Introduction
Last Sunday’s column sought to make the argument that, despite the fact government activity in the economy is so huge and it operates as a drag, impeding economic performance and growth, there are at least eight economic functions that the government is best situated to accomplish. It is expected that government would provide these. Four of these were considered last week and in this week’s column I will refer to the remainder.
To recall, the four areas we have considered so far include 1) national defence and the preservation of the rule of law and due process; 2) ensuring the economy does not develop internal or external imbalances, which could stultify economic growth, generate inflation, increase unemployment and produce unsustainable levels of government indebtedness; 3) the regulation of Guyana’s external trading environment; and 4) the promotion of an equitable distribution of income and wealth in the society.
Measuring inequality
In regard to the last item I had pointed out that recent estimates of the Gini coefficient for Guyana average 40 per cent for most of the 2000s.
Several readers have queried the meaning of the Gini coefficient. As reported last week the Gini coefficient is a measure of inequality in the distribution of income. It is also used to measure the inequality in the distribution of consumption. It should be noted that both income and consumption distribution can be measured for either individuals or households.
At one extreme, when the coefficient is zero, this implies perfect equality in the distribution of income or consumption. At the other extreme, when the Gini coefficient is 100, this indicates perfect inequality in the distribution of income or consumption.
Guyana’s Gini coefficient is high, but it is higher in several other countries. What the data supporting the coefficient reveal is that the percentage of total income received by the richest 20 per cent of the Guyanese population is about 47 per cent. At the same time, the percentage of total income received by the poorest 20 per cent of the population is only 6 per cent.
Observations
Two further observations are warranted at this stage. First, as we look at countries around the world, more and more of the four functions I have considered so far are being provided by private and non-government sectors; the same is true for the four others we consider today.
Second, in saying that these areas of activity are best suited for government to be engaged in, should not be translated into a favourable judgment of how cost effectively these functions are being delivered in practice. In Guyana there is a lot of controversy over how well these functions are being performed by the government.
Environment and
infrastructure
Continuing the discussion, the fifth area of activity, which I believe the government is best suited to perform is environmental protection. While individuals, families/households, and enterprises affect the environment directly as they engage in making their livelihoods or consuming, government activity is needed to ensure that the net outcome of these individual actions allows the country to maintain its environmental/ ecological sustainability. This requires that the present generation of Guyanese, leaves for future generations, a country whose environmental condition is no worse than how they received it.
Environmental activities cover a wide government of public actions. Given all the public discussion, every Guyanese must be aware of the low carbon development strategy of avoided deforestation and the promotion of low carbon intensive economic and social development. Governments worldwide are concerned about global warming and climate change. They feel obligated to control carbon emissions caused by the use of carbon intensive energy sources: oil, gas, coal and charcoal.
The sixth area where I believe government activity is essential is the promotion of adequate infrastructure, particularly in view of Guyana’s geographical features. This promotion does not necessarily require that the government itself should construct the required infrastructure. Local and foreign contractors could be involved, but the government has to be the principal agent promoting a situation in which adequate roads, bridges, harbours, communication, drainage and irrigation, and so on, exist to facilitate the efficient geographic integration of the economy.
Basic utilities
and services
Linked to this function is the requirement that government should also ensure that the services of basic utilities are widely distributed. This function has been drastically reduced in recent years. Thus public aircraft servicing the interior areas have been replaced by private aircraft. Similarly, private electricity generation units have reduced dependence on the publicly owned electricity-generation grid, and private vessels have replaced public ships in our major waterways. The government, however, retains the responsibility to regulate these private sector operations for the public good.
Finally, there are certain basic services where, depending on the communities, government is best suited to provide. One of these is basic education, although several private and NGO-based schools exist. While secondary and tertiary education is being provided mainly by government, in the years to come this will likely change.
In Guyana, government is responsible for establishing the regulatory framework in which education is delivered. The grave danger of this is that, while government is proclaiming it is protecting the ‘public interest,’ the government can end up using its muscle to protect and privilege public education against private.
Indeed, I believe the presumption that government should be providing the regulatory framework in which private enterprises operate, should be established on a case by case basis and not simply as a general rule, which would apply in each and every situation. Industry self-regulation and an informed consuming public may be, in some circumstances, all that is required.
