Headline after headline announces the astronomical rise of Guyana’s GDP; its oil production soaring to nearly 1 million barrels per day by 2025, higher per capita than many of those fantastically wealthy Gulf States; a country set to receive revenues exceeding its current annual budget.
And yet and yet….the average Guyanese, the “per capita”, is yet to feel it, believe it will happen and most importantly that it will ever benefit them. Right now living costs and floodwaters are the only things rising in Guyana even as Covid-19 remains a drag on what has been a largely Georgetown-centric mini boom. For a family in the deep Rupununi, talk of oil is still an abstraction; the Anna Regina housewife is more worried about having enough for her weekly shopping list.
This disconnect between the gushing headlines and the lived experience of average Guyanese will likely only get wider as oil production and revenues ramp up. The government will need to close that gap or risk charges of hoarding revenues for its allies in the private sector and other special interests. Economic inequality, already sharp, can quickly become a liability to stable governance.
There are signs that the current government understands the distress in the country related to Covid-19 and the flooding. The Covid-19 relief programme with $25,000 per household and the cash grants to parents have no doubt assisted. Less helpful was Monday’s announcement of $4.8 billion in concessions to importers through the lowering of the taxable value of freight charges – a move that despite government guarantees will not be passed down to consumers in lower prices and is another example of discredited trickle-down economics.
Recently, the President also announced he would be allocating what he described as “direct cash transfers” to farmers affected by floods. Direct Cash Transfers was an interesting use of the terminology for a concept that many developing countries have applied to spread the wealth from a resource windfall such as oil, or in the case of Botswana diamonds, in a universal, equitable, transparent and regular manner.
It could be said that the APNU+AFC coalition missed an important opportunity by not having the imagination or courage to embrace this concept under what was the “Buxton Proposal” as set out by Dr Clive Thomas who had urged in 2019 that it be a central theme of the then upcoming elections. Indeed, the failure to even seriously consider the proposal from its Working People’s Alliance partner was the beginning of the schism that saw them leave the coalition. Dr Thomas had proposed – regardless of income so as to avoid any contention – that each of Guyana’s estimated 210,000 households receive $1 million per year for a total annual cost of US$1.05 billion. He had calculated this was manageable in the long term and that by the time it would be implemented, probably in four to five years, it would only constitute 10% of total government oil revenues.
The reception for the proposal was naturally divided along class lines, with enthusiasm among those who would benefit the most, while also exposing the hypocrisy of many who, Thomas remarked, enjoyed tax concessions and other handouts for their businesses.
The primary objection to such a scheme seems to be the opinion that people would stop working and live lives of dissolution. But human behaviour is hard to predict and it is more useful to focus on the many benefits of direct cash transfers, primarily the economic certainty and dignity they can bring to poor households. Guyanese are in general resourceful people who have made do for decades while also looking to progress financially. So it may well be that under a cash transfer scheme, the single mother decides she can now afford to go back to school, or a young couple can now meet the payments on a new home, or a farmer feels confident enough to take out a loan to expand his production. Far from “encouraging idleness”, cash transfers can spur economic development at the crucial micro/community level. Secondly, the even geographical spread of cash transfers means economic activity would be sparked nationwide and avoid the concentration along the coast. Thirdly if one accepts the strong correlation between poverty and crime, then direct cash transfers would have a significant impact. Some countries have made transfers conditional on health checkups and school attendance for children. In very poor countries, the results have been very encouraging in improving children’s nutrition. Perhaps most importantly, cash transfers would bring resilience to households and economies in a world where pandemics and climate crises might become regular occurrences.
For more detail on the design and benefits of such schemes, a useful book is “Oil to Cash: Fighting the Resource Curse through Cash Transfers” by Todd Moss, Caroline Lambert and Stephanie Majerowicz.
The authors also suggest an additional, intriguing element to the cash transfer equation. Recipients have to pay taxes on what they receive. This might appear to be an unnecessary administrative burden, but it addresses a very real danger Guyana could face. As the book explains: “Put simply, governments that do not depend on citizens for funding do not need to pay attention to citizens’ demands. Taxation may be the best way of ensuring that governments act on behalf of the governed….”
We need to be realistic here: The political environment in Guyana could not be more hostile for such an initiative. To be done right and to be seen as capable of withstanding political vagaries, it needs the input and agreement of the opposition, civil society and the unions – elements the government is resisting to include in any meaningful discussions on the country’s long term development. But when all agree on the scheme, it can become so popular that the funds feeding it become protected from special interests, while it cultivates a sense of common ownership in a country’s natural wealth.
Also one wonders whether this government is politically mature and farsighted enough to embrace a system that is not overtly political. They prefer to hand out money from suitcases with a camera clicking away, whereas a direct cash transfer system ideally turns the process into an administrative one, which can involve a bureaucratic press of a button. However that is not to say whichever government institutes such a system will not benefit in the long run.
And despite its many disappointments, politics is still the art of the possible. If this government – ever nervous of its hold on power – wants genuine political stability, cash transfers can form a foundation for a more peaceful and harmonious society.