Tag: IMF

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Oyez, the IMF brings good news for our poor

Following last week’s column featuring the IMF Article IV Consultation on Guyana I learnt that Mr Asgar Ally, former Senior Finance Minister in the post-1992 Cheddi Jagan government currently serves as a Senior Advisor to the IMF Executive Director for Guyana. In fact accompanying the Consultation Report was a statement issued in the name of the Executive Director Paulo Nogueira Batista, Mr Asgar Ally and Ms Nicole Leslie-Ann Des Vignes, another Senior Advisor.

If the report was one-sided, the statement read like the adulation reserved for saints and people who routinely walk on water. No wonder then that the Government of Guyana was prepared to break with the past and to permit the IMF to allow public disclosure of the report. Transparency under IMF rules it seems, depends on whether or not the subject government is pleased with the contents of the report. Indeed the rule can be so manipulated to pressure the IMF into writing favourable reports in exchange for ‘transparency.’

I cannot say this was done in this case but the statement by the three senior officers causes me sufficient concern to warrant my writing to the new Managing Director of the IMF, Ms Christine Lagarde about it. The IMF must know that its work is being critically evaluated by the public and that it can be called upon to justify what it puts on the record. I am allowing a week to pass before publicizing the letter and will also publish any response I receive. Now for this week’s column.

Introduction
Earlier this week I received a copy of a wonderful book called Poor Economics written by professors Abhijit Banerjee and Esther Duflo of the renowned research university, the Massachusetts Institute of Technology. It is one of the best gifts for anyone truly interested in development models and processes to help the poor and who reject the banal notions and mindless efforts of politicians across continents. The irony of our Guyana example is that our politicians have managed, quite spectacularly, to rise over a single electoral cycle from need to affluence even as they pretend to write and implement poverty strategies that will go nowhere and help no one. Poor Economics is a book that simply cannot be praised too much, winning acclaim from across the spectrum, including from heavyweights like Nobel Laureates Amartya Sen and Robert Solow, and journalists from the pro-capitalist Financial Times, Economist and Forbes to the liberal Guardian and El País – no easy feat.

The book is no ivory tower approach to the complex issue of poverty or why a poor person needs to borrow in order to save, why the children of the poor go to school but do not learn, why they pay for drugs they do not need while missing out on easily available life-saving immunizations, why they spend so much on dowries in India and funerals in Africa, why they prefer to buy a television set rather than nutritious food or why the poor can start a business but not grow it. Banerjee and Duflo spent fifteen years on this work, among the poorest of the poor in Asia, Africa and Latin America, taking a ringside view of the lives of people who are no different from each of us, or are, as the authors say, “just like the rest of us in almost every way” – with the same desires and weaknesses, and just as rational if not more so.

In the process the authors manage to humanize the poor rather than to stereotype them with a single label as some faceless group, capable of being analysed, diagnosed and treated as one homogeneous whole. As the authors note, the poor have to be sophisticated economists just to survive, having to make more careful choices about what to have, or more often what not to have. Failure for the poor is to fall off the precipice, not only for the head of the household but the several children and their children as well.

Aliens in our world
Those of us who believe that our circumstances, our thinking and our values are the standard, forget that the poor have limited access to the things we take for granted – things like good newspapers, television and books that provide the very information that can make their lives better. The poor have the additional problem of being aliens in a world not built for them – the financial system, the Blackberry, a retirement plan and health insurance and four-lane highways are not part of their lives or lexicon. For the poor their only experience with democracy is the promises they receive every five years, and their enjoyment of human rights is being able to avoid the police. Their measure is quantity rather than quality, and achievement is gauged by survival rather than success.

Ever since Desmond Hoyte embarked on the IMF-driven Economic Recovery Programme (ERP) we have heard of the safety net without realising that many of the poor were below that net, only to fall further below. The ERP was built on a set of theories hatched in the multilateral financial institutions, embraced by development economists and promoted to unsuspecting governments by aid agencies and donors keen to be seen to be doing something about poverty. That is what makes Poor Economics different. It is the product of experiences, observations, interviews and objective analyses by two accomplished economists who worked in the trenches and communities of the poor. It is about solutions of the poor, by the poor and for the poor.

The IMF brings good news
We are now told by the IMF that the reduction of poverty is a major priority of the Government of Guyana and that the authorities are moving ahead with the revised Poverty Reduction Strategy Paper (PRSP). That is more than a bit surprising for more than one reason: the government seldom acknowledges the existence, let alone the scale of poverty and has done nothing to measure it in any of the ten administrative regions of the country. I find it hard to believe that the geniuses in Vlissengen Road and in Main Street would think that the nature of poverty in Region 8 would be the same as in coastal Guyana or that some one-size-fits-all approach would magically solve the problem.

If indeed we want to find solutions to our poverty issues we have first to understand the scale of the problems faced by the poor, including the reasons why they missed the first wave of poverty alleviation and the structural weaknesses inherent in those earlier efforts. Like in so many countries, the efforts have been the top down approach by politicians who believed they knew all and therefore did not need to speak with the patient whose poverty is the problem to be solved.

The Jagdeo syndrome
Whatever the scale or the numbers, the first challenge to our poverty problem that needs to be overcome is the Jagdeo syndrome which is to throw money at the problem and if that does not work, throw some more. If free books and uniforms do not help the dropout rate or improve our CXC scores, then maybe a more expensive laptop will do the trick. If building one over-priced medical facility does not lead to an improvement in child mortality then build another, usually with loan or grant funds. If one gimmick does not work just try another.

Under this syndrome an absolute no-no is the obvious need to examine the causes of poverty or for an evaluation of the economic, social and psychological effectiveness of aid extended so often as charity rather than an effort to make available to society the human capital locked in that huge mass. Not only would that approach be too complex for the Jagdeo administration but it has no political value, the only currency the government recognises in its transactions with the poor.

Conclusion
Expectedly, the IMF tells us that the revised PRSP is being done with donor assistance. One can expect with the certainty that night follows day that the donor community will be asked to finance the inevitable outcome: that the problem is insufficient resources. This trick produced baskets of aid funds before and the chances of doing so again are high, so why not try it?

Meanwhile no one should deny the success the political directorate has had in transforming their personal poverty reduction to wonderful capital accumulation. It is a real pity that what works for the politically powerful is not available for the powerless masses. That is as true now as it was in George Orwell’s 1984.

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Poor IMF Consultation Paper predicts brighter future for Guyana

Introduction
A report compiled last November by the staff of the IMF in which two officials of the World Bank participated predicts a brighter future for Guyana despite the challenges, risks and threats to the economy. The exercise is done annually under Article IV of the IMF’s Articles of Agreement which requires it to hold bilateral discussions with members, usually every year.

The report was based on information available at the time of these discussions and completed on January 5, 2011 some days before the 2011 National Budget. Surprisingly it took close to six months for the report to wend its way through the IMF bureaucracy – and perhaps discussions with the Guyana Government – before it was published last month.

What is even more surprising is that despite the hands through which the report would have passed and the time it took before release, the report contains some remarkably elementary mistakes.

These reflect poorly on the team and the IMF despite its usual disclaimer about the views expressed being those of the staff team and not necessarily those of the Executive Board of the IMF.

The report included extensive coverage on the Amaila Falls Hydro Electricity Project and the National Insurance Scheme, but in critical areas it seems to have suffered from the absence of proper and independent research and critical analysis.

The shortcomings in those areas make the report less than helpful to someone seeking an objective evaluation of the state of and prospects for the economy. Its attention to oil and its impact on the economy was helpful but its reference to private estimates of Guyana’s potential reserves (15.2 billion barrels of oil) that places it among the top twenty countries seem far too optimistic.

In its introduction the report indicated that the team met with President Jagdeo, Prime Minister Hinds, Minister of Finance Dr Ashni Singh, Central Bank Governor Lawrence Williams, representatives of the private sector, labour, and the donor community, and members of the political opposition.

Yet the report reflects – if only coincidentally – the official line while none of the more frequently expressed concerns about the economy such as the illegal economy, the impact of the drug trade, corruption and governance gets any mention.

Business Page today presents a summary of the main findings and conclusions and offers its own comments where necessary.

Overall assessment
The report reflects a generally positive macroeconomic outlook in the medium-to-long term. It exults that Guyana is on the “cusp of major changes,” led by the government’s Low Carbon Development Strategy (LCDS) and private sector investments in gold, oil, and gas sectors and supports the large PPP (private-public sector partnership) associated with the construction of hydroelectric plant at Amaila.

It notes that the operating surplus of public enterprises is projected to rise from 0.6 per cent of GDP in 2010 to 1.9 per cent in 2011, supported by an expected surge in sugar production. It goes on to quote the authorities’ estimate that GuySuCo’s production in 2011 will rise by about one third to 300,000 tons. The results of the first crop suggest that this is most unlikely and that even the official target of 280,000 tons may not be achieved. While the report avoided any direct indication of the fiscal cost of keeping the sugar company intact or the high cost of production it did include the company as posing a risk.

Under risks, the report identified global uncertainty, volatile commodity prices, delays in grant disbursements, a widening external current account deficit and potential trouble with the NIS. In this connection, it suggested that the authorities would need to pay careful attention to balancing infrastructural needs with fiscal and debt sustainability. In the IMF song book, governance, crime and corruption do not seem to exist.

Amaila
The report notes that the Amaila Falls Hydroelectricity Project will have the capacity to generate electricity – which it states at approximately 154 megawatts – an output far in excess of present demand.

Ignoring the cost of mothballing and the need for redundancy, it predicts that Amaila should enable “a significant reduction” in the electrical tariff rates charged by GPL and lead to a sharp rise in electricity sales as self-generators would be attracted to the lower rates charged by GPL.

The authors note that based on current information, AFHP would eventually result in a 20-40 per cent reduction in the cost of generation as the switch from oil to hydro takes hold, but places the caveat that the precise extent of the pass-through of these savings to the end-user would depend on the PPA and its impact on GPL’s operations.

The report also states that GPL will have an equity interest in the hydroelectricity company, something that Guyanese are hearing for the first time. This would be an act of incurable insanity and would place GPL in a conflict situation and consumers at a real disadvantage.

While the report calls for the impact of the Amaila Falls project to be carefully monitored, both during construction (end 2011-14) as well as at the operational stages (2015 onward), its failure to do any independent examination of key elements of the arrangement leads it into unfortunate and misleading generalizations. The report does not seem to have any familiarity with the statutory procedures for the grant of a final licence and the obligation of the licensee to have power purchase agreements in place before the construction begins.

Incredibly, the report, “welcomed the high level of transparency and public disclosure of the project to date”! Without being ungracious to the team, one has to ask whether they read the independent press or used Fip Motilall as their source.

Oil
Noting that the Guyanese economy relies exclusively on imports for its oil consumption, the report observes that in 2010, oil-related imports represented some 16 per cent of GDP and were a main driver in the widening of the external current account deficit. It calculates that this makes the country vulnerable to oil price shocks and reckons that a 10 per cent increase in oil prices widens the current account deficit by 1¼ percentage points of GDP.

Changes in oil prices also have a significant impact on the fiscal accounts. Under the assumption that changes in the excise tax absorb half of any given increase, a 10 per cent rise in world oil prices boosts tax revenue by 0.6 percentage points of GDP.

Other issues

Poverty reduction
Out of the blue and from the IMF, Guyanese learn that their government in late 2010-early 2011 was currently preparing an outline of the Poverty Reduction Strategy Paper (PRSP) for discussion with the Cabinet Committee on Finance by July 2011. It notes that the architects of the outline are assessing the costs of achieving the Millennium Development Goals with technical donor support. Yet, this important step did not even warrant a mention in the Budget speech of the Minister of Finance presented to the National Assembly only a few days/weeks later.

NIS
Missing the correct date of the establishment of the NIS by nine years, the report dealt extensively with the risks posed to the sustainability of the Scheme with projections showing that after 2011, NIS will shift from small surpluses to growing deficits, largely as a result of rising benefit payments. It identifies as causes, what it calls a mismatch between pension benefits and contributions; contribution arrears and evasion by both workers and employers; and the additional challenge of the large investment of 18.6 per cent of total assets, or 1.3 per cent of GDP that the NIS has in the Clico conglomerate. Whether the team was told this by the government is a matter of conjecture, but that the government has guaranteed the indebtedness is false, wrong, misleading and dangerous.

What is more absurd is the comment that the Clico investment is “due to mature in a few years.” Professionals must do a fact-check of vital information, not repeat nonsense. Clearly they did not inform themselves about the nature of the investment or are aware that once liquidation was ordered by the court, the investments became immediately payable subject to the rules of priority of debts.

Unwilling to attribute direct responsibility for the challenges facing the Scheme to the failure of successive administrations to act promptly on the recommendations of the actuary, the report recommends “more actions” to restore its medium-term financial viability. They apparently did not ask Dr Roger Luncheon, the Chairman of the NIS Board and more importantly Cabinet Secretary to explain the failures of both Cabinet and the Board to address the problems.

The future
According to the report, the country’s future looks brighter, despite identified challenges. It predicts that with a fifth consecutive year of economic growth, Guyana is beginning to lock in gains from recent years of fiscal consolidation. It notes that prudent and sustained macroeconomic policies have developed resilience in the face of external and domestic shocks and notes that there are growing indications that the private sector is building up major plans for the exploitation of Guyana’s sizeable natural resources. One wonders whether they read Appendix G to the National Estimates which tells a different story.

The report predicts that over the medium term, the LCDS should help Guyana compete better on the global stage and unleash opportunities for lowering poverty. The report did not state what competitive advantages would accrue from the LCDS, but one can put that down to the government and the team themselves not being too clear about this.

As far as the team and the IMF are concerned, they have complied with Article IV and have said little that would ruffle the sensitive and preened feathers of the administration and have not given anything to the political opposition.

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Who’s left now? – conclusion

The death of socialism
Business Page last week suggested that amidst the cataclysmic dislocation to have rocked the capitalist world first manifested in the housing market in the United States, the response of the governments in the developed market economies is leading to a fundamental rethink of the role of ideology, and in the context of Guyana, raised the question playing on the word ‘left.’ Spreading like wildfire across industries and continents, the dislocation has made it obvious that the crisis goes far beyond the US or its housing market. It has raised troubling questions about the strengths and weaknesses of capitalism and the possibility of the revival of the socialist model of economic development which appeared to have been abandoned after the fall of the Soviet Union in December 1991.

So fundamental and vast is the problem facing the market economies that not even one trillion dollars has been able to calm the waters with the latest potential casualty being the car industry in the US, with the loss of over 2.5 million jobs directly and indirectly if the Big Three – Ford, Chrysler and General Motors – were to collapse. No longer is there any question of whether the state should get directly involved in the economy but only the extent of that involvement. For close to 20 years the world had this illusion that capitalism had solved the cycle of boom and bust, that regulation was the curse and deregulation and the market were a panacea for all the ills facing economies, that wealth in the form of derivatives could be created out of nothing and that socialism was dead.

Ideology
For some, perhaps simplistically, this all boils down to ideology, itself a misunderstood word that means nothing more that a set of doctrines or beliefs that form the basis of a political, economic or other system. Contrary to popular belief the word is not synonymous with socialism but is rather any underlying set of values and ideas and can embrace market capitalism, co-operativism or even religious fundamentalism. In last week’s column I indicated that at one stage the whole of Guyana, barring a small element, had been converted to socialist ideology by Jagan and Burnham and their respective political parties.

To get an understanding of whether those parties still subscribe to that belief I wrote their respective General Secretaries for answers and clarification about their commitment to socialism, and specifically to the PPP, whether the party gives any direction to the government on the kind of political and economic agenda it should pursue. My specific question to the PNC was whether it promotes and supports a socialist agenda. For whatever reason, neither responded to my letter.

It turned out that the PNC had long ago answered that question. In a letter published in the Stabroek News on January 12, 2002, General Secretary Oscar Clarke wrote that he could “think of no political party which can claim to have reversed itself so profoundly as the PNCR. It has changed its ideology and its economics.” That was as clear as one could be on distancing itself from the socialist agenda to which Burnham had committed that party.

Unclear
The situation with the PPP is far less clear. The party’s constitution defines it as Marxist but the party as government was all too willing to pursue the IMF-inspired Economic Recovery Programme inherited from its predecessor. The late President Jagan may have been uncomfortable having to reverse himself as much as he did in embracing the West to the extent he did, but for his supporters to selectively deal with his writings and his actions to show consistency is disingenuous, if not dishonest. I will respond separately to PPP member Rajendra Rampersaud’s letter in Thursday’s Stabroek News but for now he should refer to page 22 of Poverty Cause and Cure in Developing Countries by the late Dr Jagan. Calling for a “new economic planning strategy [which is] based on an anti-imperialist, pro-democratic and pro-socialist programme,” the late President identified the following ‘cures’:

1. nationalisation of the commanding heights of the economy – foreign and comprador capitalist-owned and controlled mines, plantations, factories, banks, insurance and foreign trade;

2. an almost total centralised planning and control;

3. expansion of the public and co-operative sectors;

4. rent, price and foreign-exchange controls.

These were obviously the very antitheses of the ERP which Dr Jagan’s government pursued on taking office in 1992 and no amount of manipulation of the records could explain this as anything but an about-face which has been taken to new lengths by Jagan’s successors. In this regard the PNC is less ambivalent. It would be more sincere if those who now want to protect or embellish Jagan’s reputation would simply explain that confronted with the prevailing international and domestic reality, he and his party had no choice.

Reversal
The completeness of the reversal by the politicians is seen not only in economic polices but in the legislative agenda; the subjugation of the interest of the worker to that of the employer; a tax structure that imposes low or no taxes on passive income while taxing earned income at punitive rates; the shift from direct to indirect taxes; concessions to business at the expense of the worker; and yes, the concentration of wealth to the business and political class.

Billions are spent annually on tax concessions to employers in exchange for their undertaking to provide employment, as though they do so for some philanthropic or altruistic reasons. The number of gas guzzling 4×4’s that are on the road, the majority with concessions, on a per capita basis is one of the highest in the world. But this practice is not only for the businesspersons. It seems that one of the first acts of a parliamentarian after taking the oath of office is to apply for duty-free concessions valued at millions of dollars to purchase a vehicle. At the exclusive community of the political elite in Pradoville the concentration of duty-free vehicles must easily be the highest in the country, with a one-car family being a rarity. These apparently trivial statistics are a measure by which it can be seen how far our society has been transformed. They are never issues that are ventilated.

Intellectual failure
It was suggested to me that one of the failures of socialism was its inability to respond at an intellectual level to the case made by Reagan and Thatcher for the market, and another was the fear of survival of socialist countries following the collapse of the Soviet Union. There is some merit in those suggestions but why have the economists and leaders of political parties not argued for an economic system, without label if necessary, that does not leave the market in charge or one that does not see the role of the government as being a mere facilitator?

Other than Cuba there are only two countries that have embraced state participation in the economy and those are right here in our region – Venezuela and Bolivia. Meanwhile we in Guyana proudly boast of how successful we have been in nationalising state entities which at the end of the day make us as a country poorer. The problem will come when we have exhausted debt write-off, when there is nothing else to privatize and when there is no further windfall revenue from VAT. For all his faults, when Burnham departed the scene, Guyana was owned and controlled by Guyanese. Now we have no control or influence over resources which have passed into foreign hands often with a bunch of goodies to go with them. To reverse that will not be easy, although we saw, as victims, some of that when CDC pulled out of GPL and Reynolds out of bauxite, leaving us to carry the can and the cost. Paradoxically, that is how it is happening in the developed world as well, as more and more businesses take public money in exchange for ceding some control to the government.

Agnosticism
It seems that Guyana’s policy response to the global economic crisis is to wait, see and hope it does not affect us. That is a naïve approach as we already see prices for our main commodities falling and we may soon see a number of Guyanese from the Caribbean returning as the construction job market dries up. In fact this seems an ideal time for a serious re-think of first the kind of society we would like to have, and second the formulation of the economic model that will take us there. That model will inform the investment policy, the regional and proportional development of the economy, the regulatory systems, taxation and the redistribution of wealth, planning and development and the provision of social services. There is no agnosticism in terms of ideology. A political party that seeks the support of the voters and the opportunity to govern has a duty, and ought to have the courage, to tell the public where they stand on fundamental issues.

The shenanigans of Wall Street, fascination with Fortune’s list of the richest this and richest that, greed and power at any cost have corrupted values and ideas. No longer do governments and parties think they need to believe in anything, once they can build a road here and create a few jobs there.

Conclusion
When a more objective judgment is made, the gains from IMF and neo-liberal policies are far from the impressive successes they seem to be. The benefits of free market liberalisation depend on who you are, your party affiliation and how much money or assets you had to begin with. There is no universal solution to begin with so rather than try to answer the question ‘Who is left now?’ I would prefer to see our political and intellectual leaders take the opportunity of the global meltdown to redefine their vision of our country and formulate a plan for taking us there.

Faced with real choices on issues and ideas I believe that our voters would be better disposed to renounce racial cleavages and start concentrating on ideas and policies. At the moment, the choice seems to be between persons of similar ideological persuasion distinguished only by their race.

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Who’s left now?

Introduction
The crisis facing the world economy is leading to a fundamental rethink of the role of ideology and the place of the ‘market’ in economic development. Some twenty years ago there was triumphalism in the West following the fall of the Berlin Wall and the demise of the Soviet Union. With the announcement and celebration of communism’s death mainly by those in the West, the practitioners, politicians and academics who had at one time extolled the virtues of socialism and the egalitarian society and equal opportunities which it would bring to all individuals all went into retreat.

Now it seems that capitalism as practised by those who were the celebrants at the death of communism are experiencing their own travails which offer a rare moment of satisfaction to the tiny minority which is still skeptical of the claims made by capitalism’s chief sponsors. Among this group is Joseph Stiglitz, known for his Nobel Prize in Economics and former Senior Vice President and Chief Economist of the World Bank. In his book Globalization and Its Discontents (2002) in which he not only critiqued globalisation but also argued that developing economies are, in fact, not developing at all, Stiglitz was particularly harsh on the IMF for imposing on those economies and countries, in exchange for loans and other assistance, economic policies “that conform to textbook economics but which do not make sense for those countries.”

In praise of deficits
Suddenly in demand for speaking engagements, Stiglitz, writing in the UK Guardian a few days ago, could barely contain his enthusiasm while speaking for that minority who never ceased having some connection to the Keynesian tradition. Lord Keynes who coincidentally was born the same year that Marx died, was the British economist who published in 1936, during the depths of the Great Depression, the tome The General Theory of Employment, Interest and Money in which his theory was that when the economy is slowing and businesses are reluctant to invest, the government should take up the slack, even if this means higher deficits.

Stiglitz in the Guardian noted that the acceptance of Keynesian theory even by the right in the US offered to those who were not captivated by the power of the market and capitalism, “a moment of triumph, after having been left in the wilderness, almost shunned, for more than three decades.” He posited that what the world was now experiencing was “a triumph of reason and evidence over ideology and interests,” and that some would see this as the end of market fundamentalism, comparable to the fall of the Berlin Wall.

Where have all our socialists gone?
But what happened to our socialists, or rather all of us, when at one time we all seemed to be socialists and the UF of Peter d’Aguiar a mere anomalous nuisance? If we are to take our constitution seriously – and why should we not given that is “the supreme law of Guyana” – Guyana is a state in transition to socialism. The constitution of the ruling Peoples’ Progressive Party, which I could not find on the party’s website, is even more emphatic about the party’s ideology – it is a Marxist party. In his seminal autobiographical work, The West on Trial, the late President and founder of the party, Dr. Cheddi Jagan wore proudly his allegiance to socialism, while blaming the British-US axis of all forms of plots and misdeeds. In fact Dr. Jagan, in the Wynn-Parry Commission into the Black Friday (February 16, 1962) disturbances said he was a communist.

Burnham, who initially came to power on an anti-socialist platform which he shared with D’Aguiar, went on a nationalisation campaign that at one time saw the state controlling some 80% of the economy.

While Burnham surrounded himself with some of the most doctrinaire left-wingers in Guyana including Ranji Chandisingh, Vincent Teekah, Elvin McDavid and Henry Jeffrey, his own commitment and that of his party, the PNC, to the socialist ideology appeared to be based on political control and nothing else. He had hardly been buried when his successor Desmond Hoyte reversed most of the socialist policies and embarked on the wholesale disposal of the country’s assets and resources for which the country received little in return.

The grand retreat
When Jagan returned to power in 1992, entirely out of character he continued those policies lock, stock and barrel, maintaining with the IMF a relationship of obsequiousness while embracing an amorphous and undefined New International Economic Order that had first been raised in 1948 in Cuba. Jagan never explained to his constituents or the country his about-turn on socialism, the IMF and the West, leaving it to others to speculate whether it was due to political expediency or his own conversion.

Whatever it was, his government pursued the same free market economics and model prescribed by the IMF and accepted by Hoyte.

Even before the death of Dr Jagan, economic policy and management of the PPP government was controlled by now President Bharrat Jagdeo who had been a member of the government from its first day in office in 1992. Jagdeo’s policies, on VAT, privatisation, price controls, food production and wages, have been entirely pro-IMF and he never for one moment betrayed his own Russian training. In effect then the policies of successive governments from 1988 to the present have been a renunciation of socialism.

The WPA too had been wedded to the socialist ideal and openly supported the Bishop regime in Grenada and the Cuban revolution. A major influence on the economic philosophy of that party was no doubt its one-time leader, economist Clive Thomas, arguably the best economist this country has ever produced. The TUF remains on paper a capitalist party but its leader sees no contradiction in being often placed in the role of spokesperson for the PPP.

Joining the clubs
For the political parties that were in government, the retreat from their ideological roots was no doubt shaped by developments in a world in which not to have the IMF stamp of approval or to be excluded from the WTO was like being an outcast. Market fundamentals reigned supreme and quietly everyone ceased being a socialist. Indeed, it would be difficult to find any leading member of the PPP – and here I distinguish it from the government – who would publicly describe themselves as a socialist. The PNC under Robert Corbin has lost not only its ideology but direction too, the WPA is peripheral as a force in politics in Guyana while the AFC is, so far as it can be labelled, very pro-market.

Cost and benefits
This column is not setting out as a value judgment on the economic model or policies which we followed at the behest of the IMF.

Nor does it suggest that there were not pluses and benefits from that relationship, however imbalanced. Perhaps both the post-Burnham PNC and the PPP needed an external force to bring investments and financial discipline to the country.

Many of the concessions and debt write-offs the country enjoyed were made possible by our allegiance to the IMF.

If the rules of accounting applied to the government, those write-offs would have been brought into its accounts as revenue, and it is partly those concessions that have made possible the substantial increases in expenditure on social services.

What is often not recognised or admitted, however, is that some of the debt write-off we have received had nothing to do with the IMF or the government, but rather stemmed from the fact that we were among a group of poor countries identified for such concessions.

Those policies have also had their cost. The resources of the country are now under external control and ownership. These foreign companies receive generous tax and other concessions under agreements which in many cases have not been subject to parliamentary approval or made available to the public. And in this regard the Asian wood giant Barama is an instructive example.

That company has reported losses for every one of twenty years while having enjoyed some of the most generous tax and other concessions imaginable. It is not only that those concessions have been costly to the revenue of the country, but they have made our domestic producers uncompetitive. With the various bauxite deals with RUSAL and BOSAI not available to the public, where is the political or public pressure to ensure that the deals are equitable and in the national interest?

One of the criticisms that can be made of the IMF-led policies is that while the national statistics may appear impressive and some Guyanese have seen marked improvements in their standards of living and a few have even reaped immense benefits, a large number of Guyanese still prefer to take their chances elsewhere. The figures show that tens of thousands of Guyanese have chosen to migrate legally or otherwise to seek jobs in just about any country they can enter. In the process, remittances have become one of our largest foreign currency earners and a major factor in any economic analysis. Public sector wages, and indeed wages in segments of the private sector as well, are cruelly low, made worse by a tax system that favours the self-employed and the shareholder over the wage earner.

Time to rethink
The crisis facing the market-oriented economies is causing a major rethink of some of the most sacred tenets of free markets and financial liberalisation. Primed as we are on the daily feed on US television we are aware of the embarrassing manner in which leaders of the US private sector trek to Congress begging for help. Make no mistake, the position in Europe and Asia is no different. When the turmoil is over and the dust has settled, the financial system, the housing and mortgage industry and the auto industry which have been responsible for much of the growth in many of the countries will have ended up in state ownership. While we privatise, they nationalise. That is not only a reversal over what took place for the greater part of the last twenty years, but a total contradiction of the free market. During all of this, the IMF seems to have gone into self-imposed silence.

Even after Guyana ceased being an IMF supervised country some two years ago, the government continued to follow the policies which the IMF imposed on us for so long that we seemed not to know there was an alternative or option. We are fortunate that we are not as vulnerable as some of the other Caricom countries, which because of a higher level of financial integration and tourism in particular, are already feeling the effects of the global storm. But make no mistake – we are not immune. Trinidad and Antigua are cutting back on construction and that will affect us directly. How do we reabsorb those Guyanese workers who may be forced to return home? For us the effects may be less immediate and also less harsh. But affect us it will.

Next week, we will look to see if there is anyone ‘left’ to help shape our response to the new reality brought about by the turbulence.