Guyana, race and ethnicity play subtle and sometimes not so subtle roles in the implementation of policy.
I think it is true to say that the private sector is generally not viewed favourably by the general public or for that matter by government officials. One Trinidadian politician, Basdeo Panday, described the business community there as a “parasitic oligarchy”.
The reasons for this disposition toward business people are complex and rooted in our history and culture. the plantocracy and the merchants were the employer class that exploited the labour of the rest of the population.
That class was also phenotypically white or near white, or in Trinidad and Tobago Syrian-Lebanese, and latterly East Indian, in Guyana and Trinidad. They assumed leadership positions in business often without formal schooling beyond secondary level.
However, after adult suffrage and independence, the political directorate reflected the majority of the voting population. The public sector was the political and economic refuge of the Afro-West Indian.
Business was not automatically accorded high status in the post colonial dispensation; however, access to the corridors of political power was accorded high status. There was little movement between the public sector, with its lifelong, pensionable employment, and the private sector.
When government had the resources as in Trinidad and Tobago, there was no need to treat with the local private sector at all. The political directorate was at best tolerant, at worst, downright hostile to the local private sector.
It did not help matters that the local private sector often could not bring itself to respect the political directorate or the public sector professionals.
They aggressively pursued their own interests but, without political power or any hope of getting it, they had to lobby, corrupt public sector officials and adopt a posture of influence and pressure as the strategies for securing or promoting their interests.
Some of this has begun to change over the last couple of decades. Many private sector leaders are now well educated at university level.
The private sector is now more reliant on professional skills – accounting, auditing, human resources management and industrial relations, engineering – in running their businesses and this has helped to bridge the gap between professionals in the private and public sectors.
Afro and Indo West Indians began to take places on the boards of private sector companies. However, there still remains inadequate crossover between the two sectors, the social gaps have narrowed but still not closed significantly, and only very few businessmen enter active politics and take ministerial office.
The labour movement loves state ownership. Governments will typically not resist the unionisation of workers in state enterprises and statutory bodies and may even agree to union representation on the boards of these entities.
But the real reason why unions love state ownership is that featherbedding becomes the norm and in industries such as the energy sector in Trinidad and Tobago, this is accompanied by high wage levels and generous terms and conditions because the business is perceived as being able to pay.
To illustrate, contrast the adjustments made by privately owned oil and gas companies since the collapse of energy prices to the publicly stated position of state-owned Petrotrin that jobs will not be affected.
Not suprisingly, therefore, the labour movement tends to be opposed to privatisation of state enterprises, or private sector provision of public services under any and all circumstances.
In Trinidad and Tobago again, the incumbent trade union even opposed the recent Initial Public Offering at First Citizens Bank, a state enterprise as a result of government intervention 20 years ago, and which by now ought to have been restored to private ownership with full recovery of the investment made by taxpayers.
Dr Terrence Farrell made these remarks at the Barbados Chamber of Commerce and Industry’s most recent luncheon. Farrell is a former deputy governor of the Central Bank of Trinidad and Tobago and also served in several senior private sector posts. The concluding part will be published next week.
