Inequality and poverty are independent though symbiotically related forces driving Guyana’s political economy. Together and separately they also dynamically interact with and through the broader development environment. Therefore, beginning today and for the next few columns I will briefly address a number of crucial developmental considerations arising from my earlier columns on inequality and poverty in Guyana.
Truthfully, most of these concerns have arisen out of readers’ queries. In this and coming columns I intend to treat with the following five, in the order indicated: 1) the rightful place of basic needs deprivation in the study of inequality and poverty; 2) the limitations of GDP as an indicator of economic performance, welfare, and well-being in Guyana; 3) the roles of the minimum wage and trade unionism in the fight against inequality and poverty; 4) the theoretical underpinnings or laws of motion driving production, extended reproduction, and distribution in Guyana; and 5) the global impact on domestic inequality and poverty.
Basic needs
The first topic is considered because two overseas readers, one of whom is from the International Labour Organiza-tion (ILO), have expressed the view that I did not properly acknowledge the role of the ILO (and by implication the global labour movement) in pioneering the basic needs approach to the understanding and treatment of poverty. I plead guilty to this omission, which is clearly both historically and institutionally unacceptable. Readers should indeed have been made aware that the ILO was the first international body to promulgate a basic needs approach to poverty. However, I had instead started my presentation of the basic needs approach with reference to the UNDP’s construction and publication of its worldwide series: the Human Develop-ment Index (HDI).
Originally, the ILO sought to develop the notion that the determination of poverty should be based on measuring deprivations encountered in the consumption of the goods and services considered essential by all those living in poverty, whether they are individuals, households, communities, nations or regions. Several deprivations have been put forward since then, with the UNDP identifying in the 1990s what is today the most commonly accepted, namely: 1) a long and healthy life, 2) knowledge, and 3) a decent standard of living, all of which lie at the core of the HDI. I trust this brief acknowledgement atones for my earlier omission.
GDP and inequality
There is no gainsaying that, for very good reasons, the single most widely used indicator or measure of national well-being and the health of an economy is the gross domestic product (GDP) and its rate of change. However, there are several well-recognized weaknesses of the GDP both as a measure and indicator of economic well-being. These are so common that they are catalogued as standard practice in high-school and introductory university texts. They include such items because the GDP is expressed as the value of a single magnitude, therefore it cannot 1) simultaneously express the myriad constituent elements that comprise it; 2) capture the changing quality over time of the goods and services it measures; or 3) the distribution of the value of the GDP among different population groups and classes.
Despite the several identified limitations to the GDP reported in these texts, in the specific case of Guyana three limitations that are peculiar to its GDP computation jump to the forefront. Firstly, a large portion of Guyana’s value added in production, incomes earned, and expenditure undertaken takes place in its informal, underground, parallel and phantom economy. This is not captured in the estimation of its GDP, which is based solely on market- based economic activities taking place in the legal formal economic sphere. As I have reported previously in these columns my estimates of the size of this irregular economy ranges between 30 and 60 per cent of the regular economy. Its main drivers have been tax evasion, criminal enterprises, and regulatory non-compliance. To the extent my analysis holds true, the GDP is therefore a partial and unreliable measure of overall economic activity in Guyana.
Secondly, Guyana faces a considerable number of ecological challenges. Thus, for example, it has to contend with specific geo-environmental risks: sea level rise, floods, drought, and endemic human as well as animal pests and diseases and so on. Further, over the years its inherited economic structure together with its path of development has focused on industries which as a rule tend to generate negative externalities: agriculture, forestry products, mining and other extractive activities. In the computation of the GDP negative externalities are very often ignored, underestimated, or discounted. Further-more, it is notoriously the case that the methodology of GDP estimation gives greater weight to the reconstruction activity which follows natural disasters, than to the natural environmental debasement that these disasters entail!
Thirdly, it is generally acknowledged that the GDP taken by itself, fails to adequately express the size of the gaps in 1) knowledge, 2) technology and 3) financial intermediation among countries, even though these form, by common agreement, the core of the differences between what are termed developed (or structurally transformed economies) and poor, undeveloped or underdeveloped ones.
Conclusion
Readers should not infer from the above discussion that I am advocating in any way whatsoever the abandonment of the use of the GDP as a useful measure of Guyana’s economic performance and welfare. That is definitely not my intention. Indeed I draw readers’ attention to the striking fact that, over the past five decades or so, the long run growth of Guyana’s per capita GDP has been just under 2 per cent. And, as previously indicated its human development index has grown by -0.22 per cent during the 1980s; 1.22 per cent during the 1990s; and, 0.87 during the period 2000-2013. The average annual growth of the HDI therefore for the entire period was also under 2 per cent!
Next week I shall address the roles of the minimum wage, trade unionism, and class oriented political actors in the struggle against inequality and poverty in Guyana. Afterwards, I shall look at the inequalisation generated by Guyana’s economic growth and the distribution of returns to ‘capital’ and ‘labour’ in that process.
