While President Jagdeo has challenged those who claim that the economy is tainted with drug money to provide the evidence, Professor of Economics Clive Thomas has argued in his weekly Sunday columns ‘Guyana and the wider world’ and in an interview with Stabroek News that a considerable amount of economic wealth derives from organized crime, and has offered possible scenarios to arrive at a figure of how much it is worth.
President Bharrat Jagdeo has argued strongly against claims that the economy was being bolstered by ‘dirty money’ and has repeatedly called on those making the claims to supply the evidence. The argument hinges on what percentage of the informal economy – ie those economic transactions which fall outside the formal sector and are therefore not captured in the measures for the Gross Domestic Product (GDP) – can be attributed to organized crime.
Speaking at the Guyana Manufacturing and Services Association three weeks ago Jagdeo defended the inflows into the economy, saying these could be traced to economic development and were not from drug money. He remarked that at a private function a member of the private sector had said that 80% of the economy was based on “drug money.”
“I don’t have a problem with anyone making that assertion,” said Jagdeo, but noted that when the US Narcotics report had mentioned that inflows into the country were tainted with drug money he had called the US embassy and asked how this had been estimated, but was still waiting to receive the methodology. “The wild assertions are not enough,” said the President.
He went on to observe that in 2006 there had been a combined inflow into Guyana of US$1.02B inclusive of remittances; “I don’t have here a line called drug money,” he said. Last year, he told association members, the government had put US$170M in disposable income into the market for people to spend or save.
Prof Thomas told Stabroek News in an interview on Thursday that in 1999 the IMF estimated the informal economy as representing 47% of official GDP. There was every reason to believe, he said, that the IMF’s 1999 estimate of the size of the informal economy could not have varied much in recent years. Allowing, however, for a margin of error of plus or minus 10%, the current estimate could therefore range between 42.3% and 51.7%, rounded off as 42% and 52% respectively. Thomas said using the GDP estimate of US$731M for the year 2006, this would yield an estimated informal economy of between US$307M and US$380M.
Using three scenarios for what he called the “phantom” portion of the informal economy – ie that attributed to organised crime – of 25%, 50% and 75%, we would get estimates, he said, ranging from (US$77M, US$154M, US$123M) to (US$95M, US$190M, US$2805M). For a small, poor economy like Guyana this represented a considerable amount of economic wealth, he observed.
“This economy is not growing
