Annual EBHS Conference, 39th Annual Economic and Business History Society Conference

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THE END OF THE STERLING AREA ARRANGEMENT – THE CASE OF TRINIDAD AND TOBAGO: 1966-1976
Luke T. Gittens

Last modified: 2014-05-19

Abstract


The principal objective of this paper is to elucidate on the decline of the Sterling Area Arrangement’s impact on Trinidad and Tobago as well as the general decline of the pound sterling as a reserve currency globally. The Arrangement was the largest currency bloc internationally and allowed member countries to remit and defray payments in pounds sterling anywhere within the Area without any exchange controls. Trinidad and Tobago was one of the last countries in the world to move away from the pound even when almost all of the Commonwealth and its Caribbean neighbors had abandoned it as a reserve currency. This movement away from the pound and the decline of the Arrangement became more prolific particularly in the lead up to (1966) and after the devaluation of that currency in 1967. The Arrangement had provided the required monetary policy stability and fiscal flexibility for mostly Commonwealth countries at a time of de-colonization of the British Empire.

The issue of the decline of the Arrangement has been looked at in detail by Collins (1988) and Schenk (2010), who both gave a more holistic perspective from varying angles of economics and history, whilst in the local context, Farrell (1989) gave a brief outline of the Area Arrangement and Trinidad and Tobago within the framework of central banking. Other literature in this area has been generalist in looking at the Arrangement from its pre-World War II start-up to its end in the 1970s, this paper gives individual attention to Trinidad and Tobago and the reluctance by the Government of the day to move away from the pound sterling for the last ten (10) years of the existence of the arrangement; the economic considerations facing the country during that time; the attitudes of other Caribbean Territories to the Arrangement; the factor of the Central Bank of Trinidad and Tobago which was freshly formed in 1964 and; the significance of the Basle Agreement (1968) and the Smithsonian Agreement (1971) to Trinidad and Tobago.

To date, monetary and fiscal policy in the Caribbean has been mostly a topic for economists and the history of which has never been contextualized to any great deal. This paper will provide the trajectory and historical analysis into monetary, fiscal and general economic matters in Trinidad and Tobago in a decade which saw that country sever one of the core pillars of its colonial roots. This study will enhance the Caribbean economic historiography.