By Samuel Brathwaite
Dr Samuel Braithwaite is a Lecturer in the Department of Economics at The University of the West Indies, Mona. He is also a technical consultant at Growth Perspectives Ltd.
With the publication of Part One of this series an article by a Guyanese financial analyst was shared with me; I had no prior knowledge of said article and its contents and so my article was not in support of nor a response to it. My articles were largely written weeks ago and edited to reflect newer information. On another note, I deliberately did not adjust the cleanup cost of the Exxon Valdez spill to reflect the value in today’s purchasing power of money. I presumed that readers would appreciate that the quantity and quality of goods and services bought in 1989 for US$ 2 billion (cleanup cost only), could not be obtained for US$ 2 billion (insurance guarantee) in 2023; in retrospect I should have been clearer.
Guyana is the size of the United Kingdom with lots of arable land, a rich biodiversity, minerals, numerous waterways, and trees so much so it could easily take the indigenous title of Jamaica, Xaymaca, which means “land of wood and water.” Yet for all its vast natural wealth Guyana remains relatively underdeveloped. It would be remiss, however, to simply look at a snapshot in time and ignore Guyana’s economic progress over the years. The many discoveries of commercially recoverable oil deposits, post 2015, are seen as the country’s chance to leapfrog its state of underdevelopment.
With vast resources and a population of less than a million people it seems that the welfare of Guyanese can be easily improved upon as the “economic pie” does not have to be shared among a large population. However, the country’s vast and varied landmass means that the cost of infrastructure is significant and reduces the amount of resources available for spending on the social sectors (education and health). Economic development (human development) requires a careful balance between social and infrastructure spending. To put things into perspective, Jamaica’s population (2.8 million) is about 3.5 times that of Guyana (0.8 million), however, the size of Guyana’s landmass is about 20 times that of Jamaica. It is much easier to develop infrastructure to meet the needs of people when they are not widely dispersed.
Infrastructure aside, Guyana’s educational system needs a major boost to give its youth and adults (including continuing education) a deeper and wider set of skills. In the same manner the skills of foreigners are being used to exploit our oil and gas resources so too we need external assistance to revolutionize our educational system. The Finnish educational system is highly regarded the world over, perhaps experts from that country should be recruited with the aim of developing a system that will ensure every Guyanese child has a world class education; I recognize some of the more radical approaches of the Finnish educational system might not fit into our culture but surely the idea is not to replicate wholesale what obtains in Finland.
Ethnic Conflict & the Resource Curse
In Part One of this series, I spoke to the Dutch Disease phenomenon. While it is certainly best to understand and mitigate the harmful effects of the Dutch Disease, it is not a death sentence. The Netherlands, the country which defined the Dutch Disease phenomenon, is today a highly developed country and the world’s sixth largest exporter of food.
The perennial issue which is arguably a fundamental source of Guyana’s economic underperformance is its ethnic fractionalisation. Guyana’s population primarily consists of people of Indian descent (40 per cent) and African descent (30 per cent); the rest of the population consists of Amerindians (Guyana’s native people), Chinese, Europeans and people who identify as mixed. Ethnic fractionalisation is a primary contributor to Guyana experiencing the resource curse. However, there is an alternative view which suggests that the race narrative is a distraction used by the elite ruling class to detract from issues of class. Class considerations notwithstanding, what is certain is that ethnic insecurity has dominated the national discourse for decades.
The roots of Guyana’s ethnic insecurity can be traced back to the period of indentureship when East Indians were brought to Guyana to work the sugar plantations. The East Indians started arriving in 1838, replacing the enslaved Africans who had just completed the period of apprenticeship. The colonial administration was not interested in social cohesion; to divide and rule was the order of the day. Distrust and suspicion took root. Fast forward to the early 1960s, as the country stood on the cusp of political independence, ethnic conflict gripped the land. News of real or imagined attacks by one group on another (Afro-Guyanese vs Indo-Guyanese) were common, sometimes resulting in violent reprisals.
While the level of violence of the 1960s has not returned, violent incidents have occurred during elections. Here too the frequency and intensity of violence have waned over the electoral cycles of 1992 to 2015. However, in 2020, with the country’s oil industry about to take off, the country was thrown into crisis with incidents of violent protests occurring in the days after the March 2, 2020, elections. Thankfully, the violence did not escalate into a protracted conflict. The country endured five months of uncertainty and heightened tension as the government and opposition battled in the courts and a CARICOM led team proceeded with the electoral recount. Guyana’s domestic institutions (courts) worked, complemented by external support. Of course, not every instance and method of external support will be acceptable to all concerned. Genuine external support, especially on the vexing issue of constitutional reform, is most welcome.
Geography, Good Governance, and External Support
External support has always been important for the economic development of any country or region. Countries don’t become prosperous simply because of good governance. Further, in small states such as Guyana and Jamaica, governance (good or bad) is heavily influenced by external actors. To ignore this reality is to be disingenuous and unconvincing. Geographic considerations can contribute to development or underdevelopment, not simply because of geography in and of itself, rather, external relationships, combined with geography, can make, or break a country.
The prosperity of Japan, a country without vast natural resources and at one time the world’s second largest economy, can be traced back to its interactions with powerful nations; China in the first instance followed by the United States. Japan’s geographic position, between two historically powerful nations, both of which it fought against, worked to its advantage. These foreign relationships were useful to Japan’s advancement because foreign ideas were embraced by the Japanese and led to political, economic, and social change.
Good governance, too, is undoubtedly important, as we can see in the strong economic performance of Botswana, a country well-endowed with minerals. Botswana’s traditional tribal institutions have served it well, they have endured and complemented its British institutions. Indeed, Botswana was a protectorate as opposed to a colony. There is a view that Botswana’s location on the periphery (it is landlocked) of the British Empire allowed for these traditional institutions to remain powerful. Botswana, it seems, benefitted from the right mixture of natural resources, traditional institutions, and external influence. What is ordinarily seen as a geographic handicap (landlocked) seems to have protected it from the harsher realities of colonialism.
Guyana and Jamaica
Historically, Guyana and Jamaica share similar economic experiences: exporters of sugar and bauxite; high levels of inflation; low growth rates; high levels of debt; and declines in the value of their currencies vis-à-vis the US Dollar. It seems that both Guyana and Jamaica are now on the cusp of rapid economic growth based on the exploitation of energy resources (oil and gas). Guyana has already discovered oil, and one estimate suggests that Jamaica has approximately 2.4 billion barrels of recoverable oil reserves. In February of this year, it was reported that United Oil & Gas has hired a new consultant to help it find a partner to drill an exploratory well in offshore Jamaica in the Walton-Morant area. The drilling will be done in about 2400 feet of water and is estimated to cost about US $30 million.
Fossil fuels present an opportunity for rapid economic growth but not as a long-term strategy. The world is quite rightly moving away from fossil fuels and both Guyana and Jamaica are prime locations for the use of renewable energy resources. In the transition to cleaner energy sources Guyana’s oil industry is likely to remain highly viable given the high quality of the resource; light sweet crude which is easier to process.
The future looks bright, but there are perennial domestic hurdles which need to be mitigated against: ethnic mistrust and underdeveloped institutions in Guyana, and organized crime in Jamaica. Additionally, both countries are in dire need of a reversal in the migration of their highly skilled workers or more remote contributions of their time and skills facilitated by information and communication technologies.
External actors (multinational firms and governments) have historically used “divide and rule” tactics for their benefit while we remain underdeveloped. Rapid economic growth and development can happen, but external actors must complement it, not retard it. Time come!