The economics of unity (conclusion)

Encouraging competition

Last week’s article considered two of the three components of the economics of unity. This week’s article will look at the third and final component, equity and efficiency in the allocation of resources by the state. This issue is no less challenging than the previous two of minimizing tension and maximizing diversity because it is often the source of much tension. Diversity in Guyana was being undermined by the unequal distribution of radio and TV licences and the restricted access to state media resources. As a result, the cultural diversity of the country is not spreading as wildly, as fast and as efficiently as it could. If Guyana is to manage its diversity successfully, then the current distribution of radio and TV licences has to be examined as a matter of priority. In addition, advertising plays an important role in encouraging competition. When consumers have knowledge of the prices of a large number of sellers, they are able to force prices down by their buying decisions. The current distribution of radio and TV licences are therefore adding to the inequity within the society.

In moving forward, it should be recalled that the PPP/C administration took the position that it will invest heavily in infrastructure projects. Infrastructure projects in themselves are not bad, but when they are not executed using the best methods and talent, and do not yield the expected outcome, many taxpayers remain dissatisfied while the incompetent contractors cart off millions. The only way of overcoming this problem is to pursue a policy of more equitable allocation of contracts and a more efficient use of public resources. The economics of unity must do so.

Equity

When one talks about equity, one has to talk about both equality of opportunity and equality of results. Neither of the two variables is as simple as it sounds for while the end result of each was noble, they both possessed factors that emphasize differences among people. In discussing, the search for equality in the USA, Thomas Dye observed that equality of opportunity was “the ability to make oneself what [he or she could be]”. This viewpoint assumes that everyone is born equal and that a person gets the opportunity to develop the talent he or she possesses and then use it to his or her advantage. Against this perspective, the difference that emerges between people was a result of initiative, hard work, and good luck.

Though true, this is only part of the story. Some people were born with talents and abilities that generate more lucrative income than others. For example, basketball stars like Michael Jordan, LeBron James, Magic Johnson and Kobe Bryant are highly talented persons who were able to command higher incomes than most other basketball players. There are many singers and actors and actresses from around the world who are talented and are able to command comparatively high levels of income as well. They practised hard and took time to hone their skills. Other high income earners like Bill Gates of Microsoft fame and Steve Jobs of Apple fame took the initiative to start separate computer businesses and ended up separating themselves financially from the rest of the world. Oprah Winfrey was able to combine talent, ability and hard work to build a media and entertainment empire.

Cause of tension

Whatever the result, inequity has been the root cause of tensions within a society. It has led to civil unrest, the overthrow of governments and the source of global conflicts. The civil rights movement in the USA, for example, had its genesis in poverty and inequity and so were protests against the “one percent” who owns half of the country’s wealth. In other parts of the world, the absence of a reliable electoral process has driven desperately poor people to challenge governments and policies of international financial institutions which remain insensitive to their plight. Guyana does not face that problem because it holds elections, in an agreed periodic cycle, that give people a chance to elect new leaders with the hope that they would be much more even-handed in the distribution of power and resources in the society. Much of the problems of equity reside in the area of equality of opportunity, and the incumbent government in Guyana has demonstrated a lack of respect for such a basic human right. It has also demonstrated an inability to treat with the matter successfully. This bad practice is reflected in stubbornly high levels of poverty across Guyana, inadequate development and use of the human resources of the country, and the open abuse of the resources of the state.

Released late

One of the weaknesses of the incumbent administration is its unwillingness to share information with the public. Official government statistics are released late often and in some cases not at all. Many factors go into the measure of poverty but most people understand it from the money that they have or do not have. It is often times necessary to estimate figures from statements of the government. From data pieced together from the budget statements of the government between 2006 and 2013, an average of 77,000 persons were removed from the income tax net. To the government, that outcome is good. But for the rest of the country, it points to a continuing problem of inequity. Even if one assumes that each worker was earning the maximum exemption of G$600,000 per annum by 2013, together they would have received an estimated eight percent of the income earned in Guyana in that year. Those 77,000 workers represent at least 30 percent of the estimated number of persons that were employed. Just imagine for a moment that those 77,000 workers were the sole breadwinners of their households consisting of between two to four persons, it says that about 40 percent of the Guyanese population was living in poverty. Guyana might just have a crisis which the current administration is unable to solve. When the 42,500 old-age pensioners are added to the roll of the impoverished, one begins to understand the magnitude of the damage done to the Guyanese society within the last 10 years and the hopelessness that flourishes.

Education

The way out of poverty is through education. Persons improve their skills and knowledge and increase their ability to earn more income. The higher the level of education, the higher the level of income, or so it should be. Such logic has been turned upside down at the University of Guyana where many persons with higher degrees are earning less income than some of their students employed by the government and now seeking a degree for the first time. Both types of employees are funded from taxpayers’ money but one is given a lower priority than the other. With such bias, the educator is regarded as unimportant. This view is validated by the impoverished wages that are paid to schoolteachers.

The current government in Guyana clings to a distortionist view of the usefulness of higher wages in the public sector and has avoided collective bargaining as a means of reducing income inequality. As a result, labour in the country has been devalued. This disposition of the government misses the fundamental point about equity and opportunity as described by the World Bank in its Social Protection and Labour (SPL) strategy. This international strategy, which targets the vulnerable, has a critical component whose usefulness is often overlooked in the wider scheme of things. The SPL, if applied properly, could ensure inclusive growth and social stability. An important element of the strategy is education which helps to increase productivity which in turn could help to increase wages at a faster pace. This objective could best be achieved through good and inclusive governance and the employment of strategies that include tax exempt or tax deductible expenses for all educational institutions in Guyana and services that are directly tied to investment in education. The SPL strategy is an option available for use in the economics of unity to reduce poverty.

Readers would recall that the issue of inequity in employment arose as part of an ongoing legal case involving a leader of the PPP/C, former President Bharrat Jagdeo, and Journalist Freddie Kissoon. Evidence was presented in the case that leaves many Guyanese with the view that bias was present in the employment practices of the PPP/C administration. As such, this article will dwell no further on the subject except to say that equal access to employment opportunities is critical to the success of the economics of unity.

Contracting process

Instead, the other focus would be on the contracting process and how that process was used to shift resources into the hands of selected persons or groups of investors. This biased practice undermines both equity and efficiency. The selective bidding process for the procurement of drugs, the abuse of the right to refuse recommendations of evaluation committees found in Article 39, paragraph 3 of the Procurement Act of 2003 and resistance of parliamentary oversight have all been used by the current administration to give money to persons or organizations of its preference. Recent news reports point out that the criteria to qualify to supply drugs to the government favour one company. The selection of inexperienced contractors to build the Skeldon Sugar Factory, the proposed Specialty Hospital and the road to Amaila Falls are high-profile examples of the abuse of Article 39 (3) in order to transfer money to preferred contractors. The use of funds held by NICIL and GGMC for investment purposes is evidence of dodging parliamentary oversight.

Good governance

It is through good governance that a country is able to tackle inequality and achieve efficiency. Good governance reduces corruption. It leads to better application of the rule of law. There is greater access to the judicial system and the hands of justice move faster in an environment of good governance. A vision that focuses on the interests of the people is better able to accomplish good governance. Such a vision could only be fashioned from the economics of unity.