Externalities
As noted in the last piece, the cost of providing the goods and services is just as important to suppliers as the price at which they sell the goods and services. The price is supposed to reflect the cost of doing business, but one must wonder how often that is true in Guyana. A common problem is the apparent exclusion of certain relevant factors from the computation of cost and hence the level of price. The factors being referred to here are described by Keohane and Olmstead in their book Markets and the Environment as the “direct, unintentional and uncompensated effects of the unwanted by-products of economic activities” that impose health and environmental costs on Guyanese and that are not captured by the market.
The contributing variable is what the writers refer to as externalities. It comes from the clogged and awful smelling drains around many stores and attractive-looking buildings in which business is conducted in and around Georgetown. It also comes from the piles of rotting garbage in the vicinity where goods for sale are on display. Some of these locations have become acceptable “third places” for socialising, even though they do not provide the comforts and conveniences that our awareness of hygiene leads us to expect them to have. Like the proverbial ostrich, Guyanese have buried their heads in the sand and pretend that the problem does not exist.
Lowest common denominator
It appears as if Guyanese have settled for the lowest common denominator of existence with their environment. A pitiful sight is the futile effort of some persons to clean the drains in their immediate surroundings. After their effort, the water flows to the edge of the boundary of the premises and stops simply because the neighbour next door does not see it fit to do the same as the civic-minded one. It is as much a problem among businesses as it is among households. Stagnant water becomes discoloured and a breeding ground for mosquitoes and other pests and parasites. The stench greets customers as they enter and leave some business premises, or as they pass under the awnings. Sales persons do not seem concerned or aware of the sight or stench around them as they pass time at the entrance of the premises.
This means that employees and consumers might be shopping and socialising in locations that could be injurious to their health, and are paying a quietly escalating price that is as yet unknown to them. The list price or over-the-counter price is the visible part of the market price of whatever goods or services they acquired. Costs that we do not see are the hidden part of the cost structure whose payment is being deferred on account of the unwillingness of many businesses to carry the extra cost of maintaining a healthy and customer-friendly business environment. As a consequence, Guyanese might be reaching the false conclusion that things are cheap or reasonable when in fact the extra charge is coming later.
Pay twice
Contractors doing work for the government do not seem to have to take these factors into account either in calculating the cost of work, and the government does not seem to care. A recent example of this disposition could be seen at the corner of Quamina and Camp streets where the recently built parking lot for employees of the Guyana Revenue Authority is located. The completed parking lot has left the gutter on the Quamina Street side filled with sand and pebbles that were not there before the job was undertaken. A drain that was perhaps two feet deep is almost level with the road. The consequence will be flooding during the rainy season with the possible impact of the erosion of the perimeter of the parking lot, and the property of neighbouring households and businesses.
It is not known by this writer if the offending contractor has been fully paid for the job. But the environmental outcome from the job reflects poor public financial management and an example of how markets can fail a country. The inability of the market to work well in the foregoing example will cause some taxpayers to pay twice through no fault of their own. They will have to pay to fix their personal property and to fulfil their tax obligations.
Tug-of-war
Despite what should be a mutually reinforcing relationship between the two principal actors of the private sector in the Guyana economy, there is a tug-of-war between consumers and producers. That tug-of-war is reflected in the distribution of the net benefits between the two groups of economic agents and is amplified by the structure and imperfect nature of most markets in Guyana, but especially the labour market. The national economy remains largely a labour-oriented economy. Estimates show that wages and benefits account for between 35 to 38 per cent of the value of products and services while business incomes account for about 16 per cent of the total value. However, businesses have managed to grow their share of the national economy far faster than households. Within the last three years, businesses have exhibited growth rates in income averaging 25 per cent per year. In contrast, labour has grown at the much slower pace of about 9 per cent per annum.
Some of this lopsidedness could be removed if better use is made of the interlocking relationship between businesses and households. One area of commonality is in the provision of capital. Greater use could be made of the Guyana Stock Market to help improve the income to households.
Foreign labour
While the reorientation of households to the Guyana Stock Market has value, the tug-of-war between businesses and households is not being helped by the policy position of the administration on labour. A major factor is the apparent preference that the administration has for the use of foreign labour over local skills in contracts signed with foreign entities. This preference changes the value placed on local labour to stimulate domestic spending and to acquire the benefits of technology transfer. Things are not being made easier with advances in air travel, communication technology and the continued assertiveness of globalisation. Through these changes, foreign investors have been able to acquire a broader knowledge base about markets, including labour markets in foreign countries.
Not only does the information help foreign investors to make critical choices in the use of foreign and local labour in construction contracts for example, it also helps them to reduce the time that it takes to make decisions, a point of view held by some experts who have studied changes in the behaviour of capital markets. The ability to make rapid decisions raises the question as to whether or not foreign firms are finding it easier, in the case of Guyana, to obtain information about the local economy than the domestic entities.
Conclusion
The ongoing experience of Guyana with its willingness to forego the benefits of technology transfer through the learning curve in favour of efficiency using foreign labour only serves to weaken the local labour market further. To the extent that efficiency trumps full employment, the preference for foreign labour over local labour would continue.
Given that markets tend to look forward and not backwards, foreign investment was likely to increasingly bring its own labour. To survive under those circumstances, Guyanese would have to make greater use of entrepreneurship or continue to leave the shores in search of employment. In other words, households will have to shift towards the side of businesses to survive in a future Guyana economy.
LUCAS STOCK INDEX
The Lucas Stock Index (LSI) declined by 1.69 per cent in the third week of trading in March 2013. Like the previous week, four stocks traded with varying results. Banks DIH (DIH) was the only stock to record positive changes this week with a 1.18 per cent gain. On the other hand, the stock of Republic Bank Limited (RBL) was the only one to record a loss, 5.36 per cent, in trading this week. Demerara Bank Limited (DBL) and Demerara Tobacco Company (DTC), which also traded, recorded no change.
