Dear Editor,
My last letter (May 18) looked at some non-income indicators of progress; this one focuses on income/consumption and inequality. In general, available, but outdated, data suggests that inequality has declined from independence to around 2006. My contention here – for which hard evidence is unavailable – is that inequality has surged in the last decade or so.
Guyana is more prosperous today than it was fifty years ago. Remittances are an important driver of growth, which underscores the centrality of the diaspora. Numerous luxury items have become necessities: electricity, pure water supply, the fridge, microwave, gas stove, TV, indoor plumbing (bathroom, toilet and running water, albeit unevenly distributed across geographies and people), a more diverse and nutritious diet, rugs on our floors, garbage collection and disposal in some areas, and less time spent in getting from point A to point B and in enhanced comfort. Then there is the ubiquitous mobile (cell) phone, tablets, and computers; every Guyanese above 14 years seems to have a mobile phone. But perhaps the most conspicuous signs of prosperity are the huge number of vehicles on the road and humongous houses that are transforming the coastland. These house are not only bigger, but are better designed, built and furnished; there are even gated communities. The age of a narrow and rapacious class of bourgeoisie has arrived, which will entrench inequality.
Employing a more common metric of prosperity, income per person in current dollars grew from US$345 in 1966 to around US$4,000 in 2015. More graphically, today per capita income, unadjusted for inflation, is 11.6 times what it was in 1966. This does not mean that the average Ganesh and Chandra are that much better off as the general price level has marched upwards. Using prices prevailing in 2005 (income for any given year based 2005 prices), the income size difference narrows precipitously. Constant mean income in 2015 was US$1,700 compared to US$783 in 1966, or only 2.2 times as large as when Guyana became an independent county. This is indeed a dismal performance that checks any intimation of prosperity and abundance. The colonial economic problem remains unsolved since Independence.
Were the fruits of economic progress shared in a fair and just manner across geographies and people? The requisite hard evidence to confront this question simply does not exist, is outdated, or unreliable. Nevertheless, consider what exists: some data is better than none, if only because they point to problems.
First, consider a broader gauge of human progress – the Human Development Index (HDI). Guyana’s HDI moved from 0.542 in 1990 to 0.636 in 2014. This represents a growth of 0.66 per cent annually, a rather depressing performance for her income level. Of the 29 countries with medium human development for which trend data is available, eighteen grew their HDI at a higher annual rate than Guyana. The lacklustre HDI performance offers a peep into income inequality (income explains about 70 per cent of the HDI). The income dimension of the HDI suffered a loss of almost 25 per cent in 2014 after it is adjusted for inequality. The loss on the life-expectancy dimension was 19.2 per cent and on the education dimension, 10.5. per cent. Of the 36 countries with medium human development for which relevant data is available for the adjusted HDI, Guyana ranked 20th in terms of overall HDI loss due to inequality across the three dimensions of the HDI; no country in the Caricom area suffered a greater loss on its HDI.
Second, consider the Gini coefficient, which is a measure of consumption/income inequality; lower values indicate lower inequality and vice versa. The earliest known source of data on inequality in Guyana is that of Jain (1975), which apparently refers to the period 1955-56. Jain computes an income Gini of 0.42. A report from the International Fund for Agricultural Development (IFAD 1982:105) found that “income distribution in certain sectors of the economy” in 1965 generate a Gini of the same order of magnitude as that of Jain. It is well-known that the distribution of income is more unequal than consumption. A 1996 study by Deininger and Squire found that, on the average, the income Gini was 6.6 points greater than the consumption Gini. Guyana’s consumption Gini declined from 44.0 in 1992 to 35.0 in 2006, according to Prof Clive Thomas (SN, Sept 14, 2014). Inequality in both urban and coastal areas fell significantly (34.0 and 33.0, respectively) from 1992. Moderate poverty in Guyana declined from 43.2 per cent of the population in 1992 to 36.3 per cent in 1999 and to 36.1 per cent in 2006. Extreme poverty fell from 28.7 per cent of the population in 1992 to 19.1 per cent in 1999 and to 18.6 per cent in 2006. These data suggest that inequality, as gauged by the Gini index and the headcount poverty index, declined during the last two to three decades. Unfortunately, I do not have the data for an analysis of inequality by ethnicity.
Third, consumption by the poorest and richest quintiles declined only marginally. Data from the World Bank for 1992-93 reveals that the poorest 20 per cent of the population accounted for 4.1 per cent of total consumption, which is slightly less than what Jain found for 1956. The richest 20 per cent accounted for 55 per cent. Based on the above-referenced article by Thomas, whose data apparently refer to 2006, the poorest 20 per cent commanded 7 per cent of total consumption; the richest 20 per cent obtained 42 per cent. Data from Jain indicate that the richest 20 per cent of the population “ate” 46.5 per cent of the country’s annual income. It seems, then, that consumption by the poorest and richest quintile did not change much from 1956 to 2006. This suggests, in turn, that the distribution of the fruits of economic progress remained as unequal now as it was 60 years ago.
Data are unavailable for post 2006, but my conjecture is that inequality has surged upwards. Drivers include massive corruption and the enrichment of the PPP top members and supporters, the massive illegal export of gold, the precipitous rise of the narcotics trade, and marginalization and discrimination. I hypothesize that the richest 1 per cent of Guyanese – no more than 7,500 persons – owned and controlled about 40-50 per cent of the country’s wealth. An indirect piece of evidence comes from deposits at commercial banks by private persons. These surged from G$85,301.7 million in 2005 to G$195,925.2 million in December 2014 and then declined slightly to G$194,331.9 million in December 2015. If it is assumed, optimistically but unrealistically, that 40 per cent of the Guyanese population between 25-69 years have a bank account, then average deposits expanded from about G$320,000 in 2005 to G$736,000 in 2014, but fell to G$730,000 in 2015. These averages, while insightful, are most likely invalid. A more likely scenario is that the bulk of private deposits at commercial banks belonged to about 3,000 or so depositors. These are the super-rich – those who have managed to siphon off, through hook and mostly crook, the surplus generated by the labouring people of Guyana. The nouveau riche snatch bread out of poor peoples’ mouth without compunction.
After fifty years of independence, we are better off in some respects and worse off in many others. There is not much to be proud of. Tepid economic growth, rising inequality, a huge diaspora, probably as large as the country’s resident population, massive corruption, violent crimes and racial insecurity bear testimony to the gloom. Independent Guyana has underperformed way below potential. We have done so because of Guyanese themselves and not the British. We are likely to stagnate in a low-level economic trap along with rising inequality unless the country breaks out of racialized politics and spurious beliefs about rights during the last 50 years. The past must not set the trend for the future. It will unless narrow-minded politicians become philosophers who are interested only in the well-being of Guyana and her people. The new administration offers little hope.
Yours faithfully,
Ramesh Gampat
