Why Diversification Fails

Abstract

It is often argued that a state or government is continuously changing, and one assumption is that each successive government that assumes office will have a differing approach to economic development. Indeed, as early as 1959, Musgrave, The Theory of Public Finance, McGraw Hill, 1959 suggested that a state generally has two major roles in the formulation and implementation of economic policies. The first is described as a normative role which determines the guidelines or principles or norms for welfare-enhancing public sector intervention. The second, a positive role, is describing and analysing what the government actually does. This chapter focuses on the second role and draws on the experience of a small mineralized Caribbean twin island Republic of Trinidad and Tobago. The first section of this chapter looks at some of the broad economic measures that were introduced by successive governments in Trinidad and Tobago during the following periods: 1957–1986; 1986–1991; and 2010–2015. It concludes, after interrogating this data, that successive regimes during these periods did not provide the necessary impetus to diversify the economy away from its dependence on petroleum and petroleum-based products, thus falling victim to the ‘resource curse.’