Introduction
The Stabroek News recently reported that Guysuco recorded a $4.1 billion loss last year (SN Aug 5, 2009). Subsequently, President Jagdeo – while addressing the 19th Delegates Congress of the Guyana Agricultural and General Workers Union (GAWU) – urged sugar workers to try harder and be more responsible so that production can top 300, 000 tonnes (SN August 16, 2009). Therefore, for President Jagdeo the responsibility for correcting the current predicament rests with the workers. In the same Stabroek News report, Mr. Komal Chand, President of GAWU, attributed the crisis to Booker Tate’s mismanagement of Guysuco. They are both wrong.
In this column, I will outline the historical policy choices that Guyanese leaders have made vis-à-vis Guysuco. The key point of this column is the current poor financial outcomes are rooted in a history of bad policy choices. On the other hand, if Guysuco is to become viable and contribute effectively to national development it must upgrade and produce a product more acceptable in foreign markets. In other words, the industry must produce a product that can either be exported at higher returns or be utilised at home and save on foreign exchange (example an E10 policy for a start – where the E means ethanol; note it is possible to go up to E20 without changing the vehicle infrastructure).
Sugar workers should be aware that accounting quick fixes and a wage squeeze to cut unit cost of production at Skeldon will not transform their lives. So even if Guysuco should return to profitability in the near future their lives will still not get significantly better. Guysuco’s problem is not just unit cost of production relative to export prices, but rather more fundamentally has to do with the very product the industry makes. In other words, when Skeldon returns to profitability the question of the status of the West Berbice and Demerara estates still remains. The PPP government and GAWU have no plan for the other estates and it appears they will allow them to fail. As I have noted in previous columns, Guysuco has to produce a commodity that (i) would be demanded at a proportional or more than proportional rate as the income levels of CARICOM (assuming the product is sold there) or the rest of the world (perhaps the US under the Caribbean Basin Initiative) rises; and (ii) there are not many substitutes for the product.
Tough questions will have to be asked and answered on how to finance the upgrade of Guysuco’s production structure – are the West Berbice and Demerara estates going to be sold to a reputable foreign firm with the expertise to make and market ethanol? (As an aside, would the properties be sold off to friends of the ruling class so as to further perpetuate a petty production structure? I’m just asking.) Would the World Bank be willing to finance such an industrial policy? The latter would lead to job creation – the kind of policy the World Bank ought to finance if it is serious about permanently eradicating poverty. Can the property rights be given to reputable foreign firms to develop other non-Guysuco lands for ethanol and other large scale agriculture?
In this column, I will examine the pre-independence policies of Bookers. My next column will delve into the post-independence policy of nationalisation and the failure to anticipate the price erosion of the Economic Partnership Agreement (EPA).
Jagan and Jock Campbell
There is no doubt that a legacy of sugar production in Guyana involved colonial exploitation. The early nationalist movement led by Cheddi Jagan – and inspired by his fervent Marxist-Leninist (a euphemism for communism) beliefs – would soon force a rethink of the role of the sugar enterprise in Guyana. Much of the reform would be led by Sir Jock Campbell of Bookers. There are two perspectives of why Bookers was willing to make concessions to improve the lives of sugar workers. One view is given in the masterful book “Sweetening Bitter Sugar” by Professor Clem Seecharan. For a different perspective on why the reforms were implemented see Professor Clive Thomas’ book “Plantations, Peasants and State.”
The purpose of this column is not to delve into what motivated Bookers to implement policies to improve the welfare of sugar workers in the 1940s and 1950s. It is a fact that Bookers under Jock Campbell (who was Chairman) did implement significant measures that improved the lives of poor sugar workers. These policies are outlined in detail in Seecharan’s book. However, I do have a few personal experiences which attest to some of the points recorded by Dr. Seecharan. For instance, I heard the old folks in Houston talk about the time in 1953 when they were able to move from the logies to a concrete house; Houston once had a beautiful community and sports centre where many bodybuilders, weightlifters and table tennis players from the working class thrived. Rohan Kanhai, Lance Gibbs and Alvin Kallicharran came to play there according to the old folks. These were Jock Campbell’s (and not the PPP/PNC) legacies. Today rum shops predominate in Houston and the community centre is dead. My generation never had one while growing up. The cricket field became a cow pasture – thus we played ball on the streets. My generation, therefore, grew up in a period when the favourable aspects of Bookers legacy were reversed because of the poor policy management of our independence leaders – primarily Cheddi Jagan and Forbes Burnham.
Bookers had a four-prong corporate policy agenda to reform the role of the sugar industry in Guyana. Jock Campbell realised that the adverse colonial exploitation associated with sugar had to be reversed. He wanted to change that legacy. As a result Bookers, by the 1950s, had a four-prong corporate strategy that involved a responsibility to the following: (i) the shareholders; (ii) the sugar workers; (iii) the customers or consumers of sugar; and (iv) the wider community. It is my opinion there was little that was fundamentally wrong with the new Bookers corporate strategy. It reflected to a large extent the Fabian Socialist views of Jock Campbell.
The strategy reflected a role for the capitalist class which will take the financial risks to invest and invest to create businesses (thus jobs) for growth and development. The capitalists already had centuries of experiences with the marketing of finished products and the cracking of new markets. If there were going to be innovation and alternative products and processes (a la Joseph Schumpeter), then the capitalists working with the wider community (the State and the workers) and the scientists would have had to take that lead. With innovation comes growth and rising productivity (wages) for the workers. Had the 1950s Bookers corporate strategy succeeded, perhaps there would have already been the much needed structural transformation of the Guyana economy.
Bookers’ new corporate strategy also recognised the importance of uplifting the welfare of the workers and educating their children and developing the human spirit (remember the community sports centres versus today’s village rum shops). It also recognised the need for better health services for the workers. By the 1950s Bookers also replaced many of its managers and senior workers with Guyanese (although there could be a cynical political interpretation of this development). This led to emergence of a new Guyanese professional class, which would later migrate after nationalisation. The early Guyanese Marxists-Leninists labelled them the petty bourgeoisie class. However, this was a critical piece of development to fulfil the path to future economic development. These are the people who could have supplied future generations of managers and entrepreneurs both for the private sector and the Guyanese State.
Another important aspect of the reforms was a focus on scientific research and applications to sugar cane cultivation. These scientific applications would have significant successes in increasing yields and thus worker productivity. In other words, scientific applications in the 1950s allowed the sugar industry to circumvent some diminishing returns. As the keen reader would realise, I am an advocate of new economic activities that will postpone diminishing output returns and/or find alternative methods, products and processes (a la Joseph Schumpeter). Why science and its application to the industry are so important? First, it increases sugar output per worker – productivity. It is productivity which drives the returns to labour (higher wages) in a capitalist system. As Seecharan recorded in his book, sugar workers were already sharing in the gains of higher productivity. Second, scientific research in one industry leads to spill over effects and applications to other industries. Surely, the soil science and water management applications by Bookers in the 1950s must have had benefits to other agricultural sectors. Remember, the force of economic growth is driven largely by alternative products, processes and products.
However, these policies – even though they led to substantial improvement in the welfare of the poor sugar workers – would be rejected by the Jagan-led nationalist movement. It was clear that by 1953 the stage was set for the nationalisation of the sugar industry (that was finally nationalised in 1976 by the PNC with the support of Jagan’s PPP). In addition, it was clear that Dr. Cheddi Jagan wanted the nationalisation of the sugar industry to fulfil his Marxist-Leninist mandate (similar to what you have in Cuba today) of state control of production – another developmental model. At that time Jagan believed the government would be better at making sugar, continue the scientific work Bookers were doing to circumvent the harsh climatic conditions in Guyana, and continue to market sugar at the world stage – all that while at the same time transform the Guyanese economy away from sugar. In other words, Cheddi Jagan wanted to jettison Bookers four-prong cooperate strategy and replace it with a Marxist-Leninist developmental agenda in which a few government bureaucrats would decide on what to produce, how to produce and who gets to share in the distribution of economic growth.
Conclusion
This column focused on the pre-independence policy agenda of the sugar industry. Next time we will continue the theme of this column by looking at the policy of nationalisation and why it failed. We will also examine the Skeldon investment and the Economic Partnership Agreement (EPA). However, the key point for now is to note that the present-day problems of Guysuco are rooted in decades old historical policy choices of our political leaders.
Furthermore, the preponderance of the village rum shops of today versus the community centres of the old days (with manicured cricket fields, bodybuilders, power lifters and tennis players from the working class) are testimony to the fact that the sugar villages did not progress. When one factors in the financial losses Guysuco is now making, the fact we have to import sugar in a world market price boom, and the missed economic opportunities to transform the economy, it is clear the policy choices of our so-called fathers of the nation have lingering adverse effects on our country up to this day.
