Dear Editor,
Dr Prem Misir’s letter of May 28 in the Stabroek News attempts to take on the incomplete and continuing analysis of Professor Clive Thomas on the rising prices and the relief package announced by the government. The good doctor did not wait until Professor Thomas had concluded his analysis to rebut, but jumped in midway to criticize. However, I am responding to his premature response to Professor Thomas, who will no doubt deal with Dr Misir’s contentions in his continuing column on Sunday.
Unless I am mistaken, Dr Misir is categorically saying Guyana has no food crisis and has had no hand in the spiralling global food and fuel prices. I do not need to tell Dr Misir that one does not have to have a shortage of food to suffer from the effects of such a global crisis. It may be true that Guyana has had no hand in the rising global food and fuel prices. However, I am not sure that Guyana’s erratic supply of rice to Jamaica and other markets may not have contributed to uncertainty in supplies or increases in the price of this commodity in those markets. But on the domestic front, the government cannot lay claim to not having had a hand in the rising food prices. From the moment VAT was imposed in January 1, 2007, food prices in Guyana began climbing. Imported inflation and price increases would have only added to this.
Professor Thomas has not yet concluded his analysis of the government’s relief package but it is clear that the relief package is inadequate. No one is arguing the issue of affordability at this point in time or that the government intervention is not to cushion the scourge of high prices and to reposition the farm sector. The issue is the extent and adequacy of the intervention.
It appears to be the penchant of everyone in this administration to run to 1992 as a point of reference as the time when the arrest of the decline of Guyana’s economic woes began. Let’s set the record straight. The repositioning of the economy using a liberal approach began in 1988 with Hugh Desmond Hoyte and not the PPP administration. It is dishonest to say otherwise. The PPP government, though Marxist in orientation, continued with a liberal policy approach because of the carrot of debt relief and god knows what other reasons, even though it is quite clear that these policies have been associated with more failures than successes.
As I said, I believe the focus of Professor Thomas’s column is on the adequacy of the relief package being offered by the government and not Guyana’s experience with rising food and fuel prices. The latter of course requires a longer lens than the current column. If as the good doctor says, the relief package was intended to cushion the impact of inflation on a day to day basis and not some “strange end of year inflation rate,” then the government should not have waited until 2008 to have made adjustments as the Bureau of Statistics would have had monthly inflation figures at its disposal.
The nine per cent across-the-board salary increases by Dr Misir’s own admission were below the annual rate of inflation of 14 per cent. This means that at the end of 2007, workers not only experienced a contraction in their real wages, but also had to pay higher prices for goods as a result of VAT and rising oil prices as well as imported inflation. By the end of June 2007, the government would have been in a good position to tell what its returns from the introduction of VAT would look like. As it turned out, the government realised $12.6 billion more in VAT and excise taxes. What a revenue neutral tax! The government could have made efforts earlier to cushion the rising prices.
To cite the current minimum wage and compare it with the 1992 minimum wage is disingenuous if you do not provide the figures to show the size of the revenue positions of the government for these years. As it stands today in Guyana, personal income taxes are not much below company taxes, whereas in 1991, there was a wide disparity between these taxes. In 1990, PAYE was only $374M.
Today it is over $1 billion. This of course, reflects the larger share of current expenditure that personal emoluments represented with a smaller public service. The government can afford to lose $3.2 billion of the excess VAT and excise taxes that it collected on the working class which in the first place paid those taxes. This is a strange Marxist perspective which sees the loss to the government but not the hardship faced by the working class which Marx considered as the most important of the productive forces.
What the good doctor is missing is that the revenue which he seems to want to cling to belongs to the people of Guyana. It is their taxes. The government is just the custodian of the taxes to spend as it sees fit in the people’s interest. The government has been elected because a certain percentage of the electorate believes that they have the skills to make the necessary decisions and adjustments that are needed for the country to develop and for the welfare of all to be enhanced. It is good that the government has acted. So allow an economist a chance to analyse the government’s measure without jumping in halfway with extraneous issues.
Dr Misir does a disservice to cite what Professor Thomas has said and to misunderstand it and then cite a quotation from a popular columnist out of the London Financial Times which actually supports not contradicts what Professor Thomas says.
Professor Thomas said: “Food prices are certainly affected by the pass-through effects of rising oil prices, but so far the global supply-demand imbalances [my emphasis] seem heavily concentrated on two grains: wheat and rice.”
Martin Wolf of the Financial Times is quoted by Dr Misir as saying: “The recent price spikes apply to almost all significant food and feedstuffs. Yet these jumps are themselves part of a wider range of commodity price rises. Powerful forces are linking prices of energy, industrial raw materials and foodstuffs. Those forces include rapid economic growth in the emerging world, strains on world energy supplies, the weakness of the US dollar and global inflationary pressures.”
Dr Misir, there is no contradiction between what Professor Thomas said and what Martin Wolf said.
The supply-demand imbalances he referred to had to do with the shortages of the two commodities on the world market and the resultant rise in prices – another dynamic affecting the global food crisis.
There are no contradictions. He just did not get the point.
And no, the menu of measures announced by the government is not adequate to increase the disposable income of Guyanese. How can you expect people in Guyana to live on below US$1 a day and say that that is all that can be done with the resources available? It either means that the resources are not being managed efficiently or the government needs to reorient its priorities.
What measures are being taken to have a climate of inclusive politics so that everyone feels that his voice is being heard? This is the first step that the government has to take to create a conducive climate for sustainable development in Guyana. The government owes this to the people who voted it into office as well as those people who did not vote them into office. After all, it is the government of all of Guyana and not just half of Guyana.
This is not to say that the PNC is blame free. It has its own crosses to bear. But it is the PPP which is in power and it is the PPP which has to reach across the divide to rule in the interest of the entire country. The declassified records on Guyana show clearly that Dr Jagan was prepared to do this when he had been sabotaged and was in opposition.
Unless people feel that they are included in the decisions that govern their lives and unless they see hope ahead, they will not resist the temptation to be on the streets. The government’s best response to this will be to provide a climate where people feel safe, where investments can generate returns and where the working class can make a wage without fear. It is high time that the government cuts its ties with the restrictive policies of the IMF and World Bank which have stifled a chronic patient.
It is time that we put meat on the bones, that we give substance to the gestures, that pre-budget consultations actually have a purpose apart from just being a process to bear and that we put the nation above divisive politics.
Yours faithfully,
Gitanjali Singh
