Dear Editor,
Because of my schedule, I have been rather tardy in following up on a few issues raised by noted economist Dr. Desmond Thomas (SN, 1 October). Without doubt, he has enriched immensely the discussion about the investment-growth conundrum. Two major contributions of his letter are that the conundrum is not unique to Guyana and that institutions are central to growth; the latter reaches back to Adam Smith. He showed that the investment-growth puzzle is a “Caribbean-wide phenomenon.” But this does not necessarily mean, he cautioned, that the same set of factors constraining the contribution of investment is applicable to all countries of the region. For example, Dr. Thomas acknowledged, as did Mr. Rampersaud and I, that, given the Guyana’s topography, good drainage and irrigation and sea defence are an expensive precondition for strong and sustained growth. Other Caribbean countries do not confront this problem or at least it is not as serious. In addition, Dr. Thomas reiterated the importance of “the institutional setting” to growth, “especially in the Guyana context.” The deep concern with institution is of relatively recent origin, made possible by endogenous growth theory. Yet while institutions are important, economists are unsure about their relative contribution. I do not wish to dispute the centrality of these arguments, as I myself have made them, and I thank Dr. Thomas for bringing them back to the centre of the discussion. The rest of this letter focuses on two issues on which Dr. Thomas and I hold different views.
First, I believe that Dr. Thomas mischaracterizes the discussion between Mr. Rampersaud and I. Mr. Rampersaud argued that total factor productivity is an important ingredient of growth. I admit this, but went on to demystify the TFP black box, trying to explain what it is and how it comes about. This is a useful discussion that cannot be described as a “sterile back-and-forth about the merits of total factor productivity.” Unbundling TFP draws attention to the importance of institutions (rule of law, property rights and security, quick resolution of legal matters, and, more generally, the legal framework), health, nutrition, education consistent with the demands of the labour market, finance, research and development, adaptation of technology, and, of course, politics and policies. It seems that our different viewpoints are the result of cognitive dissonance.
Second, Dr. Thomas argues that the “low efficiency of investment is an indication that the Region is still caught in a post-colonial time warp, unable to transition to more productive strategies, to find the keys to sounder, more sustained growth in changing international circumstances.” If the “time-warp” – the colonial legacy – refers to the mere shifting of predatory and parasitic behaviour of politicians, “business and other elites,” I agree. Post-colonial leaders have replaced the British as the agents – that great sucking sound – that siphons off of the surplus, splurging on conspicuous consumption and channeling the rest into offshore bank accounts. Similarly, if the phrase is taken to mean the reproduction of the structure of the economy from colonial times to the present, it would be difficult to contest the validity of this statement. The economic apparatus of the post-colonial economy has not been altered substantially from what it was during colonialism. So has the “post-colonial time warp” chained us to underdevelopment and misery? Dr. Thomas thinks so; I differ.
Here’s the development riddle: suppose Guyana had escaped colonial plundering, would its economy have developed along a different trajectory than has actually been the case? Instead of sugar, could processing, manufacturing and mining have dominated the economy from the inception? Did our colonial masters have viable (but selfish) options besides those they have chosen and implemented? I fear these questions cannot be answered in the affirmative, and maintain that a particular species of “time warp” would still be present even if Guyana did not suffer the fate of a colonized territory. The country’s geographical location, climate, resource endowments and the difficulty and high cost of developing it, disease environment, and its human resource situation suggest that Guyana’s fate without colonialism would not have been remarkably different from what it actually is. The growth dilemma confronting Guyana would not have been vastly different absent colonialism.
If the territory were not colonized, perhaps the country Guyana would not have existed; it would very likely have been parceled out among our three neighbours. In this case, our development bugbear – ethnic politics – and attendant pervasive corruption, petty, grand and state, would not have arisen. To the British, then, we owe our existence as a separate country, however underdeveloped, fractious, impoverished and miserable it is. But to expect a more diversified and dynamic economy than what the British delivered at Independence in May 1966, is simply unrealistic. In either case, the natural conditions that nest the economy would have remained unchanged and therefore dictated a similar structure of the economy. Given these and the larger – global – economy of which Guyana is inevitably part, human interventions would not have made a huge structural difference.
The result is that an independent Guyana inherited a lopsided economy that would not have been much different in the absence of colonialism. In either case, its deep insertion into the global economy makes it dance to the tunes of international business cycles; the rise and fall of prices for export commodities and basic imports (oil, medicine, certain food, intermediate goods, etc.) readily transmit disruptions of the international economy to the local economy. The real question, then, is how to diversify the economy, how to broaden its productive pillars, and how to relocate the growth stimulus from the external sector (the global economy) to the local economy. That is, to borrow from the new growth theory, how to convert the stimulus from an exogenous one (the global economy) to an endogenous one (the local economy).
If one seminal event – British colonialism – dictated a “path dependent” development pattern, another, which will probably happen before the close of this century, could very likely undo the “time warp,” colonial legacy. If our “political, professional, business and other elites” are unable to break the country’s path dependence, climate change will likely accomplish that feat. Whether the changed circumstances will be more propitious for growth and human development remains to be seen, but I doubt it.
The pessimistic undertone of this letter should not imply that Guyana is doomed to limp along in a low-level equilibrium trap for neither geography, history nor colonialism is destiny. The colonial development trap can be escaped, but that requires unwavering political will and seeing beyond ethnicity. It is to ethnic politics that our inability to escape post-colonial plunder, pillage and underdevelopment derives. Pointing to colonialism as the continuing cause of underdevelopment excuses the sheer incompetence and spite of political leaders and other elites. The past tells us that ethnic political leaders have a psychological predisposition to corruption, aggrandizement, immorality and eye-pass.
Finally, I am aware I have opened Pandora’s box by challenging the colonial thesis of underdevelopment, at least in the case of Guyana.
Yours faithfully,
Ramesh Gampat
