There are two crucial issues which remain to be tackled in this series on inequality and poverty in contemporary Guyana. The first is to examine whether the structural relations embedded in the global economy exert a direct and therefore, independent impact on poverty in Guyana. And the second is to address those philosophical concerns, now raging worldwide, concerning the increasing manifestation of rising income and wealth inequality within nations. These two issues will be addressed respectively in today’s and next week’s column.
To aid consideration of these issues I urge readers to recall three earlier observations that I made as they speak directly to Guyana’s circumstances. The first is Piketty’s observation, which arose from his measurement of inequality across a significant number of continents, regions and countries over several historical time-frames. That is: in the clear absence of countervailing policies and programmes, the generation and regeneration of inequality rather than the promotion of equality is the more likely outcome for capitalistic market-based economies.
This observation directly repudiates the declared expectation of mainstream economics. As has been earlier indicated this argues: “the respective shares of GDP going to labor and capital will be held roughly constant in the economy over time.” Thus as we saw Solow predicts “balanced growth” in the long run. Similarly, Kuznets has theorized a U-shaped curve showing inequality worsening in the early periods of growth, but over the long term the “rising tide of growth and prosperity would lift all boats” providing broad-based equity for all.
The second observation is Piketty’s arguments that, as capitalists grow richer, an increasing share of their profits (returns) would flow into various financial products from which they are expected to receive good returns. However, if this process continues over time, it will become increasingly apparent that capitalists are no longer only “innovative entrepreneurs,” as mainstream economics term them, but they are becoming “rentiers,” in the sense that their income and wealth are increasingly dependent on “economic rents” derived from their previously accumulated wealth. There is the widely cited example of Bill Gates (the founder of Microsoft) who has been reportedly able to accumulate even greater wealth after he had retired from Microsoft!
The third observation to be borne in mind is that it must be repeatedly emphasized the Piketty relation (which I had addressed over the past two weeks) namely: the ratio of capital income to GDP (previously termed B) is equal to the rate of national saving (previously termed s) divided by the rate of growth of national income (previously termed g), which was then represented as: B = s/g is a description of a long term behavioural tendency and not the description of a likely short or medium term outcome. I repeat this here because of the direction of several readers’ queries sent to me even though I had cautioned against this in last week‘s column when I applied this relation to Guyana’s economic data..
Global impact
The issue I propose to address today is whether the prevailing international environment (economic, social, and political) exercises an independent and therefore direct impact on inequality and poverty outcomes in Guyana. This task should not be confused with the equally important and perhaps more straightforward consideration of determining the operation and evolution of global inequality and poverty. This latter field of study is quite different. It clearly focuses on the generation and distribution of inequality and poverty between countries, groups of countries, regions, and continents. Such fields of inquiry are the legitimate domain for research, analyses and policy formulations in disciplines like international relations, global development studies, and economic and social history.
To repeat, in the particular case of Guyana my present concern is to indicate that its domestic inequality and poverty outcomes are crucially dependent not only on domestic factors but also on the independent and direct impact of international factors. Readers would have observed that, thus far, I have been concentrating exclusively on the domestic factors, while basically ignoring all linkages between global and domestic factors. These domestic factors have included such varied items as Guyana’s size, openness, vulnerability to natural and man-made disasters; government policies; the quality of institutions; governance; property rights; and politics and so on.
It should be stressed, however, that my introduction of international factors to the discussion is not intended in any way whatsoever to reduce the analytical weight given to domestic factors. To the contrary, my sole intent is to offer a fuller and more rounded portrayal of the situation in Guyana.
There is one very recent (2014) multi-country quantitative/ empirical study aimed at measuring the independent and direct impact of the global economy on domestic poverty with which I am familiar. Space, however, does not allow its introduction in today’s column, so I will start next week’s with a brief report on that study. In the conclusion to this column below I anticipate my report on this study, and briefly illustrate how this global impact manifests itself as an independent and direct factor affecting poverty in Guyana.
Conclusion
If one examined Guyana’s present external relations, it would be quickly observed that the two most binding sets of its obligations flow from the Caricom Agreement and the EC-Cariforum Economic Partnership Agreement (EPA). Both entail substantial intrusions into every facet of Guyana’s life. Thus for example, they directly impact on the regulation of domestic areas like consumer protection; policies for health, social protection, and welfare; finance; workers’ rights; national procurement; e-commerce; property rights; subsidies and taxes; and judicial processes to name a few. All these matters would obviously have huge direct impacts on inequality and poverty outcomes because they are closely intertwined with the generation and distribution of livelihoods, income and wealth.
Next week I continue the examination from this observation.
