One of the most fundamental characteristics of a modern society is to secure the requisite to survive this constantly evolving world whilst adapting to technological advances. Given the enormous challenges of facing a future of rapid change and ushering a one-tiered oil and gas economy like Trinidad and Tobago’s into a technological era, creative destruction becomes an integral part of economic growth.
Economic growth and technological change are accompanied by what the economist Joseph Schumpter calls creative destruction. New sectors attract resources away from the old ones. New firms take business away from the established ones. New technologies make existing skills and machines obsolete. Trinidad and Tobago’s success in the oil and gas industry was due to the prospective political nationalist elite responding to industrial-era technological demands on the economy, while moving away from the colonial plantation economy model.
Lessons of past economic and societal transitions may not be particularly useful to restructure the modern post-industrial society. The scale of creative destruction to be attained can best be shown by comparing emerging developmental and economic trends with past demands and mapping the process it would take to adapt to the technological changes.
Expectations and realities
A future deep with protracted disruption of existing production and consumption arrangements will help accelerate creative destruction. Some efforts have been made in this regard, with government funding diversification drives in the agricultural and tourism sectors. Yet, if creative destruction is an integral part of economic growth and the solution for an economy to thrive sustainably , why has it not been stimulated across the board?
In Trinidad and Tobago’s case, shifting from a system dominated by oil and gas to a new diversified economic arrangement – fueled by creative destruction – will be more difficult to achieve than is commonly realized.
Firstly, capital mobilization and technological advances in the information and communications technology (ICT) sector are required before any large scale mode of economic activity can begin to make a major difference in the Trinbagonian economy.
Secondly, creative destruction is a process that follows a newly established progression. Starting with the slow initial advances of an economic activity, it is followed by a rapid rise in its usage and an eventual turning point for a new economic foundation to emerge.
The internet’s evolution since the 1960’s follows the same pattern, for example. The internet’s commercialization grew due to its transformative role in restructuring industries, and continuous technical advances paved the way for mobile technology and digital networks.
Institutional changes for economic development
In order for creative destruction to occur, innovation would have to deconstruct the previously long-standing arrangements to free resources to be deployed elsewhere. In September 2018, the country’s Prime Minister announced the shutting down of the Petrotrin oil refinery due to its financial incompatibility with the country’s economic growth. The freed resources from this outcome will enable the entity’s operational structure to be reinvented.
Growth under the oil and gas industry appears to be spectacular when in motion – Trinidad and Tobago has one of the highest per capita GDP in the Caribbean. Yet, its economy has contracted and there is a need to shift to new economic activities from the one-tier oil and gas industry.
Countries differ in their economic successes because of their different institutions, the rules influencing how the economy works and the incentives that motivate people. Political and economic institutions can either encourage economic growth or become obstacles to it as political institutions determine economic development.
Institutional changes can only emerge during a critical juncture. Critical junctures are major events that disrupt the existing political and economic balance in society. There is a very low possibility that the existing economic activities will sustain Trinidad and Tobago to the same extent 100 years into the future as they do now. This is because there is the need to diversify an economy in order for growth and economic sustainability to develop away from stagnation or contraction.
Existing privileges unravelled
Throughout history, technological innovation has shown the potential to make an economy prosperous. The economic and political fear of the displacement that innovation and technological advancements brings, however, can threaten to reshape political power and disrupt labour markets. In turn, this will become an impediment to the economic privileges of investors and remove the concentrate of political power from the hands of a few.
This political and economic fear of creative destruction can impede the technological change that would allow the economy to sustainably thrive. The new century we live in cannot be a replica of the old one due to our changing needs and a future reshaped by technological advancements. Economic growth without creative destruction and technological innovations will not be sustainable.
Replacing the old with the new in the economic realm creates losers as well as winners in the political arena and the economic marketplace. Thus, Trinidad and Tobago will need the most radical and disruptive innovations to overcome the resistance to creative destruction.
Accordingly, a consequent shift in political power – reorganizing the way political and economic institutions are shaped – can move policy direction forward. It can address these newly represented notions arising from technological innovation and the unfolding future trends towards sustainable economic development.
Institutions that create a level playing field and encourage investments in new technologies and skills for a more diverse economy are more conducive to economic growth as opposed to those that are structured to extract resources from its own reserves for economic activity. This is where planning and development by the government and economic actors play a most important role.
There are highly competitive local markets for nearly all feasible techniques and products. The technical capacities to put in place new infrastructures are unparalleled in technological innovation in Trinidad and Tobago.
“The twentieth century was equivalent to 20 years of progress at today’s rate of progress….and because of the explosive power of exponential growth, the twenty first century will be equivalent to 20,000 years of progress at today’s rate of progress” – Ray Kurzweil