Letters to the Editor
Newsday
THE EDITOR: War is costly. Immediately we think of the lives lost, infrastructure destroyed, dreams stolen. We only need to look at the images from Gaza, Ukraine, Sudan. War changes a society. And it rattles economies. Not just that of the countries involved in war, but their neighbours.
Local commentary has been filled with analysis of how increasing tensions between the US and Venezuela and the presence of warships in the region can affect our TT. And rightly so, we should have cause for concern. The risks are clear. The rewards for us less so, partly because they have not been articulated to the population.
A recent study by the Kiel Institute in Germany quantifies the economic cost of war, using data from more than 150 wars since 1870. According to the findings, in war sites, economic output (GDP) falls by 30 per cent on average and inflation rises by about 15 percentage points over five years.
Furthermore, non-belligerent third countries also bear high costs, especially the neighbouring countries of war sites. For neighbouring countries, output falls by ten per cent on average after five years while inflation rises by five percentage points over the same period.
These results should be particularly concerning for TT. We should be more concerned because we are not like the average country in the Kiel Institute study – for two reasons.
Firstly, in most cases studied in the dataset, the economic ties are not as close as has been between TT and Venezuela. Therefore, this estimate of ten per cent decline in economic output is likely higher for TT. Evidence of this can already be seen as the Venezuelan authorities have suspended energy deals with TT. We need not be reminded on the significant role the energy sector plays in our economy. Our fishermen have also been limited in their ability to ply their trade.
The TT economy contracted by about 8.8 per cent in 2020 during the first year of the covid19 pandemic. We are still recovering from this. Imagine what a ten per cent output decline would look like. Or rather feel like – for those who lose jobs, the businesses that close, the households that struggle to feed their families. A ten per cent decline in output would mean a 100 per cent drop in income for many. This is not just an economic cost, but one which will have wider social ramifications.
Secondly, the estimates above assume a “non-belligerent neighbour.” In other words, a non-aggressive neighbour. One can assume that an aggressive neighbour would feel the effects even more, beyond the ten per cent output decline and five percentage points increase in inflation estimated.
Is TT a non-belligerent neighbour? Venezuela would surely argue otherwise, having recently declared our PM persona non grata. The Kiel Institute study is quantitative – it measures economic fallout with hard numbers. What is less measurable is the loss in confidence that will result from this situation.
Our Caricom brothers and sisters will begin to lose confidence in us. TT has always been integral to the Caricom project and Caribbean identity – the Treaty of Chaguaramas which established Caricom in 1973 was signed in TT.
From the economic standpoint, we can only hope this does not affect trade. Caricom remains one of the biggest markets for exports, particularly manufactured products. Investors will begin to lose confidence in us. Investors, once concerned with crime and corruption, will now add regional tension and shifting foreign policy stance if the government changes to the list of concerns.
We have entered uncharted waters. Since 1962, when we became an independent nation, our stance as a neutral country has held firm until now. So, if war is so costly, why is war a permanent feature of history? After all, the data used in the Kiel Institute study is based on 150 wars since 1870. That is an average of almost one war per year.
Some economies grow during war. For example, both Russia and Israel have maintained growth of between three-four per cent between 2023 and 2024. Same for the US between 2003 and 2005, with the 2003 Iraq invasion. In these cases, growth is largely fuelled by war spending and limited costs to these countries as the war is not fought on home soil. The USS Gravely was docked in TT.
In 1992, Singing Sandra sang that “nobody wins a war,” yet the war goes on. Some economies win. Large economies. Economies of superpowers who are looking for more power. Unfortunately for us, based on the research, the same cannot be said for neighbouring countries – particularly small belligerent ones.
DR JAMELIA HARRIS
economist
