When boom is not boom

Mr Manning’s motive in doing so is transparent: the term “boom” is always followed by “bust” and, as Budget Day draws nearer, the warnings about Government mismanagement of the economy have been growing more strident. On Monday, the Downtown Owners and Merchants Association (DOMA) and the Trinidad and Tobago Manufacturers Association (TTMA) both issued statements about rising inflation, suggesting that the Government should slow down its construction programme. Other organisations and individuals, from all backgrounds and all social strata, have been voicing similar concerns.

Thus far, however, Mr Manning has not heeded the advice. “A ‘boom’ suggests that some peculiar circumstances arise that give you a temporary increase in economic activity. But the economic activity that we are witnessing in TT today is by no means temporary,” said Mr Manning.

This is wrong on two counts. First, a boom does not represent a rise in economic activity, if such activity is defined as an increase in the production of goods and services. Instead, it represents an increase in price, usually of a commodity. So the boom we are now having is based on an increase in the price of oil and a higher demand for natural gas, both driven largely by increased production in China and East Asia. What we are therefore seeing in Trinidad and Tobago is growth without development ie an economy that is getting bigger, not an economy that is getting better.

But it is the second part of Mr Manning’s statement that is especially egregious. His claim that the boom is not temporary is based on an assertion that the country’s oil and gas resources “will be with us for a very long time.” That may well be so, but that doesn’t mean that high prices and high demand will also be with us for a very long time. Mr Manning argued that the first oil boom ended because developed countries found alternatives in coal and nuclear energy and made technology more energy efficient. But that strategy, he says, cannot work today.

However, unless Mr Manning has some means of seeing into the future, his optimism has no basis. The rate of technological progress has accelerated, not slowed, over the past two decades.

It is therefore more, not less, likely that alternative energy sources will be developed and knock the bottom out of the natural gas and oil markets.

Or perhaps manufacturers will find more efficient ways to make their goods, thus producing more at lower costs, and so also reducing commodity demand. Or perhaps new oil and gas fields will be discovered elsewhere, thus driving prices down.

But, even supposing none of this happens, the question still remains as to what Mr Manning considers a “long time.” Twenty years? Fifty? A century? Whichever it is, the Government has a responsibility to use the boom dollars now to prepare for a future where TT will not have oil and gas money. And, so far, there are few signs that that is happening.