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Caribbean Islands Patterns of Development
World War II profoundly transformed the economy and society of
Trinidad and Tobago. As in World War I, World War II produced an
oil boom as the nation fueled the Allied forces' war efforts,
causing oil to replace sugar as the most important sector in the
economy. A more profound social and economic transformation,
however, resulted from the new military presence of the United
States in Chaguaramas, Trinidad, as an outcome of the 1941 LendLease Agreement between the United States and Britain (see The Road
to Independence, this ch.; Historical Background, ch. 7). The
building of a United States base in Trinidad created a strong
upswing in construction activity, directly employing approximately
30,000 workers, or between 15 and 20 percent of the labor force.
The United States presence had many spin-offs, both economic and
social. The Americans, having no colonial relationship with the
Trinidadians, generally saw them as their equal and were willing to
pay them relatively high wages. Real wages rose, employment
improved, ports were upgraded, and the economy was stimulated by
greater consumption from high wages. Higher urban wages, however,
accelerated rural-urban migration, causing a shortage of
agricultural labor as sugar employment dropped from 30,000 in 1939
to 18,000 in 1943. The Americans' fewer class prejudices also
helped dispel myths of white supremacy as they, too, performed
manual labor and consumed their earnings alongside Trinidadians.
The United States presence also caused a greater penetration of
American culture and consumption habits, which unrealistically
increased the economic expectations of many Trinidadians.
The diminished world trade resulting from the war changed the
production patterns in Trinidad and Tobago. Decreased markets for
traditional agricultural exports and declining food imports caused
total land under food production to more than double during the
war. Although high urban wages resulting from the United States
presence were a drain on the rural labor supply, food production
actually increased as output shifted from export agriculture to
domestic agriculture. Domestic agriculture was also bolstered by
guaranteed prices for farmers, price controls, and government "back
to the land" slogans. The fall in imports had a similar effect on
Trinidad's small manufacturing sector, which previously was limited
to the processing of export crops. Shortages in consumer goods
during the war stimulated the import substitution of those products
most easily produced domestically, such as edible oils, fats,
matches, some textiles, and other consumer necessities.
In the 1950s, the economy of Trinidad and Tobago experienced a
postwar boom unprecedented on both islands. Real GDP increased an
average of 8.5 percent annually from 1951 to 1961; in the second
half of the period, from 1956 to 1961, growth averaged 10 percent
annually. In spite of rapid population growth during this period,
real per capita income increased 15 percent. The evolving structure
of the economy was characterized by the rise of industry and
services and the decline of agriculture. Oil, construction, and
manufacturing emerged as dominant industrial sectors. In 1956 a
United States oil company, Texaco, entered Trinidad and Tobago and
consolidated several holdings of other companies. Oil production
jumped from under 60,000 barrels per day (bpd) prior to 1950 to
80,000 bpd toward the end of the decade. In addition, the price of
oil continued to rise, allowing for increased oil earnings and
growing government revenues. Early self-government in the 1950s
launched extensive infrastructure projects, causing construction to
more than double in over ten years. Manufacturing's output,
encouraged by generous fiscal incentives since 1950, also increased
rapidly, although its share of GDP rose only slightly from 11 to 13
percent. In terms of services, the banking industry enjoyed the
fastest growth in the whole economy, and tourism was stimulated by
new fiscal incentives as well. Agriculture, by contrast, decreased
as public finance favored industry. During the 1950s, agriculture's
share of total output dropped from 17 to 12 percent. Domestic
agriculture, emphasized during World War II, shrank after the war
and was the main reason for the sector's decline. Export
agriculture, although faced with serious challenges, such as
continued cacao diseases and changes in British agreements on
sugar, was generally able to maintain production levels.
In the early 1960s, Trinidad and Tobago's tremendous growth
spurt slowed, and the economy entered a ten-year period of sluggish
growth. By the 1960s, the islands' labor force was highly unionized
and urbanized, many belonging to the middle class, a situation
unknown in most developing countries. As economic growth slowed,
increased demands were voiced for adequate housing, better labor
rights, more jobs, improved living and working conditions, more
equitable distribution of wealth, and national ownership of
resources. Despite these demands, the socioeconomic problems
present in Trinidad and Tobago were hardly as acute as in other
Caribbean countries; nonetheless, such issues as negative attitudes
toward foreign ownership tended to dominate. The key sectors of the
economy--oil, sugar, and banking--were dominated by multinational
corporations. Growing resentment over foreign control of national
resources intensified as the economy deteriorated in the late
1960s. The high unemployment rate of 15 percent tended to increase
the number of industrial disputes and fortify union militancy.
These events, culminating in the Black Power movement of 1970, set
the stage for increased nationalization of resources during the
1970s.
In late 1973 world oil prices quadrupled and rescued Trinidad
and Tobago from the decaying economic and political trend of the
late 1960s and early 1970s. During the rest of the decade, the
economy experienced rapid growth and was drastically transformed.
In the 1970s, the country enjoyed its second major economic boom in
only thirty years. At a time when many of the world's economies
entered a deep recession, Trinidad and Tobago's economy experienced
real annual growth of 9.6 percent from 1974 to 1979. Unemployment
declined to a low of 8 percent by 1980. Government revenues from
oil increased from a level equal to 20 percent of GDP in the early
1970s to 41 percent by 1980, fueling 65 percent of government
revenues by the end of the decade. Escalating government revenues
heartened Prime Minister Williams to remark that "money is no
problem," epitomizing the nation's feel of instant wealth. Money
was indeed no problem; the government spent more than US$120
million to purchase shares of over fifty major companies in the
country, including majority or minority ownership in oil, gas,
aviation, agriculture, utilities, and banking. Major new government
investments, such as the multibillion-dollar industrial park at
Point Lisas, low-cost housing projects, and expanded utility
services, caused the construction industry to soar. Free-flowing
petrodollars spawned strong consumption that, in turn, stimulated
local manufacturing to grow at an annual pace of 9 percent. In
contrast, agriculture was severely neglected and shrank by 25
percent during the oil boom. The decline in agriculture was
symbolized by the 1984 sugar harvest, the country's worst in fortyfive years. Increased consumption and declining agricultural
production made the economy much more import intensive as higher
oil prices temporarily footed the import bill.
The sharp fallout in oil prices in the early 1980s forced Prime
Minister George Chambers in 1983 to state bluntly that "the fête is
over." From 1983 to 1986, the economy experienced strong negative
growth: negative 2.6 percent in 1983, negative 10.8 percent in
1984, negative 6.5 percent in 1985, and negative 5.1 percent in
1986; continued negative growth was estimated in 1987. The islands'
international reserves, which soared from a low US$34 million in
1973 to US$3.3 billion in 1981, had declined to under US$500
million by 1985. As a result of deteriorating economic conditions,
the Trinidad and Tobago dollar was devalued by 50 percent in
December 1985. Worth double the United States dollar in the 1970s,
the Trinidad and Tobago dollar was valued at less than a third of
the United States dollar by the mid-1980s. The unemployment rate
crept as high as 17 percent by 1987. As the economy continued in a
deep recession in the late 1980s, there was growing evidence of
increased underground economic activity linked to cocaine
trafficking (see National Security, this ch.).
Data as of November 1987
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