Last week’s column ended my extended presentation on the state of the sugar industry, which had begun on January 5 of this year. Because of the topics I had chosen to address in recent times it has not been easy to cover them adequately in highly summarized columns, hence a number of extended series in this period.
To recall for the benefit of those who are not regular readers of this column, in addition to the recently concluded series on sugar, there were extended series discussing money laundering in Guyana and the Anti-Money Laundering and Countering the Financing of Terrorism Bill; the Amaila Falls Hydro Project; Guyana’s public indebtedness at the 30th Anniversary of the Third World Debt Crisis; and, the Management of Guyana’s public investment programme.
In the interests of full disclosure I should inform readers that the above named series have piggy-backed on academic articles, conference papers and chapters that I have written which are scheduled to appear in forthcoming books on development challenges in Guyana. Interested readers can obtain copies of the available papers from the University of Guyana, Institute of Development Studies’ Website.
Proposed new focus
With the above circumstances in mind, it is my intention, at least for the remainder of this year, to focus on a miscellany of topics to be presented in shorter articles. These should not require more than, at most, two or three columns to adequately address any of the proposed topics. It is also my intention to select these topics from a long list of themes/issues, which interested readers have been inviting me to address for some time now. These topics will seek to include: access, quality and availability of economic and social statistics in Guyana; poverty and inequality; the performance of the macroeconomy; the National Budget and the budgetary process; key prices and their behaviour (especially the wage rate, exchange rate and interest rate), the phantom economy; the economic consequences of crime and corruption; the scramble for minerals in Guyana; and, the role and size of government in the national economy.
As is readily apparent the list is long. My hope, however, in indicating some of the topics in this column is to pre-empt readers who have already approached me suggesting topics from having to do so again. I propose to cover all their suggested topics, eventually. I should perhaps also mention that recently I have been pressed to add to this list of topics: whether it is appropriate for Guyana to be negotiating “national debt write-off as settlement for slavery reparations.” I will address this in a July column before Emancipation Day.
The first set of topics I shall be treating with is the role and size of government, and whether in economic terms the Guyana government can be said to be too big, too little, or just about right for its economy. In the next section I begin by looking at the roles of government.
Roles of government
Since the early Independence years, and particularly during the period of intense debates about socialism in the 1970s, the size and role of government in our economy has been an enduring issue. In the 1970s, the then PNC government had publicly declared its aim of “owning and/or controlling 80 per cent of the economy.” This was the cornerstone of its political economy and was aimed at 1) ending foreign domination and exploitation of the country’s resources; and 2) fostering a state/cooperative-led model of autonomous growth and development.
When examined closely the debates in those years were as much political, social, cultural and ideological in essence, as they were economic. If truth be told, however, economics does not offer universally accepted indicators of the efficient (optimal) size of government for any economy.
Similarly it can be said economics does not offer universally agreed guidelines for the roles government should play in the economy. Indeed, across the world this practice varies enormously, indicating I believe that such roles are conditioned by the historical time and place an economy/society finds itself occupying.
Common sense rules/roles
Notwithstanding the above, there are certain commonsense economic rules to follow. One such rule is that reducing inefficient government functions/activities facilitates economic growth and development. And, by parity of reasoning reducing efficient government activities/functions adversely impacts on a country’s economic growth and development.
In similar vein economics recognizes that, while in practice government roles differ across economies worldwide, conceptually every government today performs four distinct, observable commonsense roles, although in practice these are closely intertwined.
The first of these is that, in today’s world, all governments (including Guyana) produce goods and services for the economy. These cover an exceptional variety of items, ranging from building public infrastructure for use by private business and citizens (roads, bridges, rail networks, markets and ports) to providing many essential public and social services (like social protection, health, education, and personal security).
In Guyana there are also several major for profit state-owned enterprises, which play substantial roles not only in the sectors where they located, but also in the wider economy; examples of these include: GuySuCo (sugar), GPL power (electricity), media, and printing.
In recent times increasing attention is also being directed towards what are termed public-private partnerships. These have been linked to the controversial public company: National Industrial and Commercial Investments Ltd (NICIL), which has created a number of special purpose vehicles (SPVs) to facilitate such transactions. Most of the SPVs NICIL has created have partnered with foreign-based investors.
The second role of today’s government is to be the location/source through which income transfers are made in the economy. These income transfers are both vertical in nature (for example, from rich to poor) and horizontal (for example, old age pensions). The latter would normally be based on age and independent of a person’s income or wealth.
There is a fundamental difference that should be noted between government spending on goods and services and its income transfers. I shall explain this in next week’s column where I plan to wrap-up this discussion of the roles of government.