Dear Editor,
I am grateful to bloggers who posted thirty-four comments on the article “The idea that Guyanese are rich is an erroneous arithmetical idea,” SN, 12 November. Here’s a non-exhaustive summary of issues bloggers raised: (i) GDP, including oil, is political propaganda; (ii) Guyanese have not prepared for the oil boom; (iii) some Guyanese became rich because Guyana is rich; (iv) some leaders of the PPP are getting wealthy while Guyanese “go broke;” (v) the question about the “lopsided contract” should be directed to the PNC; (vi) Gampat did not tie his “Financial analysis” to the “already tried and failed economic policy of this PPP Gov’t Privatized Capitalist model;” (vii) many Guyanese are “hanging their hats where their hands can’t reach,” which is why the “poverty thing” is puzzling; (viii) per capita income is a deceptive metric and misses the fact that there are “a few very very rich people” and “a mass of poverty stricken folks.”
The “numbers” need further analysis;” (ix) the question that should be asked is: Are you better off today than 2019? “The resounding answer is yes;” (x) your analysis “is static and misses a few nuances” because “there is a lag.” That is, “it takes some time before it [per capita income] is translated into improvement in the lives of the citizenry;” (xi) the oil money is “in the hands of the Government and in the contractors bank accounts;” (xii) agree “with Dr. Gampat” that Guyana’s exports are largely owned by the oil companies and they claim the lion’s share.” Bloggers divide into two camps: those who agree with me, and those who do not. The latter camp seems to think that my analysis is simplistic, probably incorrect, and misleading because income per person is a flawed metric. Yet the “do-not” camp failed to demonstrate the validity of their arguments. At this point, it is perhaps a good idea to restate the main thrust of my 12 November article.
(i) From around 2014, the country’s economy bifurcated into an oil and a non-oil economy
(ii) The oil economy grew at 67.4 percent, the non-oil economy by 10.1 percent, and the total economy (oil + non-oil) by 37.8 percent from 2021 to 2024 (growth in 2024 is projected)
(iii) Its huge oil reserves, the surge in economic growth caused by the export of oil and the current spending spree, mainly on much-needed infrastructure, and a population of less than 800,000, make Guyana is a rich country
(iv) Based on the country’s total GDP (oil + non-oil), increased from US$10,400 in 2021 to US$24,000 in 2024
(v) Since the oil economy is a foreign-owned economy, most of its GDP is foreign-owned and does not benefit Guyanese in any notable way. Consequently, oil GDP should be excluded from the computation
(vi) Redoing the calculations based on non-oil GDP, income per person rose from US$7,000 to US$10,000
(vii) Non-oil GDP per capita income averaged 42 percent of total income (oil + non-oil) during the last three years, including this one. The inclusion of oil GDP in per capita income creates the perception that Guyanese are rich, about 58 percent richer than they actually are. The upshot is that Guyanese remain some of the poorest people in the Americas
My blog response might have been harsh and offended some bloggers, and I publicly apologize. In retrospect, I mistakenly assumed that most regular readers and regular bloggers are familiar with introductory economics.
Owing to a space limitation, I will only touch on blog points (vii) and (viii). The “hats” pattern of spending of which this blogger spoke is mostly concentrated in Georgetown and its immediate East Coast and East Bank environs, and the West Coast of Demerara. It is not representative of the entire county, but it does raise eyebrows about the “poverty thing.” Data on poverty and consumption (income) inequality in Guyana are as scarce as a hen’s teeth. According to the Inter-American Development Bank (IDB), the poverty rate in Guyana measured as the percentage of people living on less than $5.50 reached 41.2 percent in 2017 (https://borgenproject.org/poverty-in-guyana-2/). It appears that poverty rate was higher in 2022, according to the World Bank: 48 percent of the Guyana’s population were living below US$5.5 a day, which was among the highest in Latin America and Caribbean [https://www.stabroeknews.com/2022/11/02/news/guyana/world-bank-says-poverty-in-guyana-among-highest-in-latin-america-caribbean/]. The rate is probably somewhat lower in 2024.
The same blogger argues, correctly, that per capita income (not the poverty line of US$5.5) in Guyana is not representative of the average Guyanese. The extent to which this statement is true depends on the level of income inequality but inequality data is very scarce. Without the requisite data, the need to “further analyze the numbers” of which this blogger spoke is impossible. With a rapidly expanding and changing economy, riddled with corruption, anecdotal evidence of huge national and ethnic inequalities, handouts, and other reasons, data on poverty and inequality are a cardinal necessity. How, for example, is the state of living conditions changing from year to year and from one ethnic government to the other? We should all be calling upon the PPP government to release the piles of data buried in the Bureau of Statistics.
On 24 November 2015, the then PNC Government signed off on a project with the IBD to the tune of US$750,000 to conduct a Household Survey of Living Conditions. Among other things, the survey was expected provide accurate and updated information on poverty and inequality indicators, and overall living standards. The results of the survey were supposed to be released in late 2020. That did not happen, but the survey was done and the data, analyses and results are sitting in the BoS. Perhaps the “numbers” blogger could use his “clout” with the PPP Government to release the full, accurate and untampered results of the survey.
Switching from bloggers to letter writers, Roger Ally wrote that “The impression that Dr. Gampat want to portray that there is an oligarch, and the population is not benefiting from the bonanza.” He said the “model” I used is “static and rudimentary.” There are two observations here. First, the “GDP = C+I+G+X-M” model was used to show that most of oil-GDP does not benefit Guyanese and, therefore, should be excluded from the computation of per capita income. Second, income per person captures living standards at a specific point in time, usually a year, and is, by definition, static; per capita does not trickle down but rises up over time. Introducing dynamics into the calculation means that income per person is calculated over infinitesimal periods, perhaps a single minute. No country in the world has the data to support the dynamic calculation of per capita income. More importantly, such computations, even if they can be done, are meaningless and do not justify the cost and effort involved. For example, per capita income on Sunday, 17 November will be the same as on Monday, 18 November.
Mr. Roger Ally goes on to argue that my analysis is “woefully inadequate because it ignores the factors on the ground.” That argument which makes little sense. Per capita income at a specific point in time, say 2024, reflects the level of a country’s living standard, regardless of the state of the economy, investment, income class, etc. These two criticisms, “static and rudimentary,” and “factors on the ground” led Mr. Roger Ally to conclude that “Dr. Gampat’s arithmetic is an exercise in ‘nothingness.” As far as the computation of income per person goes, his criticisms are irrelevant and does not affect in the least my analysis. Regardless of how many cars, motorcycles, e-bikes people are buying, how much is spent in infrastructure, including roads, housing schemes, hospitals, etc., these are all captured in the “static and rudimentary” model of GDP and therefore included into the computation of per capita income. Spending by the government and private sector creates income for workers, which is spent on all manner of things without a meaningful lag.
Having read my article, Janet Bulkan observed that Dr. Jagan “addressed the reality of poverty in his writings and speeches” and that “The present and all future governments would do well to take Dr. Jagan’s vision to heart.” I agree with her and apparently leaders of the PPP now sees CBJ’s vision as passé and irrelevant. Self-interests triumphs vision. C’est la vie? The arguments raised against my article do not change my analysis and conclusion in any significant way. While I salute bloggers and letter writers, they merely argue around the margins, more noise than substance.
Sincerely,
Ramesh Gampat
