Abstract
This article criticizes the resource curse thesis for neglecting the interplay of international factors and domestic politics, that is the political settlement, in explaining industrial performance in a resource-dependent society – Trinidad and Tobago. Using political settlement, analysis secondary as well as interview data, it examines the dynamics at the macro and sectoral levels in iron and steel and telecommunications in Trinidad and Tobago. The historical evidence reveals that anti-colonial mobilizations spurred critical public investments in developmental institutions and industrial projects responsible for improving the country’s productive base and technological capability in the post- Black Power period. These investments were bolstered by a favorable geopolitical climate and the 1973 commodity boom. Sectoral case studies reveal how shifts in the country’s political settlement affected late-industrializing accumulation of accumulation technological capabilities. Hereafter neoliberal policies facilitated an increased role for external actors in economic policy and ethnic-based clientelism within the political economy.
Keywords
Introduction
During the last three decades, the resource curse thesis has come to dominate the analyses of economic development in resource-rich countries (Auty, 2017; for more critical perspectives, see Edwards, 2017a; Saad-Filho & Weeks, 2013). Analysts have claimed this so-called resource curse to be responsible for the weak manufacturing capacity and lackluster industrial performance of countries with large resource sectors. Perverse political and economic outcomes including corruption, low growth and poverty are correlated with resource abundance. Missing from resource curse analyses, however, is an examination of microlevel conditions and patterns of structural and institutional change generated through state intervention and state coordination of industrial activity (Dadzie, 2013; Morris, Kaplinsky, & Kaplan, 2012b). In addition, different episodes of growth and technological development are not considered (Dutrénit & Katz, 2005).
State intervention is viewed as creating opportunities for rent- seeking among bureaucrats and business elites (Krueger, 1974). Such an approach proffers a correlational view of the relationship of resource-based commodities to economic and political outcomes, bolstered by path-dependent institutional practices across time. Scholars often use, however, selective historical evidence that favors an argument for neoliberal policies, which becomes tautological and is decoupled from an examination of how these polices have affected social relations relative to economic and political factors (Di John, 2011; Rosser, 2006). A dynamic view of history and a developmental state-, agent-centered institutional analysis is needed. This approach reveals how countries are not locked into specific development paths. Rather, development is a complex and multi-causal process shaped by specific social-institutional configurations, policies that emerge from the complex interaction of domestic and external forces, and economic structures that prevail in a society and in turn help determine political and economic outcomes often not considered in the resource curse literature (Amsden, 2009; Breznitz & Ornston, 2016; Edwards, 2017a; Mohan, Asante, & Abdulai, 2017; Ovadia & Wolf, 2017).
In the case of Trinidad and Tobago (hereafter T&T), recent studies have suggested that reliance on petroleum and gas resources have weakened manufacturing growth and diminished innovation (Artana, Auguste, Ramiro, Sookram, & Watson, 2007; Khadan, 2016). Critics challenge these conclusions by invoking the agential role that the organized labor played in the country’s governance and human development (Edwards, 2017a, 2017b). The dominance of mainstream and certain structural explanations have neglected the process of institution-building and the role of social actors in catalyzing important investments in the science and technology infrastructure needed for industrial development in T&T (some examples are Best, 2012; Farrell, 2012; Mottley, 2008; for exceptions, see Barclay, 2004, 2015). Barclay (2004, 2015) examines key institutional changes in T&T’s resource-based industrialization thrust, but this analysis is confined to the natural gas sector and focuses on foreign investment while giving little attention to the institutional foundations underpinning technological efforts in the former state-owned sectors. 1 These studies also neglect shifts in the balance of power and the material and distributional effects (see Fine & Saad Filho, 2014) that result from dynamic international forces (Hogenboom, 2012).
With this research, scholars proffer certain mainstream assumptions about “getting the planning, policy and institutions right,” which is perceived as a technocratic activity that improves “institutional efficiency” 2 (e.g. Barclay, 2015; Farrell, 2012). Thus, the neoliberal market-driven model of governance is largely unquestioned and even deemed critical to the economic development of resource-rich economies. These observers even contend that the rational behavior of political and economic actors and a “backward culture,” as well as the unrealistic expectations of the labor unions undervalue material progress (Farrell, 2016). They therefore do not examine the complex interactions between the sociopolitical, technological and international economic factors that generate diverse development outcomes (Cooper, 1972; Girvan, Gomes, & Sangster, 1983; Papaioannou, Watkins, Mugwagwa, & Kale, 2016; Stewart, 1977). These scholars also tend to believe that institutional change comes about as a result of pragmatic policy choices and not wider social forces.
This article challenges these perspectives and relies upon a multilevel political economy approach to explain varying patterns of growth and industrial development in a developing country like T&T (Edwards, 2017b; Jessop, 2015; Migdal, 1988; Ngo, 2016). It examines how state capacity and a certain form of “developmental state” emerged to promote industrialization in T&T, reinforced by a favorable international climate and buoyant commodity prices. In particular, the political settlements analytical framework, a contemporary and appropriate contribution to the development literature offers an insight into how institutional context and power interact at both the macro and organizational level to generate particular economic and political outcomes (Khan, 2010). This framework is extended to consider the heterogeneity of interests within the state beyond business–state relations and the asymmetries between domestic and external players in the international economic system. This article thus asserts that institutional reforms 3 are not blunt instruments, and their effects are shaped and in turn affect the complex interaction between power at the domestic, organizational and international levels.
The next section reviews the literature and provides the theoretical background for this study. Section 3 presents the research design. Section 4 presents T&T’s experience and highlights the short-lived development of technological capabilities in two value-added economic sectors that deemed important during the state-driven industrialization era: steel and telecommunications. The article contends that market-promoting policies shifted the balance of power and entrenched international social forces and policies supported by ethnic-based clientelism. Section 5 summarizes the findings and discusses the implications.
Literature Review
In the mainstream literature, resource-curse proponents argue that resource wealth and endowments are correlated with poor economic growth (Auty, 2002; Sachs & Warner, 1995). In resource-dependent developing countries, according to these scholars, manufacturing growth has stagnated due to the leakage of economic resources to enclave commodity-based sectors that produce little employment, appreciate the exchange rate and absorb a considerable amount of foreign exchange (Frankel, 2012; Khadan, 2016). Perverse effects are supposedly spread through poor inherited economic institutions such as weak property rights and contracting, and such countries are ultimately plagued by relatively low per capita incomes, price distortions due to state intervention and poor human development outcomes (Acemoglu, Johnson, & Robinson, 2001; Engerman & Sokoloff, 2005; Krueger, 1974; Sachs & Warner, 2001).
Empirical tests have shown mixed results with respect to the effect of resource endowments (van der Ploeg, 2011), although some scholars posit that commodities such as oil, mineral ores and agricultural products have the greatest negative effects on growth (Sachs & Warner, 1995). For mainstream institutionalists, the effects of the resource curse are mediated through institutional politics that promote the extraction of rents and the plentiful nature of state revenues especially when price booms worsen these prospects (Auty, 2017; Robinson, Torvik, & Verdier, 2006). On the other hand, countries with transparent and accountable governance have a better chance of producing higher per capita income and can stave off political corruption that may adversely redirect large amounts to “white elephant” projects and massive unsustainable social spending (Pendergast, Clarke, & Kooten, 2011; Robinson, Torvik, & Verdier, 2006).
More recent critical historical and institutional studies question the conventional wisdom that has become an important analytical lever for policy discussions about resource abundance (Di John, 2011; Edwards, 2017b; Morris, Kaplinsky, & Kaplan, 2012a; Ovadia & Wolf, 2017; Rosser, 2006; Saad-Filho & Weeks, 2013; Saylor, 2014). These studies give credence to social relations—the agency of domestic social actors and the distribution of power among them—demonstrate considerable variability in performance of resource-rich countries over different historical periods, and give importance to the evolution of institutions, in particular the role of the state and the pressures of the international political economy (Grabowski, 2002; Hogenboom, 2012). On the basis of these critical works, a fundamental questioning of market fundamentalism that favors increased competition, the opening of tradable and financial sectors, the removal of subsidies and other inducements for domestic-owned firms and the inevitable transnationalization of the economy through unfettered capital flows arises (Edwards, 2017a; Saylor, 2014). Instead of an a priori curse created by the mere presence of natural resources, this strand of research views the resource curse as a culmination of sociopolitical relations that generate particular types of uneven development outcomes (Haslam, 2016; Rosser, 2006; Saad-Filho & Weeks, 2013).
From a global perspective, natural resources have consistently been critical to industrial change over different periods of time through the dialectical interaction between different classes, relative to the state, society and the international economy (Jessop, 2015; Reinert, Ghosh, & Kattel, 2016; Rueschemeyer, Stephens, Huber, & Stephens, 1992). This recognition of the salience of natural resources to industrialization is exemplified in the technological content of mineral-based products and the capitalist development of Western industrialized centers (Wright & Czelusta, 2004). Rather than natural resources being a “curse,” sui generis leading to lackluster performance of manufacturing (as it appears to be in peripheral countries of the global South), the causality runs the other way, where underdevelopment of industrial sectors and the economy as a whole have limited the expansion of productive capacity (Farrell, 1982; UNCTAD, 2017). Recently, scholars have noted the importance of natural resources for industrialization in some Latin American countries, and the creation of critical backward and forward linkages for the promotion of high value-added service sectors (Katz, 2015; Marin, Navas-Alemán, & Perez, 2015; Morris, Kaplinsky, & Kaplan 2012b; Pérez, 2010; Figueiredo & Piana, 2016, 2017; Stubrin, 2017).
The postcolonial period in many resource-dependent developing countries emboldened the population to demand wealth distribution, the creation of national institutions and offered much hope for the development of the knowledge base and relevant infrastructure (Levitt, 2005). According to some scholars, the nationalization of industries, including petroleum in T&T and other developing countries, however, was insufficient to catalyze widespread shifts in production, since the local system did not possess all the required technical know-how and there was no international pressure to upgrade the producers so they remained uncompetitive (Bell, 1984; Farrell, 1979). Natural resources, from this angle could be viewed as a source of rent or subsidy for expanding productive capacity and capital accumulation in new economic endeavors. It was therefore unenforceable policies that failed to create the impetus for natural resources to sustain broad-based development. The major determinant of the effectiveness of these policies has been the “nature of power relations in a given society” and the political and technical capabilities to implement them (Amsden, 2009; Girvan, 1979, p. 2; Khan, 2000).
Notably, economic performance varies in terms of political, economic and social structures that may stimulate or hamper structural changes in a developing country (Khan, 2010). Configurations of power, which are historically rooted and shaped by the nature of politics, its symbolic and material expression have been decisive at the societal level, across industries and within organizations (Nem Singh, 2012; Ngo, 2016). Khan explains this as the political settlement, which is described as follows:
[A]n interdependent combination of a structure of power and institutions at the level of a society, that is, mutually “compatible” and also “sustainable” in terms of economic and political viability….[this] combination of institutions and organizations can reproduce itself over time. Once a reproducible social order emerges, the relative power of different organizations is relatively stable and evolves along stable paths. The macro-level political economy can help to explain a fundamentally important observation: particular formal institutions appear to perform differently across countries and over time. (Khan, 2010, p. 20)
The political settlement can ultimately influence how policy decisions are made. Institutional performance comes to reflect this power matrix in line with the distribution of benefits in a society (Grabowski, 2002). It explains why advanced country institutions work differently in latecomer contexts. Political settlements are manifested at both the micro and the macrolevel social order. They explain the performance of institutions within a particular context based on the balance of power among elites and lower level factions (Gray, 2016). At another level, it influences the technological and organizational capabilities within enterprises and the access by ruling elites to rents from production and exports (Ngo, 2016). These interconnections help explain the dynamics of industrialization and the development of capabilities across public and private sectors (Figueiredo, 2008; Lall, 1992).
The political settlements approach critically addresses the varying levels of performance of developing economies and gives greater attention to the functioning of the state which tends to be characterized by clientelist relations (Grabowski, 2002). In the case of T&T, for example, nepotism prevailed during the colonial period and persisted thereafter among the governing elites and capitalists (Brereton, 1981). This approach eschews the kind of static analysis associated with conventional resource curse studies. In this perspective (see Khan, 2010), “holding power” is defined as a relational concept which describes the ability of people, groups, and organizations to impose costs on others and hold out in conflicts based not simply only on their economic resources but also their capabilities and connections to ruling elites and patron–client networks. Such an understanding of power relations leads to a different notion of how technologies interact with the social, political, and economic environment in a two-way causal relationship (Evangelista, 2017). Groups come to exert influence on policy based on their abilities to organize and deploy ideologies and use political and economic resources, such as ethnic and symbolic associations with the ruling elites, to preserve their income and wealth (Khan, 2010). In this regard, Amsden (2009, p. 36) contends that “power over policies and decision making runs through the Third World’s struggle for technological knowledge” [and] “the less the third world has of it, the less it can grow.” These factors help determine the level of investment by political elites in the institutions needed to advance industrialization.
Viewed from this perspective, the state is embedded within a network of actors/interests that define the possibilities for policy actions (Jessop, 2015). The degree of effectiveness of relevant policies and institutions in different contexts depends on the distribution of power and technical capabilities within the different economic, bureaucratic, and political organizations that employ various rent-seeking strategies. They reflect the specific institutional, technological, and economic forces that prevail in a society and their ability to address particular problems, but not necessarily through impersonal bureaucratic structures or a Weberian governance system (Khan, 2013). The compulsions for sectoral upgrading and macroeconomic effects are based mainly on interactions at the firm level, existing internal resources and knowledge, and the policy environment; as well as the perception among firms in terms of the rents that can be accumulated to drive productive investments (Cimoli & Porcile, 2016; Weiss, 2017). This perspective, therefore, shows how institutional configurations and consequences are not uniform across sectors, and that they are part of historical processes and the structure of the state–society matrix.
Methods
This article examines the nature and evolution of state capacity as it is linked to the processes of institutional change and development outcomes. It focuses on the critical links between politics at the domestic and international levels and how these links and the distribution of power help to determine the pattern of industrialization in countries like T&T (Ovadia & Wolf, 2017). Industrialization is broadly defined as the process of developing value-added activity across economic sectors, including the creation of linkages, in addition to the deepening of the technological content and productivity within sectors borne from investments and institutional arrangements that create demand, boost skills and increase technological capabilities (Bell, 2009; Farrell, 1982; Morris, Kaplinsky, & Kaplan 2012b; Ovadia & Wolf, 2017). Technological capability refers to the knowledge base, resources, skills, including design and engineering competences, and the organizational structures that are needed to meet demand (Bell, 2009; Farrell, 1979). It is therefore a matter of increasing returns to scale from investments that create new technological learning that leads to transforming productive and social systems.
According to Migdal (1988, p. 4), state capabilities include the “capabilities to penetrate society, regulate social relationships, extract resources and appropriate or use resources in determined ways.” State capacity can be defined in terms of the following four dimensions (Centeno, Kohli, & Yashar, 2017, p. 6):
the ability of the state to achieve its own identified goals (implementation), the ability of the state to achieve an ideal set of goals usually determined by an outside party (scope), the ability of a state to impel citizens and other states to do what they may not have done otherwise (relational power), and the organizational competence of the civil servants (quality of bureaucracy).
The study delves into understanding how domestic and international factors affect the emergence of state and social actors, the ability to mobilize, distribute and utilize resources, and develop technical capabilities over time in industry (Grabowski, 2002). According to Jessop (2015, p.46): “one could test those particular state capacities with respect to which policy fields and economic sectors are effective in promoting economic performance and over what spatiotemporal horizons of action and in what circumstances they can do so.”
Based on this kind of political economy approach detailed above, this article analyzes the relative power of institutions and organizations within T&T society. It adopts a historically grounded case study method with an institutional focus that highlights the characteristics and configuration among relevant actors over different periods of time. Case study research offers the advantage of “producing the context and time dependent knowledge needed to trace complex multi-dimensional, path dependent and path-shaping processes” (Ovadia & Wolf, 2017, p. 2), which help us to ascertain the reasons for the success and failure of state-led processes in specific economic sectors. Using this method, the study analyses the T&T’s institutional framework and two industrial sectors: (a) iron and steel (mid-tech manufacturing) and (b) telecommunications (high-tech services) to understand the development of state-led industrialization in this country.
This case study uses primary and secondary sources of data: government and international donor policy documents, elite semi-structured interviews and historical materials gathered at government and university libraries. A total of 47 interviews identified through purposive sampling were conducted with contemporary and former state, industrial, international agency and scientific representatives from September 2014 to June 2015. 4 Interview sessions allowed participants to give spontaneous feedback which lasted from one and half hours to two and half hours. Interview responses were cross-checked against documentary evidence such as business reports, past evaluations of state companies and various publications for verification, as well as to help reconstruct the sequence of events (King, Keohane, & Verba, 1994). Based on the information obtained and the findings of this case study, the evolution of STI and the industrial development experience of T&T are discussed in the following pages.
An Overview of Trinidad and Tobago
T&T is an resource-rich small island nation of 1.4 million inhabitants which are a diverse cultural and ethnic mix of people of East Indian heritage (35.4%), African ancestry (34.2%), Mixed heritage (22.8%), and other groups (Caucasians, Syrian/Lebanese, Chinese, Portuguese, and others) and “unstated” groups numbering 6.2 percent of the total population (Central Statistical Office, 2012). This twin-island nation is situated in the southernmost Caribbean Sea, northeast of the South American continent, and east of the Venezuelan coastline. Having adopted the Whitehall model of Parliamentary democracy at independence in 1962, the legislature consists of two houses of Parliament—a lower house of elected members and an upper house of nominated members with an overall government majority.
As a politically competitive and ethnically diverse democratic society, changes in economic fortunes and the international environment constrain the political elites’ ability to maintain legitimacy and achieve progress through the implementation of development policies. With the discovery of oil fields in 1806 and the start of commercial drilling in 1857, the cultivation of sugar increasingly gave way to extraction of petroleum. The economy’s present fortune is largely dependent on its hydrocarbon resources that make up almost 44 percent of gross domestic product (GDP), 65.8 percent of the country’s exports, but only 3.1 percent of total employment. Downstream activities in liquefied natural gas, ammonia, urea, and methanol have grown in significance (Jaupart, Longmore, & Cazorla, 2014). Figures 1 and 2 reveal the growth per capita of the GDP between 1960 and 2015; as well as the relative sectorial activity of the economy as a percentage of GDP between 1973 and 2015.
Science and Technology Institutions and the Pattern of Industrialization in T&T
In T&T, the foundations for science and technology institutions (STI) were laid primarily in the early twentieth century with the establishment of a number of research organizations. During this time, the British colonial government held the reins of institutional power and defined the country’s economic policy, eschewing any serious attempts at industrialization. This era was marked by intense struggle between the laboring classes, plantation owners and the Crown Colony government for greater democratic control and improved socioeconomic conditions. By the 1930s, petroleum comprised 60 percent of the T&T’s exports and employed 8,000 workers predominantly of African ancestry, while sugar production made up 33 percent of exports and employed 68,000 workers of East Indian heritage (Edwards, 2017b). The colonial economic disparities spurred uprisings and mass strikes by the oil workers who led the fight for improved wages, education, health care services, and political decolonization (Ryan, 1972).
The rudimentary establishment and exploration of STI activities known as “science for development” was largely oriented toward agriculture (Worboys, 1996, p. 108):
It was expected that science and scientists would be catalysts of development by discovering economic opportunities, making the tropical environment safe, solving technical problems in production, processing and distribution, directing and improving the productivity of investment, and generally demystifying the tropics and their people.
The Imperial College of Tropical Agriculture and the Cocoa Research Scheme were established during the colonial period and were later integrated into the present University of the West Indies (Table 1). These institutions supported wealth generation for the colonial planters and the British colonial state and were funded in part through the profits of the commodity boards. The efforts of the early STI system were concentrated on research activities related to the T&T’s export commodities and toward meeting Great Britain’s imperial demand for raw materials. This approach was accompanied by the limited development of skills and local technological capacity, and the fragmented domestic control over the institutional development process have maintained up to that point the colony’s pattern of capital accumulation (Brereton, 1981; Hodge, 2002).
In the period preceding the declaration of independence in 1962, colonial administrators were ambivalent about industrialization and had forged relations with the colonial planters to maintain the status quo. This socioeconomic order was centered on plantation-based sugar production until labor-led struggles sought to subvert this concentration of power (Brereton, 1981; Ledgister, 1998). Early “laissez-faire” industrialization in which the government facilitated manufacturing growth strengthened the merchant trade and foreign-owned manufacturing sectors of the economy but would later create the impulses for a state-led industrial process. On the political scene, the rise of a nationalist middle class and the People’s National Movement, which was elected in 1961, articulated a new vision for the country based on the promotion of industrial development, along with the continuation of natural resources exploitation.
Key events in the evolution of ST&I and industrial policy
The industrialization thrust led by Prime Minister Eric Williams included policies and legislative reforms in the first Five Year Development Plan (1958), including the creation of industrial estates and incentives to woo foreign industrialists with various incentives and tax concessions to establish local manufacturing operations (Best, 2012). The postcolonial state created the Industrial Development Corporation and saw its role as facilitating industrial activity through basic research, providing infrastructure, including plant facilities and office space and setting up private sector institutions that would attract R&D investments from foreign capitalists (Government of Trinidad and Tobago, 1958).
The offshore petroleum sector remained largely in the hands of foreign owners of capital and generated significant income that enabled this group to continue to have an influence on the direction of economic policy to this date. Early into the First Five Year Development Plan, the government acknowledged that this strategy was not stimulating the quality of industrial activity in terms of reducing economic dependence and unemployment at a grand scale and that more was required through state intervention. After independence, the national government established the National Scientific Advisory Committee (NSAC), led by the first local-born Dean of the Faculty of Engineering at the University of the West Indies (UWI), Professor Kenneth Julien. 5
By the late 1960s, social conditions had deteriorated and employment stood at 13 percent, which increased discontent among the local population, including the trade unions, the working class, and university student activists who initiated protests clamoring for greater equality and wealth distribution (Edwards, 2017b; Pantin, 1995). In 1970, the major unions and civic groups boycotted the election and ran a “no-vote” campaign against the government. These groups mounted a “Black Power” campaign to force the government to nationalize important sectors of the economy, including air transport, manufacturing, petroleum, sugar production, and telecommunications. It also created new state institutions, enacted social reforms, and attempted to increase productive activity in new sectors, including resource-intensive industries such as iron and steel, fertilizers, ammonia, and urea refining (Edwards, 2017b).
Professor Julien emerged as a technical leader in the resource-based transition from a petroleum-based to natural gas economy, and he spearheaded the first committee to explore the utility of creating natural gas from petroleum flaring (Barclay, 2015). With the commitment of the Prime Minister, who was driven by the unpopularity of his government among the citizenry, Professor Julien led a coalition of state and private companies (which had access to foreign technology and the technical staff at UWI) which succeeded in monetizing natural gas (Mottley, 2008). It was notable that direct civil society involvement was absent from this effort though they benefited from increased subsidies, new taxes, and social welfare programs. As a result, the government’s involvement in the economy changed, no doubt that it was equally emboldened by calls for a New International Economic Order during this period at the international level and the support of the local labor movement. This effort was assisted by the global oil shock of 1973, which increased the government’s natural resource rents (Figure 2), and resulted in its increased investment in the country’s social and economic infrastructure.
In 1970, the Caribbean Industrial Research Institute (CARIRI) was established with support from the United Nations Industrial Development Corporation. It provided some initial funding and technical consultants who proposed an organizational framework for the Institute that had a continued bias towards facilitation of rather than involvement in industrial research and a top-heavy structure, which was contested by the government. 6 Under the influence of the existing political environment, a hybrid structure was created with significant government funding and control. CARIRI established collaborative relations with several private sector associations, like the Coconut Growers’ Association that invested in technology to “de-husk” tropical coconuts. 7 In the government’s natural gas thrust, foreign consultants also played an important role in framing the decisions of the government (Pantin, 1987).
Subsequently, the National Institute of Higher Education in Research in Science and Technology (NIHERST) was created in 1984. Prime Minister Williams sidelined a leading bureaucrat, Frank Rampersad from the Office of the Prime Minister for fear that his influence was growing, and instead appointed him to NIHERST as its President (at the time intended to be a peripheral agency). 8 During his tenure, a number of agricultural studies to promote tissue culture research, especially in plantation crops were carried out (Pantin, 1987). As a consequence, the public sector exercised greater control over technological activity, and increased the total value of imported technologies from 6.5 percent to 60 percent (Long, 1983). From 1974 to 1982, the growth in technological know-how bolstered by new institutions and civic leadership helped to improve various economic activities and the country witnessed an average annual growth in its GDP of 5 percent during this period with a remarkable expansion in various sectoral activities (Figure 1).
The Iron and Steel Sector
As a result of a wave of populist policies, the government in the mid-1970s set up the Point Lisas industrial complex, which involved a major investment in the Iron and Steel Company of Trinidad and Tobago (ISCOTT) to promote local steel production. It was one of the first state-run minimills in the Western Hemisphere, using the MIDREX electric arc furnace technology. 9 At its inception, a number of skilled personnel with energy experience and process engineering skills were brought in to staff the company. It was furnished with cutting-edge technology from steel facilities in the United States, West Germany, Japan, Canada, Netherlands and Austria (Holton, 1995).
This enterprise was meant to be a joint venture with both Mitsui and Company Limited and the Hoogevens and Kawasaki Corporation of Japan (they both sold their stake in 1977). Its projected capacity was 840,000 tons of direct reduced iron (DRI), 640, 000 tons of billets, and 420, 000 tons of wire rods. After the withdrawal of the two multinational partners, ISCOTT became a wholly state-owned enterprise, and produced a small range of products, namely sponge iron, billets, and wire rods. It became dependent on the US market for its exports (Auty, 2017). The company suffered initial organizational challenges, when the Japanese partners pulled out, 10 but received strong state support because of the close personal relationship between the then prime minister and its chairman. The cost of the plant skyrocketed to US$466 million and the production of DRI began in December 1980 (Holton, 1995).
The company had significant infrastructure expenses: electricity, water, and natural gas supplies from local utilities, much of which were subsidized for private manufacturing firms. ISCOTT could not sell half of its production due to plummeting international demand (Holton, 1995). In its first year, it recorded losses of US$750,000. By 1983, over 1 billion TT$ had been expended by the government to finance its start-up operations (Boopsingh & McGuire, 2014). Despite producing lower value-added products, the company nevertheless sought to use its technological advantage. The management structure was mostly occupied by expatriates from the United States and Europe. At the plant level, a large number of local process engineers coming from other energy companies worked alongside expatriates to learn the DRI and steel mill production process. 11 In 1984, when the melt shop broke down, it took two years and several consultants to repair it. They worked with ISCOTT technicians and they were able to return it to operation. They also managed to build the company’s capabilities to reach international standards and take increasing responsibility for the company’s operation. In 1983, with the aid of a new Quality Control Department they successfully shipped for the first time the highly reactive DRI product to Spain. They also exported a largest volume of 60,000 tons of DRI to Spanish and Italian clients in May 1984. That same year, the company was the third largest international supplier of wire rods and exported 53,000 tons to the United States. In T&T, it was the fourth largest foreign exchange earner for the government, and generated TT$74.5 million in earnings (Holton, 1995).
A combination of external and internal factors eventually led to its privatization. The company’s management and the political elites did not foresee the collapse of demand in its primary export market, the United States, and thus risks to it production capacity. This resulted in low production capacity coupled with design flaws to inhibit its output. During this time, steel industry interests along with US legislators and government officials mounted legal and political challenges to foreign producers. 12 Lobbying by the largest producers prompted the US government to charge ISCOTT with anticompetitive practices, which provoked countervailing antitrade measures. 13 The close relationship between the chairman and the prime minister also was deemed, by one analyst to have bred technically deficient decision-making including the dependence on mediocre talent from abroad in the person of the company’s chief executive officer (Farrell, 1987).
The company’s planners, as well as the international firm hired to conduct the market study for this industry, did not take into account the international macroeconomy and the rapid shift in demand. This series of events worsened the situation as political opposition mounted against the company seen by both government officials and external observers as a costly mistake. The original plan to achieve profitability within three years was unrealistic and demonstrated management and the government’s inability to envision the multiplier effects. 14 They blamed technical inexperience and management structure, and were incapable of responding to external geopolitical threats. By the late 1980s, ISCOTT suffered further significant losses and was privately leased in 1989 to Ispat International, and eventually sold to Mittal various concessions. 15 Within a year, the company achieved profitability due in large part to home-grown technical resources, government-financed infrastructure, short term loans, and preferential natural gas prices most of which were extended to the company after its sale at a nominal price of US$75 million.
Telecommunications Sector
After a protracted strike that lasted 36 months, the country’s telecommunications company was nationalized in 1961, as dissatisfaction with its performance grew among policymakers. The government drew up a management contract and outsourced it to a US company, General Telephones and Electronics. It was later incorporated as a joint venture with Continental Telephone Co. of the United States in 1968. 16 Further unease dissolved the relationship and the government purchased the company outright in 1973. Technical know-how, however, was inadequate and a technical assistance contract with Northern Bell of Canada 17 was made that enabled T&T to license its revolutionary digital switching technology. Local professionals were also to be trained to carry out progressively more sophisticated tasks. During 1981 to 1986, the company executed an expensive network expansion and utilized loan facilities from North American and Japanese sources (McCormick, 1997).
The National Alliance for Reconstruction won electoral office in 1986, it promised to maintain strategic investments and ensure sound management of the country’s growing national debt burden (Demas et al., 1984). Between 1983 and 1989, 100 digital switch panels were installed throughout the country resulting in a massive employee training exercise.
18
The company’s leadership instituted an R&D department led by a locally trained engineer who was equipped with skills in project management, network deployment, and engineering operations.
19
The R&D department was responsible for the successful adaptation, installation, and maintenance of the new digital multiplex switching (DMS) systems.
20
In 1986, the company engaged in infrastructure investment that resulted in important cost savings and improved service quality, yet with the country’s economic downturn and mounting debt, the company found itself in serious financial straits with its international creditors seeking repayment on loans advanced (McCormick, 1997). Toward the end of the decade, Telephone Company Limited (TELCO) was partially divested, with the government retaining 51 percent of its shares and minority partner British-owned Cable and Wireless (C&W) bought 49 percent of the shares (Lodge & Stirton, 2002). According to one source:
With the advent of Cable and Wireless into the Board Room of the company, [the R&D] department was exterminated and we disbanded any sort of research function. The Board with four C & W members, who were able to convince local Board members to abandon the strategic direction that TELCO was taking after Neilson McKay (the chief executive) laid down the platform for the DMS and the upgrade of the outside Plant Network…. after the merger, things went awry. (Former technician of TELCO during the 1980s)
With a C&W representative as the CEO, in the mid-1980s, as the quote above indicates the R&D department was terminated since the CEO’s view was that building R&D capability was not vital in a small island. 21 Notwithstanding, the R&D staff were able to build repair and installation capacities, and deploy new technology in the field. Before privatization, average growth at TELCO in main line installations per 100 inhabitants was 15 percent, but after partial divestment, growth was reduced to a meager 5 percent 22 (Figure 4). The efforts of the R&D department also generated an industry grade microprocessor-based test system (subscriber pair identifier) that was patented in the United States and exported to the Bahamas and Barbados. 23
By the late 1980s, local management of technology acquisition was in jeopardy as the debt situation worsened. A committee set up to consider a number of possible institutional arrangements for “regulation of technology imports” was eventually overshadowed by the macroeconomic situation. Its recommendations that would have had wide-ranging effects on several sectors of the economy, including telecommunications, were not taken forward. 24 The inclusion of the T&T Manufacturing Association in the Committee, an organization that was set up during the colonial period to protect and support merchant interests opposed key aspects of the report. They claimed that technological control was an undesirable policy option and that there should instead be more incentives for foreign investors who in their view would increase export competitiveness (Moniquette et al., 1986). The neoliberal shift was clear in the government’s new investment policy that emphasized foreign investment and contained contradictory positions on technology transfer (Industrial Development Corporation, 1987). Toward the end of millennium, the policy conditionalities set in place by structural adjustment loans from the International Monetary Fund and World Bank in 1987 had a long-term adverse effect on the country’s public STI investment.
During the early 1990s, neoliberal reforms and the loss of a strategic state capacity resulted in significant cutbacks of government financial support to CARIRI 25 leading to layoffs of engineers and technical staff. CARIRI shifted focus from long-term industrial research activity to analytical and testing services for oil and gas companies. 26 The learning of new capabilities and technological solutions were not strategically translated into increased downstream production even though attempts were made to deepen forward linkages by selling patented products in the telecoms sector and steel products exported abroad. These attempts to diversify the production base of the T&T economy into medium-technology manufacturing and high-technology services were met with significant external and domestic political challenges. The growth of the transnational enterprise sector, a vestige of the preindependence era, further meant that this sector continued to exercise policy influence (Grabowski, 2002). Since that period, the state’s ability to promote the development of certain industrial sectors has been stymied and its institutional apparatus has increasingly become fragmented (Dohnert, Crespi, & Maffioli, 2017).
Conclusion
The foregoing analysis offers important implications for devising the kind of interventions that are necessary for advancing prospects for development based on investments in science and technology in T&T, as well as similar resource-rich developing countries. We have shown that natural resource wealth does not automatically constrain industrial growth and the development of technological capabilities in other sectors outside of the natural resource sector. Public investments and domestic social forces have contributed to institutional development at the national level and the expansion of economic activities into the iron and steel and telecommunications sectors (Figures 3 and 4). It is thus clear that the complex entanglements between competing agents and forces at the domestic and international levels are determining factors in institutional development and industrialization in countries like T&T. As shown, there was a burgeoning development of technological capability at TELCO within the R&D department, and ISCOTT depended on local engineers who increased their knowledge about shipping reactive compounds and how to repair the plant. While the TELCO was limited in its ability to export products since the local market was the main customer, ISCOTT was oriented from the outset for export-based industrialization. These state-owned enterprises were affected by international economic conditions, like the decline in commodity prices and macroeconomic forces that increased their indebtedness and limited their productive investments.
The predominant role of international actors, reminiscent of the colonial period, still persists and affects public action with regard to addressing the country’s current developmental problems. Governance capability, that is, the ability to design and enforce policies, is contingent on the nexus of external factors and the internal mobilization of resources for investment in increasing technological capabilities. Delineating how the distribution of power through time influences state capacity has revealed the links between industrial and technological processes during different conjunctures.
In the future, civic action is required to enhance the multiple capacities of technical analysis, public education and the mobilization of pressure on policy makers to undertake efforts at technological upgrading and transforming the existing institutions. The institutional and political context which enabled decisive state-coordinated action in the pre-Washington consensus period has been significantly displaced and the social relations among the various contending groups has been transformed. As a former NIHERST staffer noted: “the [current] political environment seems to cultivate lethargy and stasis in institutions.” 27 The political system has been unable to reproduce the type of productive and developmental relations that emerged during the 1970s. State investments in the past served to jump start important ventures, but the private sector was unwilling or incapable of shedding its mercantilist structures.
Currently, the coordination capabilities of the state are circumscribed and need to be enhanced within a broader context of social mobilization and engagement. To transition to more advanced levels of capability that will generate sustainable employment-based growth, a new impetus and movement is required to take advantage of current structural opportunities among the main societal actors, especially in view of the current fiscal and economic conditions. Multilateral organizations and actors continue to play a constraining role that prevents the development of dynamic local problem solving skills, the industrial development and appropriate reforms (unlike the current dictate for “business climate” reforms or to focus on static comparative advantages in energy services for instance). They also continue to reinforce the current distribution of wealth and political power. This study reveals that this is not necessarily an effect or curse of the resource abundance of countries like T&T but a combination of factors, including the historical influence of incumbent sectors on domestic economic policy-making, the inability of government to use fiscal instruments and mobilize domestic capital for long-term strategic investments, unwavering ideological commitment to market-oriented supply-side policies that take demand for granted and the fragmentation of trade unions and civic organizations to organize strategically.
The role of these multilateral organizations cannot be ignored. They can offer external funding and technical support, but this should in no way supplant local efforts and local experimentation or productive exchanges between countries. Externally imposed prescriptions, like good governance reforms based on the narrow objective of fostering the “ease of doing business” have made very little contribution to developing a dynamic private sector or supporting autonomous development in countries like T&T. This study suggests that the political settlements approach should be expanded to include the indigenization (localization) of power relations i.e. the agency of domestic actors like local civil society organizations, the incorporation of heterogeneous interests within the state machinery and the effective analysis of the effects of the international political economy upon national institutional and technological development.
Declaration of Conflicting Interests
The author declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author acknowledges the kind support of a doctoral bursary supplied by the Government of Trinidad and Tobago's national scholarships program. Fieldwork support was also provided through the University of London's School of Oriental and African Studies Santander Mobility Award that realized the fieldwork for this research. Kind assistance of other organizations like the International Development Research Center (Canada) and the Institut de Recherche pour le Developpement (Paris) is also acknowledged that organized a 2016 conference at the OECD in Paris where an earlier version of this article was presented.